Late hour selloff drag benchmarks lower

Thursday’s trading session turned out to be a disappointing session of trade for the Indian equity markets, as market participants booked all their initial gains ahead of Wholesale Price Index (WPI) data for the month of February. Though, India’s inflation rate based on the wholesale price index is expected to have eased to a nine-month low of 4.9% in February from 5.1% the previous month. The domestic benchmarks traded in a narrow range, but in the green terrain, for most part of the trades but a sharp wave of selling, which emerged in last leg of trade, dragged the key gauges below their crucial 6,500 (Nifty) and 21,800 (Sensex) levels.

Earlier, domestic bourses made a positive start as sentiments remained jubilant after the consumer price index (CPI) for February eased to 8.10 percent from 8.79 percent in January, its lowest level since January 2012. Meanwhile, the index of industrial production (IIP) in January stood at positive 0.1 percent, highest since September 2013, against an expectation of continued contraction. However, a sudden slide in last leg of trade pulled key benchmark indices from positive zone to negative terrain as investors turned cautious after China released another batch of disappointing data, adding to fears about growth in the economic giant.

Moreover, weak opening in European counters too weighed on sentiments. The Ukraine crisis was also in focus with the European Union agreeing on a framework of sanctions on Russia. However, most of the Asian equity benchmarks ended in the green terrain, though gains on the up-side remained capped after Chinese industrial output, which measures production at factories, workshops and mines, posted the slowest rate since April 2009, at the height of the global financial crisis as it rose 8.6 per cent year-on-year in January and February. At the same time, retail sales, a key indicator of consumer spending, were up 11.8 per cent, which was also the worst performance for several years.

Back home, trade was also under pressure after the Securities and Exchange Board of India (SEBI) tightened norms to prevent money laundering through the capital market and asked capital market entities to conduct a detailed risk assessment of their clients, including those linked to countries facing international sanctions. Meanwhile, software and technology counters witnessed blood-bath, led by over 8% fall in Infosys on reports that IT major expects sluggish growth in January-March (Q4FY2014) quarter mainly due to muted spending by clients, especially in the retail sector. Additionally, selling in Healthcare counter too dampened the sentiments, led by Sun Pharmaceuticals which tumbled over 5% after US Food and Drug Administration imposed a ban on imports from its plant at Karkhadi in Gujarat, in the latest quality blow for India's drug sector.

The NSE’s 50-share broadly followed index Nifty declined by over twenty points to end below the psychological 6,500 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex -- dropped over eighty points to end below its psychological 21,800 mark. Moreover, broader markets too struggled to get some traction and ended the session in the red with a cut of around half a percent. The market breadth remained in favour of decliners, as there were 1287 shares on the gaining side against 1,506 shares on the losing side, while 145 shares remained unchanged.

Finally, the BSE Sensex declined by 81.61 points or 0.37%, to settle at 21774.61, while the CNX Nifty lost 23.80 points or 0.37% to settle at 6,493.10.

The BSE Sensex touched a high and a low of 21991.36 and 21720.13, respectively. The BSE Mid cap index was down by 0.55%, while the Small cap index lost 0.22%.

The top gainers on the Sensex were Mahindra & Mahindra up by 2.40%, ONGC up by 2.37%, HDFC Bank up by 2.30%, Coal India up by 2.02% and Hero MotoCorp up by 1.82%, while Infosys down by 8.54%, Sun Pharma down by 5.03%, SSLT down by 1.54%, Axis Bank down by 1.23% and TCS down 1.16% were the top losers in the index.

On the BSE Sectoral front, Oil & Gas up by 1.45%, PSU up by 1.35%, Bankex up by 0.92%, Auto up by 0.54% and FMCG up by 0.39% were the top gainers, while IT down 4.06%, Teck down by 3.53%, Realty down by 3.47%, Healthcare down by 1.03% and Power down by 0.69% were the top losers in the space.

Meanwhile, amid concerns over the increasing imports of electronics products, the National Association of Software and Service Companies (NASSCOM) President R Chandrashekhar has asserted that Indian imports of electronics by 2020 will increase two fold over the present figure of oil imports. Observing that policy decisions to boost industry growth does not come in the manner as it should be, NASSCOM President emphasized that Industry in the country is still not focused on policy making and is currently playing the role of only a regulating body. In the manufacturing sector, there are two industry bodies, one representing the domestic industry players and other global players.

R Chandrashekhar added that consultation in policy making is essential and expressed the need for the presence of different bodies like NASSCOM. Now, it has become imperative that country’s premium institutions like Indian Institute of Technology (IIT) should come forward and make changes with policy makers and industry bodies. The Centre for Technology and Policy set up by IIT can play an important role in promotion and assessment of public policies introduced by technological and scientific innovations, and identification of key technology gaps in meeting developmental goals in key areas.

Rising India’s imports of electronics projects reflects the need to enhance investment to boost domestic manufacturing of electronics products. However, the government has also taken several measures like preferential market access policy in order to boost local production. The National Manufacturing Competitiveness Council (NMCC) has recently floated a plan to set up a billion-dollar venture capital fund to increase domestic production of electronic products especially telecom equipment and devices.

The CNX Nifty touched a high and low of 6,561.45 and 6,476.65 respectively.

The top gainers of the Nifty were BPCL up by 7.63%, Mahindra & Mahindra up by 2.65%, Kotak Mahindra Bank up by 2.47%, Dr. Reddy's Laboratories up by 2.47% and ONGC up by 2.35%. On the other hand, Infosys down by 8.45%, DLF down by 6.39%, Sun Pharmaceuticals Industries down by 5.12%, Jaiprakash Associates down by 3.72% and Ranbaxy Laboratories down 3.04% were the top losers.

Most of the European markets were trading in green, France's CAC 40 was up by 0.13% and Germany's DAX was up by 0.26%, while United Kingdom's FTSE 100 was down by 0.10%.

The Asian markets concluded Thursday’s trade mostly in green with Japan’s Nikkei share average ending down to a 1-1/2-week low, erasing earlier gains after weaker-than-expected Chinese output and retail sales data disappointed the market. China’s central bank is prepared to take its strongest action since 2012 to loosen monetary policy if economic growth slows further, by cutting the amount of cash that banks must keep as reserves. The Bank of Korea left its key rate unchanged, supporting a rebound in growth as Kim Choong Soo gets ready to pass the reins to a new governor who will face risks from record household debt to US monetary tapering. The central bank has held the seven-day repurchase rate at 2.5% for a tenth straight month.

The data on retail sales and industrial production in China came in below forecast. Growth in industrial production in China slowed to 8.6% in the first two months of 2014, compared to a 9.7% expansion in December, and growth in retail sales narrowed to 11.8% from 13.1% in December. Chinese Fixed Asset Investment fell to a seasonally adjusted 17.9%, from 19.6% in the preceding month. Malaysian Industrial Production fell to a seasonally adjusted annual rate of 3.7%, from 4.8% in the preceding month while Japan’s Core Machinery Orders rose to 13.4%, from -15.7% in the preceding month.