Late hour selloff drag benchmarks lower

Thursday's session turned out to be a horrendous session for the Indian benchmarks which disintegrated like a ‘house of cards’ in last leg of trade and went on to breach various key technical levels in over a percent fall. The domestic benchmarks made a firm opening and traded in fine fettle for most part of morning trades but a sharp wave of selling pressure, which emerged in last leg of trade, dragged the key gauges below their crucial 6,250 (Nifty) and 20,900 (Sensex) levels.

Earlier, market sentiments remained upbeat on report that foreign institutional investors (FIIs) bought shares worth a net Rs 10.16 crore on January 1, 2014, as per provisional data from the stock exchanges. Some support also came in from rally in shares of public sector oil marketing companies (PSU OMCs) as their under-recovery on diesel declined for the first fortnight of January 2014. But, sentiments turned cautious after India’s manufacturing sector decelerated marginally in December as a slowdown in domestic order flows led to slower output growth. The HSBC India Manufacturing Purchasing Managers’ Index (PMI) - a measure of factory production - dropped slightly from 51.3 in November to 50.7 in December.

Selling got intensified after European counters reversed their initial gains and are trading with a cut of over half a percent in early deals on the buzz of hedge fund selling. Moreover, Asian markets ended mixed on account of weaker-than-expected manufacturing data out of China. The country’s official PMI dropped to 51.0 in December, from 51.4 in the previous month and below street expectation of 51.2.

Back home, the selling was both brutal and wide based and barring software counter, none of sectoral indices on BSE were spared. Moreover, those counter which featured in the list of worst performers, included Realty, Capital Goods and Power. Moreover, intra-day reversal of Rupee, which pared all its morning gains, too weighed down the sentiment. The rupee was trading at Rs 62.10 per dollar at the time of equity markets closing compared with previous close of Rs 61.90 per dollar. Sentiment also got hurt after shares of public sector oil marketing companies (PSU OMCs) reversed intraday gains as crude oil prices rose.

Banking pivotal, which had been one of the top gainers on the BSE, too witnessed sell-off on expectation that weak growth and higher inflation will spur the RBI to keep policy on hold later this month. Additionally, stocks like, Tata Power, Reliance Power and Reliance Infra etc. too edged lower after the Delhi government, rejecting the contention of private power distributors, ordered an audit of their finances by the government's national auditor or Comptroller and Auditor General (CAG), fulfilling yet another election promise of the Aam Aadmi Party (AAP). Meanwhile, Adani Power fell over six percent after Mumbai unit of the Directorate of Revenue Intelligence (DRI) formally opened  a case for alleged ‘over-valuation’ of capital equipment for power projects against the Gujarat-based group.

The NSE’s 50-share broadly followed index Nifty dropped by over eighty points to end below its psychological 6,250 level, while Bombay Stock Exchange’s sensitive Index -- Sensex tumbled over two hundred and fifty points to end below the psychological 20,900 mark.

Broader markets too got butchered during the trade and ended the session with a cut of around two percent. Moreover, the market breadth remained in favour of decliners, as there were 1,039 shares on the gaining side against 1,563 shares on the losing side, while 129 shares remained unchanged.

Finally, the BSE Sensex plunged by 252.15 points or 1.19%, to settle at 20888.33, while the CNX Nifty declined by 80.50 points or 1.28% to settle at 6,221.15.

The BSE Sensex touched a high and a low of 21331.32 and 20846.67, respectively. The BSE Mid cap index was down by 1.77%, while the Small cap index lost 2.03%.

The top gainers on the Sensex were TCS up 0.40%, Maruti Suzuki up 0.34%, Sun Pharma up 0.26%, Infosys up 0.24%, and Wipro up 0.03%, on the flip side BHEL down 3.42%, Tata Power down 3.27%, Coal India down 3.05%, L&T down 3.04%, and Bharti Airtel down by 2.81%,were the top losers on the index.

On the BSE Sectoral front IT up by 0.11%, was the only gainer, while Realty down by 3.07%, Capital Goods down by 2.84%, PSU down by 2.15%, Power down by 2.09%, and Bankex down by 1.82%, were the top losers on the sectoral front.

Meanwhile, the Cabinet Committee on Economic Affairs (CCEA) is likely to consider the Power Ministry’s proposal soon to amend the Mega Power Policy introduced in November 1995 to provide impetus to the setting up of large power projects and derive benefits from economies of scale. The amended power policy is expected to provide benefits to thermal power projects of 1,000 MW and hydel plants of 500 MW. Meanwhile, policy guidelines were also modified in 1998, 2002 and 2006 to encourage power development in the North Eastern region and Jammu & Kashmir.

Mega Power Policy allows mega power projects to tie up electricity sales to distribution utilities through long-term power purchase agreements. The benefits of Policy also apply to energy-efficient supercritical projects, which are awarded through international competitive bidding with the mandatory condition of setting up indigenous manufacturing facilities.

These mega power projects can also sell power outside these agreements, in accordance with the National Electricity Policy 2005 and the Tariff Policy 2006, which have amended from time to time.

The CNX Nifty touched a high and low of 6,358.30 and 6,211.30 respectively.

The top gainers on the Nifty were Power Grid Corporation of India up by 2.21%, TCS up by 0.68%, Infosys up by 0.47%, Sun Pharmaceuticals Industries up by 0.38%, and Maruti Suzuki India up by 0.34%, On the other hand, IDFC down by 4.83%, Jaiprakash Associates down by 4.59%, PNB down by 4.08%, Tata Power Company down by 3.65%, and Larsen & Toubro down by 3.23%, were the top losers.

The European markets were trading in red, France's CAC 40 was down by 0.94%, Germany's DAX was down by 0.53%, and United Kingdom's FTSE 100 was down by 0.52%.

The Asian markets concluded Thursday’s trade mostly in green, on the first trading day of 2014, while Chinese stocks moved lower after manufacturing data came out poorer than expected. Although regional stocks started the day mostly higher, they weakened after HSBC’s PMI release. Thailand’s baht fell for an 11th day, the longest losing streak on record, and stocks slid on concern capital outflows will quicken amid prolonged political unrest in the country. China’s official Purchasing Managers’ Index, pointed to slowing momentum in factory activity. The December reading was 51.0 - slower than 51.4 in the previous month, but still above the 50 mark that indicates an expansion in manufacturing. It was followed by a similar deceleration in HSBC’s PMI, which came out at 50.5 for December, compared with 50.8 in November.

Singapore’s economy contracted in the fourth quarter mainly as a result of weaker manufacturing and construction. Gross domestic product for the three months to December 31 contracted 2.7% on a seasonally adjusted and annualized basis compared with a revised 2.2% increase in the third quarter. Indonesia’s trade posted a surplus for two consecutive months in November, bolstering indication that the country’s current account deficit is narrowing. It was also the largest monthly trade surplus since March 2012. The country posted a $776.8 million trade surplus in November, compared to a revised $24 million surplus in October.