13th May, 2013 : April deficit shocks, mkt shivers

iiflAfter hitting a new calendar year high and surging past the 6100 mark in Saturday’s special trading session, profit-booking gripped the Nifty. It fell sharply in trade today registering its biggest intra-day percentage fall since May 8, 2012.

Higher-than expected trade deficit numbers for April was all that the markets needed to free fall – a sell-off from which it never recovered. Trade deficit in April widened to $17.8bn. Exports increased 1.68% at $24.2bn while imports expanded 10.96% at $41.9bn.

The market is abuzz with news that the Reserve Bank of India’s forensic study into Cobrapost’s money-laundering allegations has unearthed fictitious permanent account numbers, unknown non-resident ordinary accounts and rampant non-compliance of know your customer norms.

Media reports suggest that the apex bank’s probe into private banks like HDFC Bank and ICICI Bank threw up KYC violations and cash transfers from non-resident accounts.

This took a toll on the banking index, which declined 1.6%, with index heavyweights like State Bank of India, HDFC Bank, HDFC, Bank of Baroda, IndusInd Bank, and Punjab National Bank losing out.

“Bank of Baroda and Bank of India results carried a mixed flavour with operational performance being weaker-than-expected while asset quality was stable. Though their valuation is undemanding, PSU banks in general face both cyclical and structural challenges.

Trade deficit number of close to US$18bn for the month of April surprised negatively on the back of further increase in the import of Gold and Silver and feeble exports growth. It has dented the market hope that CAD situation would significantly improve with the recent crash in prices of oil and precious metals,” says Amar Ambani, Head of Research IIFL.

 Among sectoral indices, the FMCG index was the top loser, declining 3% led by a sharp sell-off in index heavyweight ITC. The cigarette major was down 5% registering its biggest intra-day fall since May 8, 2012.

The other major laggards included metals, capital goods, autos and oil & gas stocks. Even mid- and small-cap stocks were not spared.

The currency too played spoilsport in today’s session. It depreciated sharply and is near striking distance of the 55 per dollar mark.