Markets trade flat with negative bias in range-bound session

In the extremely range-bound session of trade, Indian equity benchmarks altering between positive and negative territory, were now trading flat with bit of negative bias as investors and foreign funds were adopting a cautious approach, ahead of the expiry of November futures & options contracts due on November 26, 2015. Further, the markets will closely watch the winter session of Parliament, beginning this week, which sets the agenda of the government. NDA's recent reverses in Bihar elections have put a cloud over the pace of reforms, and market participants fear that it won't be smooth sailing in Parliament. Further, sentiments remained subdued on reports that overseas investors have pulled out more than $1billion from the Indian capital markets since the beginning of the month due to lacklustre quarterly earnings and concerns over a possible rate hike by the US Federal Reserve. Depreciation in Indian rupee against dollar also weighed down sentiments.  The rupee depreciated by 11 paise to 66.30 against the US dollar in early trade due to appreciation in the US currency overseas. However, the broader market outperformed the benchmark indices with the BSE midcap and BSE smallcap indices gaining 0.32 and 0.65 per cent in trade. Market participants got some relief with former governor of RBI C Rangarajan’s statement that Indian economy will slightly perform better this year as the productivity level of capital may remain high.

On the global front, Asian markets trading mostly in green in early trade on Monday, after the US shares had their best week this year and investors shook off concerns about terror attacks in Paris and Mali. While Japan, the biggest market in the region, is closed for a holiday, most of the other markets in the region showing signs of optimism. Back home, stocks from Realty, Power and Capital Goods counters were supporting the markets’ uptrend, while those from IT, TECK and Realty counters were adding to the underlying cautious undertone. In scrip specific development, shares of Vakrangee have rallied after the company announced alliance with Ricoh India, to provide Managed Print Service (MPS) on a Pay per Unit (PpP) model to the un-served and under-served geographies in India through various Vakrangee Kendras. Furthermore, Strides Shasun surged after the company has received approval from the United States Food & Drug Administration (USFDA) for Dutasteride Capsules, 0.5 mg.

The market breadth on BSE was positive, out of 2246 stocks traded, 1354 stocks advanced, while 759 stocks declined on the BSE. 

The BSE Sensex is currently trading at 25852.05, down by 16.44 points or 0.06% after trading in a range of 25825.76 and 25958.04. There were 17 stocks advancing against 13 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.32%, while Small cap index up by 0.65%.

The top gaining sectoral indices on the BSE were Realty up by 0.97%, Auto up by 0.65%, Capital Goods up by 0.56%, Consumer Durables up by 0.34% and Power up by 0.31%, while Metal down by 0.94% and FMCG down by 0.75% were the only losing indices on BSE.

The top gainers on the Sensex were Hero MotoCorp up by 2.59%, Bajaj Auto up by 1.96%, Wipro up by 1.20%, Dr. Reddys Lab up by 1.16% and BHEL up by 1.11%. On the flip side, Hindalco down by 3.43%, Vedanta down by 2.31%, ITC down by 1.83%, Tata Steel down by 1.50% and Cipla down by 1.25% were the top losers.

Meanwhile, amidst the concerns of government achieving the fiscal deficit target, after recommendation of the seventh pay commission's for a 23.55% increase in pay, allowances and pension for government employees, credit rating agency, Care Rating in its report “Impact of 7th Pay Commission” has said that India will have to generate additional revenue of Rs 80,000 crore  to meet the government’s self imposed target of 3.5% fiscal deficit at the end of the current fiscal.

The rating agency has said that if the country needs to attain the 3.5% deficit ratio, the government needs to facilitate increase in revenues, as with the likely reduction in the corporate tax rate, there is going to be pressure on the revenue collections. Besides, there have to be some cuts in expenditure, in order to ensure that there are savings which can compensate for this additional cost on salary account and Service tax rates, which have already been increased, could be hiked further.

It further said that the government needs to balance the expenditure with no compromise on capital expenditure because the cushion of further lowering the subsidies may not be available. Further, the government needs to maintain its disinvestment levels in order to reduce the fiscal deficit impact.

However, it said that on the macro front, the increase in salaries and pensions will have macroeconomic impact in the form of improved purchasing power in the economy. Increased expenditure by households would benefit sectors such as consumer durables, electronic goods including mobile handsets, housing and automobiles.

Secondary impact on the same would be seen on steel, electric goods, auto parts etc. Banks would experience increased business in the form of higher home loans. The state government will experience equivalent amount of additional pay hikes to public sector employees. The finances at the state government would hence also be impacted. The states with fiscal deficits would have to generate additional revenues in order to maintain their deficit targets.

The CNX Nifty is currently trading at 7852.60, down by 3.95 points or 0.05% after trading in a range of 7846.80 and 7877.50. There were 26 stocks advancing against 24 stocks declining on the index.

The top gainers on Nifty were Adani Ports &Special up by 2.71%, Hero MotoCorp up by 2.43%, Asian Paints up by 2.03%, Zee Entertainment up by 1.94% and Bajaj Auto up by 1.51%. On the flip side, Hindalco down by 3.30%, Vedanta down by 2.25%, ITC down by 1.80%, Tata Steel down by 1.74% and Cipla down by 1.53% were the top losers.

Asian markets were trading mostly in green; Taiwan Weighted was up by 0.24%, FTSE Bursa Malaysia KLCI up by 0.61%, Shanghai Composite up by 0.26%, KOSPI Index up by 0.56% and Jakarta Composite up by 0.3%. On the other hand, Hang Seng was down by 0.16%.