Benchmarks end lower on some disappointing Q3 numbers

Friday turned out to be a disappointing session of trade for the stock markets in India as the benchmark equity indices clobbered out of shape and settled the session below their crucial 6,300 (Nifty) and 21,100 (Sensex) levels, as sentiments got spooked on account of disappointing Q3 numbers by some of the blue chip stocks like ITC and TCS. Sentiment remained downbeat right from the beginning after the Global ratings agency Moody’s underscored that India’s economic recovery is likely to be slow in the second half of 2014 and the outcome of general elections could have an impact on the growth prospects. Investors also remained sidelines ahead of earnings of index heavyweight Reliance Industries (RIL).

On the global front, most of the Asian markets ended in the red with Japanese Nikkei extending its losses from the previous session as stronger yen weighed on investor sentiment. However, European markets traded in the green with CAC, DAX and FTSE all edging higher.

Back home, selling in banking counter too dampened the sentiments after the industry body Assocham underscored that the growth of Indian banking industry is likely to remain under pressure with gross non-performing assets (NPAs) expected to touch 5 percent of total loans by March this year. Moreover, telecom stocks viz. Bharti Airtel, Idea Cellular and Reliance Communication extended their previous session’s slide triggered by Reliance Industries surprisingly deciding to join the bidding for upcoming telecom spectrum auction slated for February 3, 2014.

Sentiments also remained dampened after TCS’ Q3 result fell short of market expectations. The company, on consolidated basis, reported 50.25% rise in its net profit at Rs 5333.43 crore for the quarter ended December 31, 2013 as compared to Rs 3549.62 crore for the same quarter in the previous year.

Bucking the trend, shares of public sector oil marketing companies (OMCs) gained as brent crude dropped as concerns over a rise in supply from Libya and Iran dragged on prices. Moreover, Indian Oil Corporation (IOC) rose on reports a panel of ministers has approved sale of a 10% government stake in IOC to ONGC and OIL India through a block deal on the stock exchanges.

The NSE’s 50-share broadly followed index Nifty slipped by around sixty points to end below its psychological 6,300 level, while Bombay Stock Exchange’s sensitive Index -- Sensex dropped over two hundred points to end below the psychological 21,100 mark.

Moreover, the broader markets too suffered sharp cuts and ended the session in the red, down by around one and a half percentage points. The market breadth remained in favour of decliners, as there were 885 shares on the gaining side against 1,748 shares on the losing side, while 149 shares remained unchanged.

The BSE Sensex plunged by 201.56 points or 0.95%, to settle at 21063.62, while the CNX Nifty declined by 57.25 points or 0.91% to settle at 6,261.65.

The BSE Sensex touched a high and a low of 21270.11 and 21015.61, respectively. The BSE Mid cap index was down by 1.32%, while the Small cap index lost 1.63%.

The top gainers on the Sensex were Bajaj Auto up 1.37%, BHEL up 1.30%, Cipla up 1.27%, Hindustan Unilever up 1.27% and Mahindra & Mahindra up by 0.62%, on the flip side TCS down 5.77%, Wipro down 3.15%, HDFC down 2.58%, ICICI Bank down 2.44% and Axis Bank down by 2.05%, were the top losers on the index.

On the BSE Sectoral front Oil & Gas up by 0.25%, FMCG up by 0.07% and Auto up by 0.03%, were the only gainers, while IT down by 2.55%, Realty down by 2.40%, Teck down by 2.28%, Bankex down by 1.57% and Consumer Durables down by 1.16%, were the top losers on the sectoral front.

Meanwhile, amid rising concerns over the deteriorating macro-economic indicators of the country, global rating agency, Moody's has stated that India's economic recovery is likely to be slow in the second half of 2014 and the outcome of general elections could affect the growth prospect. Moody’s has assigned 'Baa3' rating on India with a stable outlook indicating medium grade with moderate credit risk.

Further, the rating agency has projected that India's inflation and interest rates to decline during the year. Referring to country’s fiscal position, Moody’s highlighted that fiscal deficit would remain higher in future with social welfare measures such as the Food Security Act passed last year that will raise the government's medium-term expenditure commitment. Meanwhile, the rating agency added that the structure of India's government debt compromises domestic currency, relatively low real rates and have long tenors, which has mitigated stress on the government's fiscal position.  On the other hand, the government hopes to contain fiscal deficit at 4.8 percent of GDP in FY14 and reduce it further to 3 per cent by FY17.

Global rating agency also highlighted that its expectation for global growth prospects will improve with declining global risks and sovereign ratings in South and Southeast Asia will remain largely stable in 2014.

The CNX Nifty touched a high and low of 6,327.10 and 6,246.35 respectively.

The top gainers on the Nifty were BPCL up by 2.92%, Cipla up by 1.89%, Bajaj Auto up by 1.38%, Hindustan Unilever up by 1.34%, and Mahindra & Mahindra up by 0.82%, On the other hand, TCS down by 5.55%, DLF down by 4.26%, PNB down by 3.31%, Wipro down by 2.60%, and ICICI Bank down by 2.30%, were the top losers.

The European markets were trading in green, France's CAC 40 was up by 0.17%, Germany's DAX was up by 0.64%, and United Kingdom's FTSE 100 was up by 0.33%.

The Asian markets, barring Hang Seng and Straits Times concluded Friday’s trade in red following a negative lead from Wall Street on disappointing set of corporate results and soft economic data. The Malaysian market remained shut for the trade today in observance of Thaipusam.  Japan and China accumulated record amounts of US Treasurys in November, a sign that demand for the US debt among those economic giants remains robust even as interest rates rise. China’s foreign direct investment expanded 3.3 percent in December compared with the same month a year earlier, picking up from November’s 2.35 percent and extending growth for the 11th straight month. Foreign investors channeled US$12.08 billion into China last month, bringing actual inbound foreign direct investment to US$117.58 billion for 2013, up 5.25 percent on an annual basis.

The volume of Hong Kong’s goods re-exports increased 3.6% year-on-year for November, while that of domestic exports dropped 10.4%. Taken together, the volume of total goods exports increased 3.4%, while the volume of goods imports rose 4.8%. Goods re-exports’ prices rose 2.7% year-on-year, whereas those of domestic exports dipped 0.1%. Taken together, total goods exports’ prices increased 2.6%. Concurrently, goods imports prices rose 1.7%. Japanese Household Confidence remained unchanged at a seasonally adjusted annual rate of 0.0, from 42.5 in the preceding month.