Benchmarks end lower on Bihar verdict; Sensex holds 26,100 mark

Indian equity benchmarks ended the session with a loss of around half a percent on the back of selling by fund and retail investors. Earlier, markets made a huge gap-down opening after BJP's heavy defeat in Bihar state elections raised concerns that his government will struggle to pass policy reforms. Though, there was some recovery after the initial slump but it was not that strong that could lift the markets in green. The recovery was induced with finance minister Arun Jaitley’s statement, who attributing the NDA's defeat in Bihar assembly elections to ‘huge index of opposition unity’, said that it will not impact the economic reforms process. He also said that he hope that Bihar, which is a consuming state, would support the legislation with pending Goods and Services Tax (GST) bill in the parliament. With the heavy buying in the last hours of the session the frontline indices not only surpassed the psychological 7,900 (Nifty) and 26,100 (Sensex) levels but also recovered most of their early losses. 

Further, traders also drew some encouragement on reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 219.17 crore on November 6, 2015, as per provisional data released by the stock exchanges.  Besides, Prime Minister Narendra Modi has said the 17-month-old NDA government has managed to turn around the image of India as a 'written off' economy to one of the fast developing economies in the world that too supported the sentiments.

On the global front, European stocks were flat to slightly weaker in early trade as investors paused for breath following the rally sparked by Friday’s bumper US jobs data. Asian markets ended mostly in red, while China stocks closed higher, as investors welcomed Friday evening's announcement by the securities regulator that initial public offerings (IPOs) would resume in the next several weeks.

Back home, depreciation in Indian rupee too dampened the sentiments. The rupee was at 66.67 per dollar at the time of equity markets closing as compared to 65.56 per dollar level on Friday. Moreover, lower-than-expected quarterly earnings by some more bluechip companies dampened the trading sentiment. However, buying in PSU oil marketing companies too supported the markets as the minister of state for petroleum and natural gas Dharmendra Pradhan said that government is considering a proposal to remove cooking gas subsidy for those earning above a certain threshold. HPCL and BPCL were trading up by around half a percent.  Aviation stocks too surged and ended with considerable gains.

The NSE’s 50-share broadly followed index Nifty declined by around forty points to end the psychological 7,915 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by around one hundred and fifty points to end below its crucial 26,300 mark. However, broader markets ended with the gains of around half a percent . The market breadth was evenly divided, as there were 1484 shares on the gaining side against 1132 shares on the losing side while 131 shares remain unchanged.

Finally, the BSE Sensex dropped by 143.84 points or 0.55% to 26121.40, while the CNX Nifty declined by 39.10 points or 0.49% to 7915.20.

The BSE Sensex touched a high and a low 26193.17and 25656.90, respectively. The BSE Mid cap index was up by 0.42%, while Small cap index up by 0.78%.

The gaining sectoral indices on the BSE were Consumer Durables up by 2.24%, Auto up by 1.25%, FMCG up by 1.16% and Oil & Gas up by 0.01%, while Realty down by 2.20%, TECK down by 0.70%, Capital Goods down by 0.62%, Power down by 0.56% and IT down by 0.44% were the losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 3.89%, Maruti Suzuki up by 2.54%, ITC up by 1.59%, Vedanta up by 1.52% and SBI up by 1.17%. On the flip side, Sun Pharma down by 5.82%, BHEL down by 3.86%, Dr. Reddys Lab down by 3.44%, Wipro down by 1.99% and ICICI Bank down by 1.70% were the top losers.

Meanwhile, in a bid to meet the fiscal deficit target, the government is likely to take up a step to mop up additional resources by hiking duties and seeking higher dividends from PSUs to make up for the anticipated shortfall in disinvestment and direct tax proceeds.

The disinvestment department was able to garner Rs 12,600 crore so far this fiscal due to volatile market conditions. It has a target of Rs 69,500 crore to be garnered from minority stake sale in PSUs as well as strategic stake sale. With seven months of the current financial year already over, the Department of Disinvestment has already indicated to the Finance Ministry that it would not be possible to meet the ambitious target.

Making up for the shortfall in disinvestment through other sources is essential for meeting the fiscal deficit target of 3.9 per cent of GDP. Finance Minister Arun Jaitley has already delayed the fiscal consolidation programme by a year in order to fuel growth. Jaitley has proposed to bring down the fiscal deficit to 3 per cent of GDP by 2017-18 as against the earlier target of 2016-17.  Fiscal deficit in the first half of the current fiscal stood at Rs 3.78 lakh crore or 68.1 per cent of the Budget estimate for the whole year.

For dividend, the government is pushing blue-chip PSUs to either step up their capex or pay higher dividends and not sit on cash pile. The government had budgeted to collect Rs 36,174 crore by way of dividend from the public sector enterprises, higher than last year's realisation of Rs 28,423 crore.  It has already received a dividend of Rs 65,896 crore from RBI, which is higher than this year's budget projection of Rs 64,477 crore.

As per government estimates, in the current fiscal the total tax revenues are likely to fall short by Rs 50,000 crore from the budget estimates. Tax revenues collected in the current fiscal could be around Rs 14 lakh crore as against the budgeted Rs 14.50 lakh crore Although indirect tax collections are showing a healthy growth, the collections of direct taxes have remained subdued.

Recently, the Finance Ministry has raised excise duty on petrol and diesel by Rs 1.60 per litre and 40 paise per litre respectively. This move is expected to fetch the exchequer additional revenue of about Rs 3,200 crore during the rest of the fiscal and also help the government in partly meeting the shortfall in disinvestment and direct tax realisation.

The CNX Nifty was trading in a range of 7771.70 and 7937.75.

The top gainers on Nifty were Tata Motors up by 3.94%, Bank Of Baroda up by 2.63%, Maruti Suzuki up by 2.33%, Asian Paints up by 1.90% and PNB up by 1.77%. On the flip side, Sun Pharma down by 5.78%, Cairn India down by 3.91%, BHEL down by 3.60%, Dr. Reddys Lab down by 3.57% and Idea Cellular down by 3.27% were the top losers.

European Markets were trading mostly in the red; Germany’s DAX decreased 36.3 points or 0.33% to 10,951.73 andFrance’s CAC decreased 29.88 points or 0.6% to 4,954.27, while UK’s FTSE 100 increased 3.87 points or 0.06% to 6,357.70.

The Asian markets closed mostly lower on Monday, while equity markets in China and Japan scaled their highest levels in more than two months. Yang Weimin, Vice Minister of the Office of the Central Leading Group on Financial and Economic Affairs stated that China is making 6.5% a floor or minimum level for annual economic growth in 2016 through 2020, adding that the figure would be a base for setting a target for the five-year period. Weimim added that the economic growth target has not been fixed yet, as that is an objective that needs to be approved by the National People’s Congress.  Chinese Trade Balance rose to 61.64B, from 60.34B in the preceding month. Japan’s Average Cash Earnings rose to a seasonally adjusted 0.6%, from 0.4% in the preceding quarter whose figure was revised down from 0.5%. Taiwanese Trade Balance rose to a seasonally adjusted annual rate of 6.12B, from 5.25B in the preceding month. Malaysian Industrial Production rose to a seasonally adjusted annual rate of 5.1%, from 3.0% in the preceding month.