A bout of volatility was witnessed as key benchmark indices pared losses after extending intraday losses in mid-morning trade. The barometer index, the S&P BSE Sensex, pared losses after hitting its lowest level in more than 10 months. The 50-unit CNX Nifty trimmed losses after hitting its lowest level in more than 10 weeks. The 50-unit CNX Nifty was currently hovering below the psychological 8,000 mark. Earlier, the Nifty had regained the psychological 8,000 mark after falling below that level at the onset of the trading session. The Sensex continued to hover below the psychological 27,000 mark after falling below that level in early trade. The Sensex was currently off 947.22 points or 3.46% at 26,418.85.
The broad market depicted weakness. There were more than eight losers against every gainer on BSE. The BSE Mid-Cap index was off 3.92%. The BSE Small-Cap index was off 4.68%. The decline in both these indices was higher than the Sensex's decline in percentage terms.
The sharp setback on the Indian bourses was triggered by a rout in global equities. Chinese stocks led a sell-off in Asian markets on concerns about slowdown in China's economic growth. The sharp setback in Chinese stocks materialized after US stocks tumbled during the previous trading session on Friday, 21 August 2015, as fears about China's economy and global growth spurred heavy selling. Trading in US index futures indicated that that the US stocks will tumble again at the opening bell today, 24 August 2015.
Banks stocks witnessed selling pressure. Metal and mining stocks dropped on concerns about slowdown in China's economic growth.
There was heavy selling of Indian stocks by foreign portfolio investors (FPIs) during the previous trading session on Friday, 21 August 2015. FPIs sold shares worth net Rs 2340.60 crore on Friday, 21 August 2015, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) bought shares worth a net Rs 1524.10 crore on Friday, 21 August 2015, as per provisional data released by the stock exchanges.
Indian stocks may remain volatile in the near future as traders roll over positions in the futures & options (F&O) segment from the near month August 2015 series to September 2015 series. The near month August 2015 derivatives contracts are set to expire on Thursday, 27 August 2015.
At 11:19 IST, the S&P BSE Sensex was down 947.22 points or 3.46% at 26,418.85. The index fell 1,153.16 points at the day's low of 26,212.91 in mid-morning trade, its lowest level since 17 October 2014. The index fell 635.67 points at the day's high of 26,730.40 at the onset of trading session.
The CNX Nifty was down 308.65 points or 3.72% at 7,991.30. The index hit a low of 7,940.75 in intraday trade, its lowest level since 12 June 2015. The index hit a high of 8,060.05 in intraday trade
The BSE Mid-Cap index was down 439.81 points or 3.92% at 10,776.84. The BSE Small-Cap index was down 543.62 points or 4.68% at 11,066.82. The decline in both these indices was higher than the Sensex's decline in percentage terms.
The market breadth indicating the overall health of the market was extremely weak. There were more than eight losers for every gainer on BSE. 2,090 shares fell and 248 shares rose. A total of 31 shares were unchanged.
Metal and mining stocks dropped on concerns about slowdown in China's economic growth. JSW Steel (down 6.59%), Steel Authority of India (down 6.14%), Vedanta (down 6.12%), Hindalco Industries (down 5.87%), Hindustan Zinc (down 5.83%), Tata Steel (down 5.65%), Hindustan Copper (down 4.33%), Bhushan Steel (down 3%), Jindal Steel & Power (down 2.83%), NMDC (down 2.15%) and National Aluminum Company (down 1.81%), edged lower. China is the world's largest consumer of copper, aluminum and steel.
Banks stocks witnessed selling pressure. Among PSU banks, Bank of India (down 7.9%), Syndicate Bank (down 6.33%), Union Bank of India (down 6.16%), IDBI Bank (down 6.11%), Central Bank of India (down 6.08%), Punjab National Bank (down 5.98%), Bank of Baroda (down 5.86%),Canara Bank (down 5.44%), UCO Bank (down 5.12%), Andhra Bank (down 4.81%), State Bank of India (down 4.77%), Allahabad Bank (down 4.72%), United Bank of India (down 4.35%), Indian Bank (down 4.16%), Corporation Bank (down 4.06%), Dena Bank (down 3.56%), Punjab and Sind Bank (down 3.56%), Bank of Maharashtra (down 3.27%) and Vijaya Bank (down 2.77%), edged lower.
