Sensex tanks 551 points on P-notes concern, China sell-off

Markets ended lower on concerns that capital inflows could take a hit if curbs are imposed on P-notes

Markets ended nearly 2% lower on Monday on concerns that capital inflows could take a hit with the government proposing to look into the Special Investigative Team's stringent norms on participatory notes (P-notes) while the sharp-sell off in Chinese shares also weighed on sentiment. Further, muted earnings from large corporates, reforms uncertainty amid political logjam, expiry of July derivative contracts, the outcome of the US Fed meet on July 28-29 also weighed on markets sentiment.

The 30-share Sensex ended down 551 points at 27,561 and the 50-share Nifty was down 161 points at 8,361.

"Market took cues from weakness in regional markets wherein China corrected substantially while the talk of SIT recommendation of stricter norms for P-notes also weighed on investor sentiment," said Vaibhav Sanghavi, Director, Ambit Investment Advisors.

 

The broader markets also witnessed profit taking with the BSE Mid-cap down 1.4% and Small-cap index ended down 1.1%.

Market breadth ended weak with 1,744 losers and 1,078 gainers on the BSE.

The Supreme Court-appointed special investigative team (SIT) had, last week, recommended stricter norms for participatory notes (P-notes) to check the flow of unaccounted money. The SIT suspects that P-note route is being used for the purpose of tax evasion. The P-notes route accounts for Rs 2.75 lakh crore of FPI holdings as of end-June 2015.

Meanwhile, the Indian rupee extended losses and was trading lower at 64.15 against the US dollar compared to the previous close of 64.03 amid fears of capital outflows in the weak of weakness in domestic equities.

GLOBAL MARKETS

Asian stocks ended lower after Chinese shares recorded their single-biggest drop in 5 1/2 years to end over 8% lower on Monday as investors booked profits while the sluggish economy also weighed on investor sentiment. China's benchmark share index, the Shanghai Composite ended down 8.5% at 3,752.56. Hong Kong's Hang Seng ended down 3.2% while Nikkei dropped 1% and Straits Times ended down 1.1%.

European markets opened lower tracking the sharp sell-off in Chinese stocks and investors turned cautious ahead of the US Fed meet this week. The CAC and DAX were down over 1% each while the FTSE was trading flat with positive bias.

SECTORS & STOCKS

The BSE Metal index was the top loser down 2.3% followed by Bankex, Realty, Auto, Oil and Gas among others.

Metal shares extended losses tracking sharp fall in global commodity prices and fears that demand from China, the world's largest consumer, would continue to remain muted. Tata Steel, Hindalco and Vedanta ended down 3-5% each.

In the banking space private lenders were among the top losers amid fears of non-performing assets  

Jaiprakash Associates total bank loans and long-term non-convertible debentures (NCDs) worth Rs.29,303.40 crore have been reduced to default rating by rating firm Credit Analysis and Research (CARE) due to a delay in servicing of debt by the company and poor liquidity. According to an 8 July report by brokerage house UBS, ICICI Bank Ltd, SBI, Axis Bank Ltd and Yes Bank Ltd have significantly increased their loan approvals to Jaypee Group. ICICI Bank, Axis Bank, HDFC Bank and SBI ended down 1.7-4.3% each.

Tata Motors dipped over 3% its lowest level since March 2014 on the BSE, on concerns about a slowdown in JLR car sales from its subsidiary in China.

Reliance Industries witnessed profit taking and ended nearly 2% down. On Friday, the company reported better-than-expected first quarterly earnings on the back of higher gross refining margins.

Bharti Airtel ended down 3.8%. The company plans to launch 4G data services across 44 cities across the country.

Other losers include, L&T, Infosys, HDFC and ONGC among others.

Among other shares, Lumax Industries ended locked at the upper circuit of 20% at Rs 407 on the BSE after the company reported more than two-fold jump in net profit at Rs 11.36 crore for the quarter ended June 30, 2015 (Q1).

SpiceJet rallied nearly 5%, extending their previous day’s 3% gain on the BSE, after the company said that a few parties approached it and evinced interest in making investments.

Rajesh Exports gained 2% in an otherwise weak market after the company said that the acquisition of Valcambi would be EPS (earnings per share) accretive as has been consistently profit making and dividend paying since the last 53 years.

Geometric soared 12% on the back of heavy volumes after the company reported a consolidated net profit of Rs 19.13 crore for the quarter ended June 30, 2015 (Q1) against Rs 3.29 crore in the March quarter.