Indian markets get slaughtered ahead of RBI policy meet; deposes over 2%

Monday turned out to be another gloomy trading session for the Indian equity indices which got pounded by over two percentage points. Markets prolonging their southward journey for the second consecutive session, witnessed blood bath and closed near their intraday lows, breaching major crucial support levels of 20,750 (Sensex) and 6,150 (Nifty), with rate sensitive shares leading the decline ahead of the Reserve Bank of India’s (RBI) third quarter monetary policy review tomorrow. Though, the broader expectations are RBI would opt for status quo on policy rates for the second straight month, as consumer price inflation continued to remain at elevated levels. After a gap-down opening, the domestic bourses never looked in recovery mood and continued sliding till end. Selling was both brutal and wide-based, as none of sectoral indices on BSE were spared. Counters, which featured in the list of worst performers, include realty, metal, banking, auto and power.

Selling also got intensified after European markets made a sluggish opening amid worries that the US Federal Reserve would continue trimming its monetary stimulus measures. Asian markets too ended in the red terrain with deep cut amid renewed concerns about the outlook for the global economy on account of recent weak data from China. Japanese markets declined by over two and a half percent as the yen surged to seven-week high against the dollar.

Back home, sentiments remained down-beat after the rupee breached the psychological 63 per dollar mark, to hit its lowest level in more than two months on Monday, hurt by a broad fall in other regional currencies. The rupee was trading at Rs 63.12 at the time of equity markets closing as compared with Friday’s close of Rs 62.67 per dollar. Some pessimism also came on report that foreign institutional investors (FIIs) sold shares worth a net Rs 230.96 crore on January 24, 2014.

Metal stocks like Tata Steel, SAIL, Hindalco, Jindal Steel & Power and NMDC etc edged lower on concerns about slower Chinese growth. Public sector oil marketing companies viz. BPCL, HPCL and IOC too witnessed selling pressure, as weakness in rupee raised concerns about increased costs of importing oil. Meanwhile, telecom shares ended lower after the Empowered Group of Ministers on telecom, at its meeting on spectrum fee issue, announced that the Subscriber Usage Charge for new spectrum will be a maximum of 5% of adjusted gross revenue. Additionally, shares of jewellery retailers declined after Finance Minister P Chidambaram said that the restrictions on gold imports will remain intact at least until the end of this financial year to keep a lid on the country’s current-account deficit.

The NSE’s 50-share broadly followed index Nifty declined by over one hundred and thirty points to end below its psychological 6,150 support level, moreover Bombay Stock Exchange’s Sensitive Index -- Sensex tumbled by over four hundred and twenty points to end below its psychological 20,750 mark. Broader markets too witnessed bloodbath and ended the session with a cut of over two and a half percent. The market breadth remained in favour of decliners, as there were 896 shares on the gaining side against 1,393 shares on the losing side, while 131 shares remained unchanged.

Finally, the BSE Sensex slumped by 426.11 points or 2.02%, to settle at 20707.45, while the CNX Nifty plunged by 130.90 points or 2.09% to settle at 6,135.85.

The BSE Sensex touched a high and a low of 20899.03 and 20688.03, respectively. The BSE Mid cap index was down by 2.82%, while the Small cap index lost 2.64%.

The top gainers on the Sensex were Hindustan Unilever up 1.71%, ITC up 0.08% and Cipla up 0.04%, on the flip side Tata Motors down 6.13%, Tata Steel down 6.03%, ICICI Bank down 4.53%, Tata Power down 4.16%, and Maruti Suzuki down by 4.02% were the top losers on the index.

On the BSE sectoral front Realty down by 6.82%, Bankex down by 3.97%, Metal down by 3.81%, Auto down by 3.33% and Power down by 3.01% were the top losers on the sectoral front, while there were no gainers on the sectoral front.

Meanwhile, Planning Commission Deputy Chairman Montek Singh Ahluwalia, amid rising concerns over the prevailing economic slowdown, has attributed the decline in India’s growth rate mainly to domestic factors and expressed the need for the government to take quick decisions to boost the economic growth.

Highlighting that the government cannot blame the global factors entirely for the country's flat growth, Ahluwalia asserted that the one third of prevailing economic downturn could be attributed to global factors and two-thirds to domestic factors. In the previous fiscal, India's economy’s growth slowed down to a decade low of 5 percent owing to the global slowdown as well as domestic factors such as high inflation and interest rates. The growth is estimated to remain around the same level in current fiscal.

By adding further, Ahluwalia said that India could potentially sustain a growth rate of 7 percent in future. Referring to growth in infrastructure sector, he asserted that major development in country’s infrastructure would be taken place after India's general elections in May.

The CNX Nifty touched a high and low of 6,188.55 and 6,130.25 respectively.

The top gainers on the Nifty were Hindustan Unilever up by 2.54%, HCL Technologies up by 0.93%, Cipla up by 0.87%, ITC up by 0.14%, and UltraTech Cement up by 0.01%. On the other hand, Jaiprakash Associates down by 13.81%, DLF down by 8.66%, Ranbaxy Laboratories down by 8.43%, Tata Motors down by 5.95%, and Tata Steel down by 5.93%, were the top losers.

The European markets were trading in red, France's CAC 40 was down by 0.25%, Germany's DAX was down by 0.42% and United Kingdom's FTSE 100 was down by 2.90%.

The Asian markets concluded Monday’s trade in red on fears of more tapering in Federal Reserve's policy meeting. Indonesia’s bonds fell, with the 10-year yield rising the most in three weeks, on concern inflation will accelerate and there will be further cuts to US stimulus. In China, the sales of pre-owned homes rose to an eight-year high in Shanghai in 2013, with robust sentiment prevalent in the luxury sector. The purchases of these homes totaled 293,000 units last year, up 58.8 percent from 2012. Shanghai’s gross domestic product expanded 7.7% last year, at the same rate as the national average but faster than its 7.5% rate in 2012. The city registered a 7.6% GDP growth in the fourth quarter of 2013, compared with 7.8% in the third quarter, 7.6% in the second quarter and 7.8% in the first quarter.

Japan’s trade deficit unexpectedly widened in December month with exports growing less than forecast. Exports rose 15.3% from a year earlier while imports grew by 24.7% from December 2012. The resulting trade deficit was 1.302 trillion yen ($12.8 billion), widening from ¥1.293 trillion and above a projected ¥1.256 trillion trade gap predicted. The deficit was the 18th in a row for Japan. South Korean Consumer Confidence rose to 109, from 107 in the preceding month. Hong Kong Trade Balance fell to a seasonally adjusted -54.4B, from -44.6B in the preceding month.