Benchmarks consolidate after last session's remarkable rally; Nifty ends below 8850

Indian equity indices completed the week on a sluggish note as the benchmarks showcased an unenthusiastic performance on Friday and settled with moderate cuts of around a quarter percent. Marketmen looked to consolidate their position in the session after rocketing around a percent in the last session and they largely indulged in stock specific activities ahead of next week’s F&O expiry. Sentiments remained down-beat in local market as European stock markets got off to a gap down beginning and were trading with cuts of around half percent, while the Asian counterparts too settled on a vigilant note. Adding anxiety among market participants was a private report indicating that some of investment banks have started to cut exposure to Indian equities citing expensive valuations. The global investment banks acknowledged India to be a bright spot among emerging market peers, but the valuation looks expensive. If earnings fail to bounce back, chances of a steep correction will increase. The domestic brokerage houses are also maintaining cautious approach as there is no evidence of any economic recovery out there at the moment, especially on the capex side, while private investment is also not picking up. There is nothing to suggest that capex will return in next six months or in the next financial year. However, investors got some comfort with Minister of State for Finance Arjun Ram Meghwal’s statement that the new indirect tax regime is a major tool for improving ease of doing business and has also said that the government will be able to implement Goods and Services Tax (GST) from April 1, next year. On the agricultural front, India's kharif harvest is poised to jump 9% to 135 million tonnes, beating a six-year-old record.

Meanwhile, many export oriented companies edged higher, as the government extended fiscal incentives to more items such as marine products at higher rates under a scheme with a view to boost exports, which remain in the negative zone. The total support extended by the government under the Merchandise Exports from India Scheme (MEIS) has been enhanced to Rs 23,500 crore per annum from the present Rs 22,000 crore. In scrip specific development, Websol Energy System was locked in upper circuit of 20% on the BSE after the company announced that the RBI approved the restructuring of outstanding foreign currency convertible bonds (FCCBs) subject to certain conditions. Furthermore, Majesco has jumped after the company entered into an agreement with Glemham, a UK based managing general agent, to create a new cloud based bureau processing business.

On the global front, overlooking the small losses in the region, most of Asian markets held steady on Friday, holding on to most of the gains of the week driven by US and Japanese central bank policy decisions that fueled investors’ belief that low rates will be around for a few more months. Encouraging data from China and Japan supported the market sentiments. Reports showed that a gauge of Chinese business investment improved in September, suggesting strengthening confidence among manufacturing companies, while the latest survey from Nikkei showed that Japan's manufacturing industry expanded for the first time in seven months in September. However, European stocks moved decisively lower on Friday, pulling back from the prior day’s rally after the latest round of economic data painted a mixed picture of the region’s recovery. The flash composite PMI for the euro region, measuring the combined output across the manufacturing and service sectors, fell to 52.6 in September, the lowest since January 2015 from 52.9 in August 2016.

Back home, the local market got off to a soft start as the indices showed signs of consolidation in early trade, a session after the awe-inspiring close to one percent rally. Thereafter, the key indices failed to show any kind of fervor due to lack of encouraging leads and suffered a setback in afternoon trades as sudden bouts of profit booking emerged in the local markets after a somber European market opening. Though the bourses recovered from the lows of the day but could not succeed in minimizing the whole losses by the end of trading session. Finally, the NSE’s 50-share broadly followed index Nifty, took a cut of over quarter percent to settle below the crucial 8,850 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by over hundred points and closed below the psychological 28,700 mark.  However, the broader markets showed some resilience and settled on a positive note, outperforming their larger peers by quite a margin.

The market breadth remained pessimistic, as there were 1168 shares on the gaining side against 1496 shares on the losing side, while 252 shares remained unchanged.

Finally, the BSE Sensex declined by 104.91 points or 0.36% to 28668.22, while the CNX Nifty dropped 35.90 points or 0.40% to 8,831.55. 

The BSE Sensex touched a high and a low 28825.09 and 28627.38, respectively. The broader indices made a positive closing; the BSE Mid cap index ended up by 0.28%, while Small cap index was higher by 0.08%.

The few gaining sectoral indices on the BSE were Realty up by 1.01%, Oil & Gas up by 0.74% and Metal up by 0.18%, while Bankex down by 1.23%, Power down by 0.61%, TECK down by 0.37%, FMCG down by 0.34% and IT down by 0.33% were the top losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 1.41%, Dr. Reddys Lab up by 1.05%, TCS up by 0.83%, HDFC up by 0.54% and HDFC Bank up by 0.42%. On the flip side, Axis Bank down by 5.84%, Lupin down by 2.59%, Infosys down by 1.46%, Power Grid Corpn. down by 1.46% and ICICI Bank down by 1.36% were the top losers.

Meanwhile, India’s diesel exports are expected to remain near a 3 year high in September, as monsoon rains reduced the need for fuel used in irrigation pumps. Reportedly, India will be exporting 2.85 million tonnes of diesel in September similar volumes compared with August. According to government data, Augusts’ volume was the highest since September 2013, when India shipped out 3.37 million tonnes. As per Indian-refiner, diesel demand has not been that good during this monsoon season and has generally been flattish.

Reflecting the trend state-owned Indian Oil Corp (IOC) exported diesel for the first time in more than five years and the ramp-up of a new refinery could also temporarily keep exports high after the monsoon draws to a close this month.  IOC exported its first low-sulphur diesel cargo in more than five years in August and followed up by offering a second cargo. While the first cargo was sold at a deep discount due to a low flash point making it more difficult to blend, any additional spot cargo will weaken an already oversupplied diesel market in Asia.

The increase in shipments from the world's No. 3 oil consumer has driven the profit margin for refining diesel in Asia to a seasonal six-year low. Refineries in India are also running at near maximum capacity due to healthy refining margins driven by low feedstock prices. The refinery is expected to boost IOC`s diesel output by 200,000 tonnes next month, which will reduce its offtake of the fuel from private refiners by a similar amount. This in turn could drive up exports from private refiners like Essar Oil and Reliance Industries.

The CNX Nifty traded in a range of 8,885.20 and 8,820.30. There were 12 stocks advancing against 39 decliners on the index.

The top gainers on Nifty were Reliance Industries up by 1.16%, Dr. Reddys Lab up by 0.97%, TCS up by 0.93%, HCL Tech up by 0.78% and HDFC up by 0.76%. On the flip side, Axis Bank down by 5.97%, ACC down by 3.17%, Ambuja Cement down by 2.77%, Lupin down by 2.72% and Aurobindo Pharma down by 2.40% were the top losers.

The European markets were trading in red; UK’s FTSE 100 decreased 10.4 points or 0.15% to 6,901.00, Germany’s DAX decreased 9.53 points or 0.09% to 10,664.65 and France’s CAC decreased 13.27 points or 0.29% to 4,496.55.

The Asian markets ended mostly higher on Friday, boosted by central banks' decision to continue their easy-money policies. Further, encouraging data from China and Japan too supported market sentiment. Reports showed that a gauge of Chinese business investment improved in September, suggesting strengthening confidence among manufacturing companies. The MNI business sentiment index stood at 55.8 in September, up from a marginally revised 54.1 in August. The latest survey from Nikkei showed that Japan's manufacturing industry expanded for the first time in seven months in September. Japanese shares fell modestly, with a firmer yen and profit booking in financials weighing on markets. Further, Chinese shares fell in thin trading as property stocks succumbed to selling pressure after recent sharp gains.