Global cues peel away local gains

The 30-share Sensex fell 1.6%, or 378.6 points, to close at 23,410, with only two of its components ending with gains

Indian markets on Tuesday posted their first decline in five sessions after global markets retreated due to a drop in oil prices and renewed concerns over China. Benchmark indices fell the most in nearly two weeks, underperforming most global markets, as investors turned cautious ahead of the Budget on Monday.

The 30-share Sensex fell 1.6 per cent, or 378.6 points, to close at 23,410, with only two of its components ending with gains, that too marginal.  The broad-based Nifty fell 1.7 per cent, or 125 points, to end at 7,109, with all but one of its components ending with losses.

Crude oil prices traded around $33 a barrel after the International Energy Agency said global surplus would continue next year, putting pressure on prices.

Most global markets retreated after the People's Bank of China lowered yuan's daily reference rate by the most in six weeks, sparking fresh concerns over the health of the world's second-biggest economy. The fall in most Asian markets and Europe was less than a per cent.

India's underperformance on Tuesday comes amid the start of the budget session of Parliament.

"Nifty shed nearly two per cent on Tuesday and closed around the day's low amid negative global cues and prevailing disappointment on the local front. Participants, who have pinned high hopes on the budget session of parliament, went empty handed on day one," said Jayant Manglik, president, retail distribution, Religare Securities.

Investors are keenly eyeing the parliament session and hoping the passage of key economic reforms, including the Goods and Services Tax (GST) Bill.

"Bears peeled off last few days’ gains, influenced by the drop in crude oil prices. Investors are taking a wait-and-watch approach ahead of derivative expiry and the Budget," said Vinod Nair, head, fundamental research, Geojit BNP Paribas Financial Services.

Foreign investors on Tuesday were net sellers of Rs 290 crore, while domestic institutions bought shares worth Rs 258 crore, provisional data provided by stock exchanges showed.

Foreign investors have pulled out $2.5 billion from domestic markets so far this year, triggering a 10 per cent fall in the Sensex.

Tuesday's fall was the second one-day decline of over 1.5 per cent in the past six sessions. Most sectoral indices ended with losses, with the BSE Bankex falling the most, three per cent, followed by realty, 2.5 per cent. The market breadth remained weak, with three declining stocks for every one advancing on the BSE.

Among Sensex companies, Coal India shares fell the most, four per cent, followed by State Bank of India and ICICI Bank, 3.9 and 3.2 per cent, respectively.

In a recent report, ICICI Securities said the 2016-17 consensus earnings for Nifty companies had been downgraded 21 per cent, sharpest since the 2008 Lehman crisis.

"In our view, the volatility in global stock markets and uncertainty around growth outlook has led to the frontloading of 2016-17 EPS (earnings per share) downgrades, which could result in a moderation in further downgrades in 2016," said ICICI Securities, which has set a year-end Nifty target of 8,270 (16 per cent upside from the current level).