Benchmarks continue to trade in red in the noon session

Indian bourses continued to trade in red in the noon session as investors turned cautious after the government chose Urjit Patel, deputy governor of RBI as Raghuram Rajan’s successor. Urjit Patel is known for his hawkish view on inflation just like Raghuram Rajan whose term as the RBI governor ends on September 4, 2016. By naming Patel who is a deputy governor at the central bank as the new RBI governor, the government is sending signal to markets that there will be continuity of central bank's policies. Further, caution also gripped sentiment as all eyes are set on US Federal Reserve officials annual conference in Jackson Hole this Friday after hawkish comments from key Fed officials last week on Interest rate hike. However, losses remained capped with Francis Gurry, director-general at the World Intellectual Property Organization stating that India can break into the top-25 rank in the next 10 years. Also, Union Labour Minister Bandaru Dattatreya has said that EPFO will raise proportion of its investments in exchange traded funds (ETFs) from the present 5 per cent and a final decision on the quantum for current fiscal would be taken very soon. Some support also came in from reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 409.94 crore on August 19, 2016.

On the global front, Asian markets were trading mostly in red on Monday amid uncertainty whether the US Federal Reserve is readying an interest rate hike next month. Adding more concerns, crude oil prices slipped more than 1 percent in early trades after Iraq, OPEC's second-biggest producer, indicated that it will increase exports by about five percent after an agreement to resume shipments from three oil fields. However, Japanese market gained traction on the hope that the Bank of Japan might cut rates further into negative territory at its next meeting in September in a bid to prop up the country's moribund economy.

Back home, stocks from Realty, FMCG and Consumer Durables counters were supporting the markets, while those from Metal, Auto and information technology (IT) counters were adding to the underlying cautious undertone. In scrip specific development, Oberoi Realty has rallied after the company reported 32% year on year jump in consolidated net profit at Rs 107 crore for the quarter ended June 30, 2016. On the other hand, Welpsun India declined on the report that Target Corp is ending all business with the textile manufacturers, after saying the supplier was sending it phony Egyptian cotton sheets.

The market breadth remained pessimistic as there were 1116 shares on the gaining side against 1204 shares on the losing side, while 159 shares remained unchanged.

The BSE Sensex is currently trading at 27966.58, down by 110.42 points or 0.39% after trading in a range of 27923.79 and 28143.28. There were 8 stocks advancing against 22 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.24%, while Small cap index down by 0.09%.

The top gaining sectoral indices on the BSE were Realty up by 0.55%, FMCG up by 0.47%, Consumer Durables up by 0.40% and Oil & Gas up by 0.07%, while Metal down by 0.73%, Auto down by 0.70%, IT down by 0.60%, TECK down by 0.60% and Bankex down by 0.60% were the top losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 1.80%, ITC up by 0.88%, Cipla up by 0.42%, Power Grid Corpn. up by 0.39% and GAIL India up by 0.37%. On the flip side, Lupin down by 1.86%, Sun Pharma down by 1.73%, Tata Steel down by 1.26%, ICICI Bank down by 1.26% and Axis Bank down by 1.26% were the top losers.

Meanwhile, international global rating agency, Moody’s Investors Service in its latest report has said that it may consider India for a rating upgrade if the government is successful in introducing more growth enhancing economic and institutional reform. Policies like relaxation of thresholds for Foreign Direct Investment (FDI) and a change in the monetary policy framework that fosters credibility will contribute to more stable economic environment.

The report stated that India's policymakers are likely to be successful in their efforts to introduce growth-enhancing, growth-stabilising economic and institutional reforms would lead to the rating being considered for an upgrade. Other measures have been delayed like the Goods and services Tax (GST) and now likely to be implemented with credit positive effects in the medium term. Other reforms have proven more politically difficult so far like land and labour reform.

Last year in April, Moody's had changed India's sovereign rating outlook to 'positive' from 'stable' and it stood at ‘Baa3’ citing reform momentum and Moody’s consider India for an upgrade in next 12-18 months. However, report added that the rating outlook could be revised to ‘stable’ if economic, fiscal and institutional strengthening appeared unlikely, banking system metrics remained weak or balance of payments risks rose.

Moody's said that the positive outlook on rating reflects their expectation that policies will support a more stable macroeconomic environment, with sustained growth accompanied by narrower fiscal deficits, low current account deficits, increased savings and investment and inflation that is within the central bank's targets.

Further, Moody's stated that the government in June had announced FDI liberalisation in nine sectors such as civil aviation, retail and private security services. This was the current government's second round of relaxation in FDI rules. Besides, in past two months the government has taken initiatives like inflation targeting monetary policy and also secured Parliament approval for passage of the bankruptcy, Sarfaesi and DRT laws and above all the long pending GST.

The CNX Nifty is currently trading at 8632.65, down by 34.25 points or 0.40% after trading in a range of 8615.30 and 8684.85. There were 13 stocks advancing against 38 stocks declining on the index.

The top gainers on Nifty were BHEL up by 2.46%, Hindustan Unilever up by 2.01%, BPCL up by 1.87%, ITC up by 1.18% and Zee Entertainment up by 0.69%. On the flip side, Sun Pharma down by 2.07%, Lupin down by 1.82%, Ultratech Cement down by 1.75%, Grasim Industries down by 1.57% and Bank of Baroda down by 1.52% were the top losers.

Asian markets were trading mostly in red; Taiwan Weighted decreased 0.58%, Hang Seng slipped 0.29%, Shanghai Composite shed 0.31% and KOSPI Index was down by 0.62%.  On the flip side, FTSE Bursa Malaysia KLCI rose 0.06%, Jakarta Composite increased 0.05% and Nikkei 225 was down by 0.39%.