Benchmarks snap six days winning streak

Snapping six days winning streak, Indian equity benchmarks ended the session slightly in the red with a cut of around a quarter percent. However, markets managed to minimize damage in last leg of trade, as investors went for value buying. Earlier, markets after a positive start entered into red terrain with investors booking profit after a six-day consecutive rally. Sentiments also remained dampened after the HSBC services Purchasing Managers’ Index (PMI), based on the survey of around 350 private service sector companies, fell to a three-month low of 47.5 in March from 48.8 in February, below 50 mark for the ninth successive month that separates growth from contraction. Depreciation in Indian rupee against dollar too weighed down the sentiments. The rupee was trading at 60.19 at the time of equity markets closing as compared to its previous close of 59.89, tracking mixed Asian currencies.

On the global front, European markets made a sluggish start with CAC, DAX and FTSE all trading in the red in early deals as investors awaited the European Central Bank's monthly policy announcement. However, most of the Asian equity indices ended the session in the green, as the Japanese yen weakened to a two-month low and China’s government announced stimulus policies to support growth.

Back home, stocks related to banking sector fell across the board after the Reserve Bank of India (RBI) on April 2 clarified that as indicated in its circular dated August 23, 2013 the option for spreading the Mark to Market (MTM) losses over the three quarters has ended on March 31, 2014 and no further extension is been allowed. Shares of banking license hopefuls declined, as RBI after a gap of a decade and from 25 contenders granted ‘in-principle’ approval to only two applicants, State-run IDFC and Kolkata-based microfinance firm Bandhan Financial Services.

Additionally sugar stocks too witnessed selling pressure despite report of industry body ISMA, which said that the country’s sugar production has dropped by 7 percent to 21.5 million tonnes in the first six months of the current marketing year due to lower output in key producing states. On the flip side, aviation stocks rallied, triggered by state-run oil marketing companies on April 1, 2014, announcing reduction in the price of aviation turbine fuel. Moreover, Stocks of pharmaceutical companies extended gains with counters like Wockhardt, Strides Arcolab, Dr Reddy’s Laboratories and Ranbaxy Laboratories rising up in range of 1 -13%.

The NSE’s 50-share broadly followed index Nifty declined by over fifteen points to end below the psychological 6,750 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped by over forty points to finish below the psychological 22,550 mark. Broader markets too witnessed selling and ended the session in the red with a cut of around quarter a percent. The market breadth remained in favor of decliners, as there were 1,277 shares on the gaining side against 1,511 shares on the losing side while 131 shares remain unchanged.

Finally, the BSE Sensex lost 42.42 points or 0.19%, to settle at 22509.07, while the CNX Nifty was down by 16.45 points or 0.24% to settle at 6,736.10.

The BSE Sensex touched a high and a low of 22620.65 and 22369.28, respectively. The BSE Mid cap index was down by 0.39%, while the Small cap index lost 0.18%.

The top gainers on the Sensex were Hindustan Unilever up by 1.89%, Cipla up by 1.65%, Dr Reddys Lab up by 1.50%, HDFC up by 0.70% and Hindalco Inds up by 0.70%, while BHEL down by 3.20%, Gail India down by 2.23%, Coal India down by 2.21%, SBI down by 1.97% and Axis Bank down by 1.96% were the top losers in the index.

On the BSE Sectoral front, Healthcare up by 0.95%, FMCG up by 0.44%, Metal up by  0.35% and Consumer Durables up by 0.32% were the only gainers, while PSU down by 1.33%,  Bankex down by 1.09 %, Capital Goods down by 0.83%, Realty down by 0.44% and Power down by 0.44% were the top losers in the space.

Meanwhile, in order to strengthen bank’s credit appraisal process in the wake of frauds committed by certain unscrupulous jewellers, the Reserve Bank of India (RBI) has issued additional guidelines for banks offering gold metal loans (GML) to jewellers.

The central bank has suggested lenders to check the track record and credit worthiness of borrowers, collateral securities against the loan and the trade cycle of the manufacturing activity before sanctioning GMLs. Further, the banking regulator has clarified that such loans can be availed of only by those who manufacture gold jewellery themselves and also advised banks disbursing GML to carry out independent credit appraisal of the borrower and not rely solely on stand-by letter of credit/bank guarantee (LC/BG) issued by other banks.

The RBI’s notification highlighted that the jewellers cannot sell the gold borrowed under GML scheme to any other party for manufacture of jewellery. Warning banks for not carrying out detailed credit appraisal, the RBI directed banks to carry out proper quality check of the gold stock and verify the insurance cover which can be pursued jointly by or on rotation basis by the GML providing bank and the stand-by LC/BG issuing bank.

Banks have been directed to fix the credit limit for new borrowers after carrying out a detailed credit appraisal and due diligence. In case of existing customers, gold metal loans under the scheme may be carved out within the credit limit sanctioned by the bank. Further, banks disbursing GML should open current account of the borrowers which will facilitate repayment process.

The CNX Nifty touched a high and low of 6,776.75 and 6,696.90 respectively.

The top gainers of the Nifty were Asian Paints up by 3.54%, Jindal Steel & Power up by 2.86%, Hindustan Unilever up by 2.59%, Lupin up by 2.23% and Ambuja Cements up by 2.17%. On the other hand, Bank of Baroda down by 3.07%, BHEL down by 3.00%, DLF down by 2.89%, PNB down by 2.48% and IDFC down by 2.43% were the top losers.

The European markets were trading in red, France's CAC 40 was down by 0.06%, Germany's DAX was down by 0.06% and United Kingdom's FTSE 100 was down by 0.01%.

The Asian markets concluded Thursday’s trade mostly in green with the overnight gains on Wall Street. Several cities in China, including Hangzhou and Changsha, planned to ease restrictions on buying homes and lowering the threshold for second-home buyers. Japan expects the Consumer Price Index to be just 1.5% higher in a year from now, a Bank of Japan tankan survey found, a sign of how difficult the central bank could find meeting its 2% inflation goal by the April 2015 target date. In Hong Kong, the number of sale and purchase agreements for all building units in March was 4,184, up 4.9% from February but down 38.8% year-on-year. The total consideration for sale and purchase agreements in March was $29.4 billion, up 13.3% from February but down 33.8% compared with March 2013.