Among private sector banks, Federal Bank (down 6.43%), Yes Bank (down 6.31%), ICICI Bank (down 5.72%), City Union Bank (down 5.32%), IndusInd Bank (down 5.23%), Axis Bank (down 5.1%), Kotak Mahindra Bank (down 4.69%) and HDFC Bank (down 3.55%), edged lower.
In the global commodities markets, Brent crude oil futures edged lower as concerns about a global supply glut added to worries over potentially weaker demand from China. Brent for October settlement was currently off $1.13 at $44.33 a barrel. The contract had fallen $1.16 a barrel or 2.49% to settle at $45.46 a barrel during the previous trading session.
India imports about 80% of its crude requirements and a decline in crude eases concerns on fiscal deficit, inflation and gives more room for the government to boost growth through spending on infrastructure. However, a weakness in rupee against the dollar will restrict the benefit of falling global crude oil prices to that extent. A weak rupee raises the cost of imports.
In the foreign exchange market, the rupee fell below 66 against the dollar. The partially convertible rupee was hovering at 66.48, compared with its close of 65.83 during the previous trading session.
Meanwhile, a committee headed by A.P. Shah, chairman of the Law Commission, has reportedly suggested sparing foreign portfolio investors (FPIs) from the levy of minimum alternate tax (MAT) for the period prior to 1 April 2015. If the government accepts the recommendations of the committee, it would provide a significant relief to foreign investors facing several years of levies on capital gains made by them. In the February 2015 Budget, the government had exempted FPIs from MAT starting 1 April 2015, but had not made the clarification retrospective. The tax row started after the income-tax department started demanding MAT from foreign investors on capital gains accruing to them from the sale of shares, citing an August 2012 order by the Authority for Advance Rulings (AAR) in the case of Castleton Investment that MAT is applicable to both domestic and foreign companies. MAT is a tax levied on profit-making entities that don't pay corporate income tax because of exemptions and incentives. FPIs have argued that MAT is applicable only to domestic companies that have a base in India. The government appointed the Shah panel to defuse the row that threatened India's image as an investment destination. The Shah committee submitted its report to the government last month. The tax department had earlier clarified that MAT will not apply to investment routed through countries with which India has a tax treaty.
Meanwhile, India's weather office, the India Meteorological Department (IMD), said in a daily report issued yesterday, 23 August 2015, that for the country as a whole, cumulative rainfall during this year's monsoon season was 10% below the Long Period Average (LPA) until 23 August 2015. Region wise, the rainfall was 13% below the LPA in Central India, 6% below the LPA in East & Northeast India, 3% below the LPA in Northwest India and 1% below the LPA in South Peninsula until 23 August 2015.
The June-September southwest monsoon is critical for the country's agriculture because a considerable part of the country's farmland is dependent on the rains for irrigation.
In overseas markets, Chinese stocks led a sell-off in Asian markets on concerns about slowdown in China's economic growth. In mainland China, the Shanghai Composite was off 8.37%. In Hong Kong, the Hang Seng index was off 4.59%. China has been a key engine for the global economy in recent years.
Meanwhile, the Chinese government yesterday, 23 August 2015, reportedly published finalized rules that allow pension funds managed by local governments to invest in pension funds. Under the new rules, these pension funds, with assets estimated at more than 2 trillion yuan, or about $322 billion, can invest up to 30% of their net assets in stocks, equity funds and balanced funds. They previously had been limited to bank deposits and Treasurys.
In other Asian markets, key benchmark indices in Indonesia, Japan, Singapore, South Korea and Taiwan were off 3% to 4.51%.
Trading in US index futures indicated that the Dow could slump 408.50 points at the opening bell today, 24 August 2015. US stocks tumbled on Friday, 21 August 2015, as fears about China's economy and global growth spurred heavy selling.
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