Post Session: Quick Review

Indian markets showed a smart recovery attempt, putting a resilient face amid weak global cues on Monday. Though, the benchmarks could make only a flat closing by last despite their persistent effort, but showed good short covering that took them to highest point of the day. Traders got some support with a report of SBI Research, that the three conditions that influence action on rate cut seem to be fulfilled. 'Benign food inflation, sufficient transmission of policy rates and spread of normal/excess monsoon over 64 percent of the country makes a case for at least 25 bps cut in repo rate. RBI, which has lowered the benchmark rate by 75 basis points so far this year in three installments, is scheduled to hold its next bi-monthly monetary policy meet on September 29. Earlier, the domestic equity markets made a gap-down start tracking weak global cues, but recovering from initial hiccups started moving higher, even though there were continuous bouts of profit taking, traders continued buying in selective stocks in view of FM’s statement that India remains insulated from the economic fallout and stands out as a 'brighter spot'. 

On the global front, the Asian markets followed the weak trend of the US markets and most of them ended in red with cut of 1-2 percent. The only exception was the Chinese Shanghai Composite which bucking the global trends surged by around 2 percent. There was some concern in the region on uncertainty over the global outlook and the Fed’s next move. The European markets made a mixed start, with some of the indices trading in green on hopes that European Central Bank may give clues on the need for further stimulus for the euro area. Meanwhile, Greek Prime Minister Alexis Tsipras with a coalition of moderate parties won a vote much more decisive than indicated by polls.

Back home, markets came into action in the second half, which almost took them into green. The flat closing was in the face of weak global cues and supported by report of progress in monsoon, with IMD stating that the overall monsoon deficit has dropped to 14% of the benchmark long-period average (LPA) from 16%. Traders also, drew some comfort with Finance Minister Arun Jaitley’s statement that foreign investors are quite keen on India and are rather optimistic on its economic prospects, but political impediments to reforms could dampen their interest. Though, promising a simple and globally competitive tax regime, Finance Minister Arun Jaitley said the government is confident of the new GST regime to roll out from the next fiscal and expressed confidence about an early resolution of pending disputes on direct taxes front. Banking pack was first to show the signs of recovery and moved back into green with major banking stocks surging over a percent. There was sudden surge in IDBI Bank on report that government is considering privatisation of state-owned lender on the lines of Axis Bank. The government presently holds 76.5 per cent in IDBI Bank. The power sector too was in action, as deficient monsoon and sweltering heat in most parts of the country have raised electricity demand.Powergrid was up by over 3%, PTC surged by around 6%, Adani Power was up by over 5% and Torrent Power zoomed by around 9%.

The BSE Sensex ended at 26192.42, down by 26.49 points or 0.10% after trading in a range of 25972.54 and 26233.46. There were 13 stocks in green against 17 stocks in red on the index. (Provisional)

The broader indices were trading in green; the BSE Mid cap index was up by 0.43%, while Small cap index up by 1.24%. (Provisional)

The top gaining sectoral indices on the BSE were INFRA up by 1.30%, Power up by 1.19%, Bankex up by 0.82%, PSU up by 0.73%, Realty up by 0.56%, while FMCG down by 0.80%, Consumer Durables down by 0.30%, Oil & Gas down by 0.28%, Metal down by 0.28% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were Hindalco up by 2.56%, Axis Bank up by 2.26%, Maruti Suzuki up by 2.03%, SBI up by 1.28% and GAIL India up by 1.23%. On the flip side, Reliance Industries down by 2.01%, ITC down by 1.46%, Mahindra & Mahindra down by 1.42%, Dr. Reddys Lab down by 1.17% and Bharti Airtel down by 1.17% were the top losers. (Provisional)

Meanwhile, India’s merchandise exports are forecast to hit its lowest in five years in 2015-16 between $265-268 billion, significantly lower than $310.5 billion in the previous fiscal, mainly on account of sharp erosion in commodity prices globally, according to Associated Chambers of Commerce & Industry of India (ASSOCHAM).

ASSOCHAM has said that it is not as if the entire export drop is coming around on the back of fall in demand for Indian goods. It is only that the global merchandise economy has moved away sharply from a very high cost, ultra bullish commodity situation to a bearish and low cost situation where demand relates mainly to the actual consumption which is rather low key.

It further stated that “Indian exports had achieved a landmark of $300 billion in 2011-12 for the first time making the country a sizeable player in global exports. Afterwards somehow, for one reason or the other we could reach a maximum of $314 billion in 2013-14, only to retrieve in the following year at $310 billion. But the fall this year is going to be very steep,”. The pricing power as was being mirrored in the futures trading markets all over the world - be it for crude oil, metals, coal, copper or even edible items turned out to be rather myopic and has totally disappeared. Hence no sentiment was build up around commodities and hence the demand remained restricted to the real consumption.

It further stated that with the erosion in price tags, the exports in value terms have dropped while in volume, the scenario is not that bad across sectors. India’s export basket comprises commodities, including engineering goods (mostly iron ore /steel and other metals), petroleum products, which have been hit in value terms. For the month of August, the exports of engineering goods were down 29 per cent and petroleum products by 47.88 per cent. However, the erosion is consumption demand, which is more disturbing is seen in leather goods, apparels, gems and jewellery. These products are not a commodity play and reflect the slowdown in consumption and pressure on the consuming economies. Both leather products saw a decline of close to 13 percent readymade garments 7.32 per cent in August. Gems and jewellery witnessed a modest gain of 2.66 per cent which is largely a play of changing gold prices.

The CNX Nifty ended at 7983.40, up by 1.50 points or 0.02% after trading in a range of 7908.35 and 7987.90. There were 25 stocks on gainers side against 25 stocks on losers side on the index. (Provisional)

The top gainers on Nifty were Hindalco up by 3.16%, Maruti Suzuki up by 2.43%, Axis Bank up by 2.42%, Power Grid Corpn. up by 2.40% and GAIL India up by 1.83%. On the flip side, Reliance Industries down by 1.97%, Bosch down by 1.39%, Dr. Reddys Lab down by 1.27%, Grasim Industries down by 1.23% and Asian Paints down by 1.19% were the top losers. (Provisional)

European markets were showing a mixed trend, UK’s FTSE 100 increased by 31.6 points or 0.52% to 6,135.71 and France’s CAC was up by 39.08 points or 0.86% to 4,574.93, Germany’s DAX declined by 59.86 points or 0.6% to 9,856.30.

The Asian markets closed mostly in red on Monday, amid fresh concerns over the outlook for global growth. Nikkei stock exchange was closed on account of ‘Respect for the Aged Day’ holiday. China’s Vice Finance Minister Shi Yaobin stated that the country’s stock market and foreign-exchange fluctuations are short term and the country can maintain a medium to high economic growth rate. Yaobin added that a string of downbeat activity data combined with wild price swings in the stock markets and a surprise currency devaluation in August have fuelled fears that the Chinese economy may be slowing more sharply than was expected earlier, putting Beijing’s 2015 growth target of 7% at risk. South Korea’s National Assembly Budget Office (NABO) cut its 2016 economic growth forecast to 3.0% from 3.3%, noting it might fare better than this year, but could be curbed by offshore developments. The parliamentary budget office estimate was revised down from the forecast of 3.3% for next year it made in May. It also revised this year’s growth forecast to 2.6% from 3.0%.