Indian benchmarks collapse on weak global cues

Pressurized by feeble global cues, Indian equity benchmarks have collapsed in early deals on Monday, with frontline gauges shaving off around one and a half percentage point, tumbling below their crucial 5,200 (Nifty) and 20,900 (Sensex) levels. Investors remained cautious ahead of outcome of the Reserve Bank of India (RBI) and the US Federal Reserve’s policy review meetings scheduled later in the week. Some pessimism also came on report that foreign institutional investors (FIIs) sold shares worth a net Rs 230.96 crore on January 24, 2014.

Global cues mainly played the spoilsport for Indian markets with US markets plunging on Friday on some weak earnings announcements and on global sell-off in the equity markets. Asian markets too were trading lower at this point of time with deep cut amid renewed concerns about the outlook for the global economy on account of recent weak data from China. Fears of more stimulus tapering from the US Federal Reserve too was dampening the sentiments. Japanese markets declined by over two percent as the yen surged to a seven-week high against the dollar.

Back home, selling is both brutal and wide based as none of sectoral indices on BSE is spared. Banking, Auto, Metal, Realty and Consumer Durables remained the top loser on the BSE sectoral front. Power, capital goods and oil and gas too shed weights significantly. The broader indices too were clobbered out of shape, while the market breadth on the BSE was negative; there were 309 shares on the gaining side against 1,206 shares on the losing side while 48 shares remain unchanged.

The BSE Sensex opened at 20899.03; about 234 points lower compared to its previous closing of 21133.56, and has touched a high and a low of 20899.03 and 20787.25 respectively. The index is currently trading at 20824.13, down by 309.43 points or 1.46%. There were 30 stocks declining on the index.

The overall market breadth has made a weak start with 20.35% stocks advancing against 76.69% declines. The broader indices were trading in red; the BSE Mid cap and Small cap indices were down by 1.75% and 1.73% respectively. 

The top losing sectoral indices on the BSE were, Bankex down by 2.70%, Auto down by 2.68%, Metal down by 2.36%, Realty down by 2.26% and Consumer Durables down by 2.10%, while there were no gainers on the sectoral front.

The top losers on the Sensex were Tata Motors was down by 4.60%, SSLT was down by 3.67%, Maruti Suzuki was down by 3.30%, Hindalco Industries was down by 3.20% and ICICI Bank was down by 3.18%, while there were no gainers on the Sensex.

Meanwhile, as the National Advisory Council (NAC) chairperson Sonia Gandhi has asked the government to take steps for reviving the growth of gems and jewellary industry, the government may relax the gold import norms to boost the industry. Recently, the industry players, in a letter to NAC chairperson Sonia Gandhi had strongly pitched for four policy measures, which included lifting the 80/20 rule, reducing import duty to 2 per cent, revoking restrictions on gold, and mandating banks to restrict imports in 2013-14 to 80 per cent of their imports in 2012.

Meanwhile, the Government is already giving indications that some relief can be given to industry in the form of a lower import duty and relaxation of conditions for the 80/20 scheme as country’s current account deficit (CAD) declined to 1.2% of GDP in Q2 FY14 as against the 4.9% of GDP in the Q1 FY14.

High precious metals import has become one of the major contributors to high current account deficit (CAD) of the country. In order to restrain high gold imports, the RBI introduced 80/20 rule under which 20% of all gold imports by importers has to be re-exported. The rule has made import of gold difficult, resulting in lower imports, and consequently, a lower CAD. The government has also raised the imports duty on gold, platinum and silver to 10%. The steps taken by the Reserve Bank and the government have resulted in a sharp decline in gold and silver imports as during the first nine months (April-December) of the current year, gold and silver imports in the April-December period declined 30.3% to $27.3 billion from $39.2 billion recorded in same period of last year. India’s gold import is expected to plunge between 800-850 tonnes in current fiscal from 950 tonnes in FY13.

The CNX Nifty opened at 6,186.30; about 80 points lower as compared to its previous closing of 6,266.75, and has touched a high and a low of 6,188.55 and 6,162.90 respectively.

The index is currently trading at 6,172.05, down by 94.70 points or 1.51 %. There were 1 stocks advancing against 49 declines on the index.

The only gainers of the Nifty was Cairn up by 0.28%, On the flip side, Ranbaxy down by 7.42%, Tata Motors down by 4.51%, IndusInd Bank down by 4.47%, JP Associat down by 3.75% and IDFC down by 3.57% were the major losers on the index.

The Asian equity indices were trading in red; Shanghai Composite dipped 14.10 points or 0.69% to 2,040.29, Hang Seng tumbled 462.41 points or 2.06% to 21,987.65, Jakarta Composite tanked 135.23 points or 3.05% to 4,302.12, KLSE Composite decreased 15.40 points or 0.85% to 1,787.17, Nikkei 225 declined 333.14 points or 2.16% to 15,058.42, Straits Times shed 40.83 points or 1.33% to 3,035.16, Seoul Composite contracted 27.46 points or 1.42% to 1,913.10 and Taiwan Weighted was down by 121.37 points or 1.41% to 8,476.94.