Weak monsoon forecast, firming crude prices and slow pace of economic recovery hurt the trading sentiments
Markets continued its steep downfall and closed lower as weak monsoon forecast raised fears of draught while delay in further rate cuts and slow pace of recovery in the economy dampened sentiments.
Meanwhile, India's services activities dropped for the first time in the span of thirteen month on lack of demand which weighed on the bourses.
The Sensex plunged 351 points to close at 26,837 and the Nifty dropped 101 points to end at 8,135.
In the broader market, BSE Midcap and Smallcap indices underperformed the larger peers and lost 1.2% and 1.8% each.
At 3.35 PM, the rupee was trading at 63.93 against the USD dollar after hitting an intra-day low of 64 tracking weakness in local equities.
MONSOON & ITS IMPACT
Shares of FMCG and fertilizer stocks and shares of two-wheeler and tractor maker M&M slipped across the bourses after India Meteorological Department downgraded its earlier April estimate from 93% to 88% long period average inciting concern of weak agricultural output that could further push up the inflation.
Among the FMCG pack, ITC, HUL, Marico, Colgate-Palmolive, Britannia, Dabur India, Nestle India dropped between 1-10% on the BSE.
In the auto segment, shares of two wheeler companies including Hero Motocorp, Bajaj Auto and tractor major M&M ended lower by 1.4% each on deficient monsoon forecast.
The slowdown in the rural economy will result in a fall in motorcycle and tractor volumes citing low spending capacity of the customers.
Tracking the recent downgrade by the IMD, the demand for fertilizers will drastically decrease. In the fertilizer space, Rashtriya Chemicals and Fertilizers (RCF), National Fertilizers and Gujarat State Fertilizers and Chemicals (GSFC), Chambal Fertilisers and Chemicals declined up to 5% on the BSE.
“Post the disappointment yesterday, the markets have continued to remain bearish. Today, the midcap universe has witnessed quite a few pockets of panic selling.
However, I believe that this correction on indices could actually be taken as a buying opportunity from a short term bounce. 8000 levels could be the support on Nifty spot,” said Kunal Bothra, Head – Advisory, LKP Securities.
“Many large cap stocks are 5-10% above their previous swing lows, which coincides with Nifty lows of 8000 few weeks back. Hence, we believe that this correction could actually witness a fresh level of buying given the strength in this stocks continue over the next few days” he added.
Banking stocks declined across the exchange after the RBI yesterday lowered its growth estimate for this fiscal to 7.6% amid concerns on below-normal monsoon resulting in possibility of higher inflation coupled with rising crude oil prices.
However, Raghuram Rajan urged banks to pass through the sequence of rate cuts into lending rates in order to benefit the customers.
Following the cues, SBI, PNB, Dena Bank, Punjab Sind Bank and Allahabad Bank slashed their interest rates. The stocks ended the session lower up to 4% on the BSE.
Coal India and its subsidiaries secured 98% of targeted production at 40.97 million tonnes in May 2015. The stock gained 0.7%.
Engineer conglomerate L&T secured contract worth Rs 468 crore from the Ministry of Defence for the design and construction of a floating dock for the Indian Navy.
However, the stock lost 1%.
Maruti Suzuki India launched a diesel variant of hatchback Celerio, powered by parent Suzuki's first diesel engine, however the stock dipped over 1%.
Telecom major Bharti Airtel approached investors for issuance of 10-year US dollar bonds. The stock ended the session with marginal gains.
Rate sensitive stocks fell for the second straight day a day after the RBI signaled that it would wait for data on monsoon forecast and keep a watch on inflation before any further rate cuts. BSE Realty index cracked over 5% with Unitech down 35%.
HDIL, Indiabulls Real Estate, Oberoi Realty, DLF, Delta Corp, and Prestige Estates lost between 1-8%.
Shares of Adani Enterprise plunged 83% to Rs 111 on the NSE on reports stating that the company separated its port and power arm and merged them with Adani Ports and Adani Power business.
Shares of Nestle India dropped 9% on the BSE after the Delhi government summoned officials of Nestle India claiming that the samples of Maggi noodles fail to meet food safety norms and are unsafe.
Shares of Emami gained 2% on the BSE after the FMCG major declared that has plans to acquire the hair and scalp care brand Kesh King from SBS Biotech, a Himachal Pradesh company, worth Rs 1,651 crore.
European shares nudged higher with Greek stocks up for a third straight session and buyers shifting their focus into southern euro zone bonds from Italy, Spain and Portugal.
However, Asian share markets finished lower owing to spike in debt yields which dented the allure of risky assets.