Markets recover from day’s low; undertone remains downbeat

Indian equity markets although have recovered from day’s low point, but still are languishing in negative terrain, with losses of over quarter of a percent, above the crucial 21,050 (Sensex) and 6,250 (Nifty) levels respectively. Meanwhile, broader indices continue to trade on mixed note, with Midcap index edging lower by over one tens of a percent and Smallcap index gaining over by same quantum.

Some buying which emerged at lower levels has mainly aided benchmarks in recouping some of their lost ground in light of negative global set-up. The little euphoria seen on account of better than expected December CPI data, which further bolstered the case for RBI keeping its key interest rates on hold for a second successive month at its policy review on January 28, fizzled in late morning deals on building caution ahead of WPI inflation data to be released tomorrow.

Meanwhile, in the global markets, Asian shares were mostly lower on Tuesday, with Japanese stocks tumbling more than 3 percent as the yen hit a four-week high against the dollar after last week's surprisingly weak jobs report raised concerns about the U.S. growth outlook.

Closer home, amidst across the board selling pressure, only stocks from Capital Goods, Healthcare and Fast Moving Consumer Goods sectors were showing resilience.  On the flip side, Realty, Information Technology and Technology counters were the top losers of the session. Meanwhile, Aviation stocks were trading mixed even after report pointed that India’s domestic air traffic grew 3.4 percent in November last year, in spite of significant volatility in the market. The overall market breadth on BSE  was in the favour of declines which thumped advances in the ratio of 1222:1043; while 157 shares remained unchanged.

The BSE Sensex is currently trading at 21079.19 down by 55.02 points or 0.26% after trading in a range of 21,154.76 and 21,055.01. There were 9 stocks advancing against 21 stocks declining on the index.

The broader indices continued to trade on a mixed note; the BSE Mid cap index was down by 0.11%, while Small cap index up by 0.14%.

The gaining sectoral indices on the BSE were Capital Goods up by 0.36%, Healthcare up by 0.10% and FMCG up by 0.03%. While, Realty down by 1.16%, IT down by 1.00%, Teck down by 0.81%, Metal down by 0.62%, Auto down by 0.43% were the top losing indices on BSE.  

The top gainers on the Sensex were M&M up by 0.78%, HDFC up by 0.76%, Cipla up by 0.63%, Dr Reddy’s Lab up by 0.52% and L&T up by 0.50%. On the flip side, Tata Steel down by 1.94%, TCS down by 1.70%, Wipro down by 1.34%, Tata Motors down by 1.21% and HUL down by 1.06%.

Meanwhile, providing operational flexibility in external sector, the Reserve Bank of India (RBI) has eased rules for hedging foreign exchange exposures, allowing greater flexibility for cancelling and rebooking forward contracts. With this, domestically-held forward contracts for all current as well as capital account transactions with a residual maturity of one year or less are allowed to be freely cancelled and rebooked. Additionally, as far as the exposure of the FIIs/QFIs/other portfolio investors was concerned, forward contracts booked by these investors once cancelled, could be rebooked only up to the extent of 10 per cent of the value of the contracts cancelled.

As per the existing guidelines, while domestic exporters could cancel and rebook up to 50 percent of the contracts booked in a financial year for hedging their contracted export exposures, importers were are allowed to cancel and rebook up to 25 percent of contracts booked in a financial year. These limits have now been dropped.

Such tight measures were taken by India’s central bank after Indian currency started slumping since late May on fears that the US Federal Reserve will begin tapering its monetary stimulus. The rupee after plunging to record low of 68.85 to the dollar in late August, recovered soon after RBI took slew of measures to bolster forex reserves, including raising $34 billion through two concessional swap facilities.

The CNX Nifty is currently trading at 6,258.75, down by 14.00 points or 0.22% after trading in a range of 6,280.35 and 6,250.20. There were 15 stocks advancing against 35 declining on the index.

The top gainers of the Nifty were Cairn up by 1.77%, IndusInd bank up by 1.04%, M&M up by 1.01%, HDFC up by 0.80% and Cipla up by 0.68%. On the flip side, DLF down by 2.27%, Tata Steel down by 1.94%, TCS down by 1.86%, Ranbaxy down by 1.66% and HCL Technologies down by 1.48% were the major losers on the index.

The Asian equity indices were trading mostly in red; Shanghai Composite up by 0.56% was the only gainer. While, Nikkei 225 down by 3.08%, Seoul Composite down by 0.15%,  Taiwan Weighted down by 0.21%, Straits Times down by 0.50% and  Hang Seng down by 0.39%.