Benchmarks end lower ahead of RBI policy meet

Tuesday’s trading session turned out to be a disappointing day of trade for the Indian stock markets as key equity benchmarks snapped the volatile session once again in the negative terrain, extending their losing streak to sixth day in a row. Though, both the frontline gauges made a positive start supported by firm global cues. But, markets failed to sustain the positive momentum as sentiments took a hit after investors turned cautious ahead of Reserve Bank of India’s (RBI) mid-quarter review of monetary policy for 2013-14, slated to be released on December 18, 2013.

Earlier, sentiments remained up-beat after India Inc has raised hopes that spurt in inflation to a 14-month high of 7.52 percent in November should not come in the way of the Reserve Bank's formulating an accommodative monetary policy and has said that high interest rates at this stage may only worsen the industrial slowdown and not help ease inflation.

Supportive cues from US markets and Asian markets too provided some support to local markets and sentiments remained up-beat amid expectations that Federal Reserve will keep policy loose even after deciding to taper its asset purchases in its upcoming monetary policy scheduled on Dec17-18. However, disappointing cues from European market took their toll on domestic sentiments in late trade and dragged the frontline gauges below the psychological 6,150 (Nifty) and 20,700 (Sensex) levels. Investors mainly resorted to profit booking following the decline in European markets.

Back home, sentiments also hurt after Indian rupee depreciated ahead of Fed’s decision on tapering of its monetary stimulus. The rupee was trading at 61.91/92 per dollar at the time of equity markets closing as against previous close of 61.73/74 per dollar. Selling in banking counter too dampened the sentiments. Stocks like HDFC Bank, State Bank of India, Indian Bank, Bank of Baroda etc. edged lower on expectation that RBI may hike its key policy rate by 0.25% tomorrow, the third straight increase under Governor Raghuram Rajan as part of the war against inflation. Additionally, the PSU oil marketing companies too will be under pressure as it has been reported that losses on diesel sales have climbed to Rs 10.48 per litre after international oil rates inched up.

The NSE’s 50-share broadly followed index Nifty declined by over fifteen points to end below the psychological 6,150 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex tumbled by around fifty points to finish well below the psychological 20,650 mark.

Moreover, broader markets too struggled to get traction and ended the session in the red. The market breadth remained in favor of declines; as there were 1,153 shares on the gaining side against 1,305 shares on the losing side while 171 shares remain unchanged.

Finally, the BSE Sensex plunged by 47.38 points or 0.23%, to settle at 20612.14, while the CNX Nifty lost 15.65 points or 0.25% to settle at 6,139.05.

The BSE Sensex touched a high and a low of 20784.03 and 20594.99, respectively. The BSE Mid cap index was down by 0.03%, while the Small cap index lost 0.04%.

The top gainers on the Sensex were Bharti Airtel up 4.27%, Cipla up 2.82%, Sun Pharma up 2.15%, TCS up 1.43%, and SSLT up 1.17%, on the flip side HDFC Bank down 3.55%, Coal India down 2.89%, HDFC down 2.53%, NTPC down 2.14%, and Bajaj Auto down 1.95%, were the top losers on the index.

On the BSE Sectoral front, Healthcare up by 1.51%, Consumer Durables up by 1.04%, FMCG up by 0.76%, Teck up by 0.54%, and Capital Goods up by 0.30%, were the top gainers. While, Bankex down by 1.28%, PSU down by 0.83%, Power down by 0.73%, Realty down by 0.66%, and Oil & Gas down by 0.54%, were the top losers on the sectoral front.

Meanwhile, in order to provide boost to the country’s manufacturing sector, the committee of manufacturing, chaired by Prime Minister Manmohan Singh, is likely to consider tax incentives and subsidies soon for making the manufacturing sector more competitive. The committee is likely to focus on manufacturing, especially in labour-incentive sectors, which leads to job creation in the country.

Furthermore, the committee is expected to consider measures needed to substitute imports in sectors such as telecom equipment and shipbuilding. Prime Minister Manmohan Singh had already expressed the need to develop a strong domestic manufacturing base in electronics and telecommunications in order to mitigate burden of growing imports for these sectors. India is expected to import electronics products worth $300 billion, which will be more than the value of the country's imports of petroleum products.

The domestic shipbuilding industry, which is even more labour intensive and skill intensive, is import dependent. Meanwhile, the government is of the view that the country is well placed to supply cheap skilled labour that can compete with the best in the world. Present market size of the Indian shipbuilding industry is estimated to be worth $92 billion. Indian manufacturing sector has grown by only 1 percent in Q2 FY14 and industry growth in the first eight months of 2013-14 was recorded at zero percent, reflecting the need of more measures for government to recover the domestic manufacturing sector. Further, sluggish growth in manufacturing and high imports has become main cause for widening current account deficit (CAD) of the country.

The CNX Nifty touched a high and low of 6,190.55 and 6,133.00 respectively.

The top gainers on the Nifty were Ranbaxy Laboratories up by 4.81%, Bharti Airtel up by 4.58%, Cipla up by 3.06%, Sun Pharmaceuticals Industries up by 2.18%, and NMDC up by 1.94%, On the other hand, HDFC Bank down by 3.67%, Coal India down by 2.96%, NTPC down by 2.21%, HDFC down by 1.97%, and Bajaj Auto down by 1.73%, were the top losers.

The European markets were trading in red, France's CAC 40 was down by 0.98%, Germany's DAX was down by 0.43%, and United Kingdom's FTSE 100 was down by 0.52%.

The Asian markets barring Shanghai Composite and Hang Seng concluded Tuesday’s trade in green as upbeat economic data from the US and Europe lifted investor confidence ahead of the Federal Reserve’s policy meeting. Indonesia’s bonds gained, pushing the 10-year yield to the lowest level in almost four weeks, on speculation Bank Indonesia’s decision to hold borrowing costs suggests inflation will slow. The Census and statistics department stated that Hong Kong Unemployment Rate remained unchanged at a seasonally adjusted 3.3%, from 3.3% in the preceding month.

Chinese banks bought foreign exchange worth $164.7 billion last month while selling $128.1 billion, netting a surplus of $36.6 billion. It marked the fourth month of surplus since August, after a deficit in June and July. Besides, China’s holding of US debt surged past $1.3 trillion for the first time in October, worth nearly $1,000 per Chinese citizen.