Markets trade lower in early deals; Nifty slips below 7,600 mark

Indian equity markets are reeling under pressure in early deals on Thursday after making a flat opening. Weakness in other Asian markets too weighted down sentiments. Traders remained cautious ahead of the start of fourth quarter results season, which commence next week with IT giant Infosys results due on April 15, Friday.  Further, foreign institutional investors were net sellers in equities worth Rs 494 crore on Wednesday, as per provisional stock exchange data that too kept pressurizing the sentiment. Besides, investors also failed to draw any solace with industry body CII terming the GDP calculation methodology an 'imprecise science' and pegging the country's economic growth at around 8 per cent for the current fiscal, higher than the RBI's projection of 7.6 per cent. On the sectoral front, traders were seen piling up position in Power, Oil & Gas and PSU, while selling was witnessed in Auto, FMCG, Consumer Durables, Bankex and Capital Goods.

In the scrip specific development, Future Retail (FRL) surged 4% on the BSE after the company said the asset management firm SSG Capital Management will acquire 40% stake in Future Supply Chain Solutions (FSC) from existing shareholders, including Future Retail, for Rs 580 crore.  

On the global front, US markets ended higher on Wednesday led by energy and healthcare sectors. Asian markets were mostly in red after FOMC released March meeting minutes. FOMC March meeting minutes failed to provide any hints regarding further interest rate hike.

Back home, at present, Sensex and Nifty were trading below the crucial 24,750 and 7,600 levels respectively. The market breadth on BSE was negative in the ratio of 730: 776 while 66 scrips remained unchanged.

The BSE Sensex is currently trading at 24731.08, down by 169.55 points or 0.68% after trading in a range of 24728.79 and 25013.13. There were 7 stocks advancing against 23 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.10%, while Small cap index was tad lower by 0.04%.

The gaining sectoral indices on the BSE were Power up by 0.59%, Oil & Gas up by 0.33% and PSU up by 0.10%, while Auto down by 0.80%, FMCG down by 0.74%, Consumer Durables down by 0.63%, Bankex down by 0.57% and Capital Goods down by 0.51% were the losing indices on BSE.

The top gainers on the Sensex were Lupin up by 1.65%, BHEL up by 1.18%, ONGC up by 0.97%, Dr. Reddys Lab up by 0.84% and Axis Bank up by 0.73%. On the flip side, Maruti Suzuki down by 2.37%, HDFC down by 1.68%, ITC down by 1.58%, SBI down by 1.17% and ICICI Bank down by 1.01% were the top losers.

Meanwhile, giving some flexibility to states, the government has approved Fiscal Deficit Targets and Additional Fiscal Deficit to States during Fourteenth Finance Commission (FFC) award period 2015-20 under the two flexibility options recommended in para 14.64 to 14.67 of its report. FFC has adopted the fiscal deficit threshold limit of 3 percent of Gross State Domestic Product (GSDP) for states. Besides the fiscal deficit threshold limit of 3 per cent of GSDP for states, the Commission has also provided for year-to-year flexibility for additional deficit. For the year 2016-17, according to FFC report, fiscal parameters that need to be taken into account before determining states eligibility for additional borrowings of 0.5% of GSDP recommended by FFC are the revenue position of the State as per Finance Account for t-2 and as available from Revised Estimates for t-1.

Taking into account the development needs and the current macro-economic requirement, the Union cabinet provided additional headroom to a maximum of 0.5 percent over and above the normal limit of 3 percent in any given year to the states that have a favourable debt-GSDP ratio and interest payments-revenue receipts ratio in the previous two years. Those states that have a debt-GSDP ratio of less than 25% and interest payments-revenue receipts ratio less than 10% in the previous two years will be eligible to raise their fiscal deficits.

The approval not only incentivise fiscal discipline, it also empowers states to prioritize their development spending-consistent with the implicit thinking of the FFC that one size does not fit all and that states are mature enough to competently manage their own fiscal needs. Also, there is no financial implication for Government of India as the borrowings are made by the respective State Governments within the fiscal deficit limits laid down by Finance Commission and incorporated in FRBMA of the States.

Further, if a state is not able to fully utilise its sanctioned fiscal deficit of 3 percent of GSDP in any particular year during the 2016-17 to 2018-19 of FFC award period, it will have the option of availing this un-utilised fiscal deficit amount only in the following year but within FFC award period. Any additional borrowings availed beyond the state's entitlements would be adjusted from Net Borrowing Ceiling of the following year.

The CNX Nifty is currently trading at 7574.50, down by 39.85 points or 0.52% after trading in a range of 7567.95 and 7630.75. There were 18 stocks advancing against 33 stocks declining on the index.

The top gainers on Nifty were Tata Power up by 2.71%, Lupin up by 2.06%, BHEL up by 1.62%, BPCL up by 1.42% and Dr. Reddys Lab up by 0.98%. On the flip side, Maruti Suzuki down by 2.33%, HDFC down by 1.88%, Hindalco down by 1.69%, ITC down by 1.47% and Hero MotoCorp down by 1.36% were the top losers.

Asian markets were trading mostly in red, Nikkei 225 decreased 63.32 points or 0.4% to 15,652.04, Taiwan Weighted decreased 57.07 points or 0.67% to 8,456.23, Shanghai Composite decreased 23.12 points or 0.76% to 3,027.48, Hang Seng decreased 13.31 points or 0.07% to 20,193.36 and KOSPI Index decreased 3.5 points or 0.18% to 1,967.82.

On the flip side, FTSE Bursa Malaysia KLCI increased 4.06 points or 0.24% to 1,721.07 and Jakarta Composite increased 22.81 points or 0.47% to 4,891.04.