Indian equity benchmarks end flat on the penultimate day of F&O expiry

Wednesday turned out to be a disappointing session of trade for the stock markets in India, as the benchmark equity indices failed to hold on to the initial gains and settled the session flat with negative bias, extending their losing streak for fourth straight day. Sanguine global sentiments led to initial up-move in local markets but the psychological 6,150 (Nifty) and 20,800 (Sensex) levels proved as stern resistance levels for the markets to hold. The frontline indices could not hold on to those levels for long and witnessed abrupt selling pressure in last leg of trade, as investors chose to take profits off the table, a day ahead of January series futures and options contract expiry.

Sentiments took a turn for the worse after banking counters, which traded firmly in early deals, entered into red after Indian Overseas Bank (IOB) and ICICI Bank reported rise in bad loan in Q3 FY14. IOB reported 35.56% fall in its net profit at Rs 75.07 crore for the quarter as compared to Rs 116.50 crore for the same quarter in the previous year. However, the ICICI Bank registered a rise of 12.53% in its net profit at Rs 2532.21 crore in Q3FY14 as compared to Rs 2250.24 crore in the corresponding quarter previous year. The sentiment was also hit adversely by data showing that foreign institutional investors (FIIs) sold shares worth a net Rs 1267.35 crore on January 28, 2014. Sentiments also got hurt after the Reserve Bank of India (RBI) forecasted the Indian economic growth to fall below 5 percent in 2013-14 as the prospects of a pick-up in real GDP growth in the second half of 2013-14 have been dampened by negative growth witnessed in industrial production over two consecutive months.

Investors shrugged off firm global cues with European markets trading higher in early deals. Asian markets too ended mostly higher, as sentiments remained up-beat after Turkey amazed investors with a huge hike in interest rates, stirring hopes the drastic action would short-circuit a vicious cycle of selling in emerging markets and revive risk appetite generally.

Back home, down-side remained capped as some support came from appreciation in Rupee. The partially convertible rupee was trading at 62.19 per dollar at the time of equity markets closing, as against yesterday’s close of 62.50 per dollar on the Interbank Foreign Exchange. Meanwhile, stocks related to infra sector had edged higher in early deals, as the road ministry is set to modify its exit policy and make it easier for new investors to enter and replace existing ones.

The NSE’s 50-share broadly followed index Nifty declined by just over five points to end below its psychological 6,150 support level, moreover Bombay Stock Exchange’s Sensitive Index -- Sensex shed over thirty points to end below its psychological 20,650 mark. Broader markets too struggled to get some traction and ended the session mixed. The market breadth remained in the favour of decliners, as there were 1,236 shares on the gaining side against 1,361 shares on the losing side, while 143 shares remained unchanged.

Finally, the BSE Sensex declined by 36.21 points or 0.18%, to settle at 20647.30, while the CNX Nifty lost 6.00 points or 0.10% to settle at 6,120.25.

The BSE Sensex touched a high and a low of 20828.68 and 20613.62, respectively. The BSE Mid cap index was up by 0.15%, while the Small cap index was down by 0.26%.

The top gainers on the Sensex were Maruti Suzuki up 7.11%, BHEL up 3.86%, Hero MotoCorp up 2.85%, Axis Bank up 1.58%, and Sun Pharma up by 1.34%, on the flip side SSLT down 3.05%, Tata Steel down 2.21%, Hindalco Inds down 1.80%, ICICI Bank down 1.69%, and Bajaj Auto down by 1.62% were the top losers on the index.

On the BSE Sectoral front Capital Goods up by 0.92%, Healthcare up by 0.76%, IT up by 0.56%, Teck up by 0.44% and PSU up by 0.34% were the top gainers, while Metal down by 1.35%, Consumer Durables down by 0.76%, Bankex down by 0.69%, Realty down by 0.58% and Power down by 0.09% were the top losers on the sectoral front.

Meanwhile, Finance Minister P Chidambaram has asserted that the restrictions on gold imports will be reviewed by March end. Chidambaram further expressed confidence that the government will be able to revisit some of the restrictions on gold import by the end of this year after assuring firm grip on the current account deficit (CAD). There has been about 1-3 tonnes of gold smuggled into India every month following the restrictions imposed on gold shipment last year, he added.

By adding further, Finance Minister emphasized that restraining imports of gold could not be the long-term policy to control the CAD adding that India’s long-term goal is to increase exports which will earn dollars and strengthen the country to pay for imports. Recently, the National Advisory Council (NAC) chairperson Sonia Gandhi has also asked the government to take steps for reviving the growth of gems and gewellary industry. The industry players, in a letter to NAC chairperson, 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.

High gold import has become one of the major contributors to high 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 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 declined by 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 touched a high and low of 6,170.45 and 6,109.80 respectively.

The top gainers on the Nifty were Maruti Suzuki India up by 6.96%, BHEL up by 4.23%, BPCL up by 3.68%, Ranbaxy Laboratories up by 3.46%, and Hero MotoCorp up by 2.84%. On the other hand, SSLT down by 2.93%, IndusInd Bank down by 2.44%, Bank of Baroda down by 2.19%, Tata Steel down by 2.03%, and Bajaj Auto down by 1.79% were the top losers.

The European markets were trading in green, France's CAC 40 was up by 0.12%, Germany's DAX was up by 0.78% and United Kingdom's FTSE 100 was up by 0.62%.

The Asian markets, barring Straits Times concluded Wednesday’s trade in green as tensions over emerging markets eased. Investors have started eyeing Federal Reserve decision on its stimulus program. Turkey’s central bank aggressively increased overnight lending rate/interest rates at an extraordinary policy meeting billed as a test case for under-pressure emerging markets. The central bank raised its overnight lending rate to 12% from 7.75%, raised its one-week repo rate to 10% from 4.5% and raised its overnight borrowing rate to 8% from 3.5%.

Philippine third-quarter on-year economic growth has been revised down to 6.9% from 7.0% as a result of a slower-than-initially-estimated industry and services sector. GDP growth in the first and second quarters was 7.7% and 7.6%, respectively. South Korean Industrial Production rose to a seasonally adjusted annual rate of 2.6%, from -0.8% in the preceding month whose figure was revised up from -1.3%. Singaporean Unemployment Rate remained unchanged at 1.8%, from 1.8% in the preceding quarter.Taiwan Weighted remained closed for the trade today.