Benchmarks prolongs consolidation ahead of US jobs data

Friday’s trading session was of consolidation as market participants decided to hold back on big bets ahead of the US jobs data, which is expected to bolster the case for a US Fed interest rate hike. The session largely remained a bit choppy as the aimless indices moved only sideways in a tight band amid lack of triggers. Weak trend in global markets and depreciation in rupee value against dollar, also weighed on the sentiments. However, investors got some confidence with NITI Aayog Vice-Chairman Arvind Panagariya’s statement that India can become a $10 trillion economy in the next 15 years, from the existing $2 trillion, like China did in last one and a half decade. NITI Aayog is preparing a 15-year vision blueprint which will provide a roadmap for developing India into a big economic powerhouse with inclusive growth. Some support also came from IMF’s statement that India’s strong reform push in 2016 is welcome and should continue apace. Adoption of the goods and services tax is poised to boost India’s medium-term growth. It added that as shown by India, progress on reforms could ignite business investment (including already strong FDI inflows), further boosting domestic demand.

On the sectoral front, Auto and oil-gas stocks witnessed some recovery from lower levels, while cement and power stocks faced resistance at higher levels due to profit booking. Information technology (IT) companies edged lower for third straight trading sessions on concerns of weaker earnings growth for Q2FY17 as the sector continues to face headwinds from muted global macro, BREXIT and transition of existing business to new technologies. Telecom stocks were also seen in action post the spectrum auction. On the other hand, Paper stocks like Kuantum Papers, Seshasayee Paper & Boards, Malu Paper Mills and Emami Paper Mills rallied on expectations of strong earnings growth in July-September 2016 quarter. Rising demand of writing and printing paper, coupled with a fall in raw material prices, helped boost margins of Indian paper mills. In scrip specific development, Tata Motors gained after the company’s arm Jaguar Land Rover (JLR) achieved a strong 28% year on year growth in global sales during the month of September. Moreover, Fiem Industries hit a record high after the company signed technology License and assistance agreement with Japanese companies Aisan Industry Co and Toyota Tsusho Corporation for manufacturing Canister. Going forward, the markets is likely to be volatile in near term as investors are having high hopes from July-September quarter earnings, while many are expecting to see some turnaround in selected sectors.

On the global front, Asian markets ended lower on Friday as Investors and traders were keeping a close eye on US September jobs report, which will give markets a clearer indication on the state of health of the U.S. economy, and how the US Federal Reserve might time its next interest rate hike. International Monetary Fund (IMF) has already warned that a disorderly reaction to possible US interest rate hikes could disrupt capital flows and heighten asset price volatility in Asia. US employment is expected to increase by 168,000 jobs in September after climbing by 151,000 jobs in August. The unemployment rate is expected to hold at 4.9 percent. Japanese stocks slipped after the sterling's selloff spurred risk aversion and supported safe haven bids for the yen in late Asian deals, while Singapore shares declined, sparked by a sell-off in telecom and consumer services stocks. Meanwhile, Tensions on the political front rose after the Philippine defence minister said the military could manage without US aid. 

Back home, the local benchmarks began on a cautious note tracking sluggish cues from the Asian markets, which opened on a tepid note on the back of weak leads from overnight US markets. Thereafter, the indices remained in consolidation phase for most part of the session as traders remained on the sidelines and refrained from any buying activity ahead of US jobs data. Finally, the NSE’s 50-share broadly followed index - Nifty declined by over one tenth of a percent and settled below the crucial 8,700 support level, while Bombay Stock Exchange’s Sensitive Index - Sensex shed forty five points and closed above the psychological 28,000 mark. The market breadth remained pessimistic as there were 1378 shares on the gaining side against 1397 shares on the losing side, while 222 shares remained unchanged.

Finally, the BSE Sensex declined by 45.07 points or 0.16% to 28061.14, while the CNX Nifty dropped 11.95 points or 0.14% to 8,697.60. 

The BSE Sensex touched a high and a low of 28155.68 and 27964.91, respectively and there were 11 stocks on gainers side against 19 stocks on the losers side on the index. The broader indices made a mixed closing; the BSE Mid cap index ended higher by 0.01%, while Small cap index was down by 0.02%.

The few gaining sectoral indices on the BSE were Metal up by 1.00% and Auto up by 0.62%, while IT down by 0.82%, Oil & Gas down by 0.65%, TECK down by 0.56%, Consumer Durables down by 0.25% and Capital Goods down by 0.21% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 4.39%, Tata Motors up by 2.62%, Bajaj Auto up by 2.10%, Lupin up by 0.95% and Adani Ports &Special up by 0.91%. On the flip side, Asian Paints down by 1.86%, Cipla down by 1.63%, Infosys down by 1.36%, HDFC down by 1.28% and Bharti Airtel down by 1.01% were the top losers.

Meanwhile, India’s biggest auction of telecom spectrum, closed just after five days and 31 rounds of bidding with bids worth about only Rs 65,789 crore being received for 965 Mhz of spectrum, out of total 2,354.55 Mhz put for auction and against expectation of Rs 5.6 lakh crore. This was about 40 per cent of the total worth of spectrum that was placed on the block, leaving nearly 60 percent of airwaves, including premium 4G bands, unsold. In comparison, the spectrum auction last year had lasted for 19 days and attracted bids worth Rs 1.1 lakh crore. 

During the course of the five days there were no takers for the premium 700Mhz and 900 Mhz bands, mainly because of high reserve price set by the government. The 700MHz band alone was expected to fetch Rs 4 lakh crore for the government.  Companies winning spectrum in frequency bands above 1Ghz -- 1800 Mhz, 2100 Mhz, 2300 Mhz and 2500 MHz -- will have to make 50 percent upfront payment, while the rest can be paid in 10 years after a two-year moratorium, this means that the government would get about Rs 32,000 crore in upfront payment.

On the final day total bids had dipped a bit to about Rs 63,325 crore at the end of the 26th round as compared to the previous closing. Each round on final day was of 45-minute duration, unlike 60 minutes on the previous days. The bidding activity took place only in few circles with interest continuing to be largely around 1800 MHz and 2300 MHz that can be used by operators to provide 4G services. Industry also showed interest in 2100 Mhz (3G/4G) band, 2500 Mhz (4G) band and 800 Mhz (2G/4G) bands.

Seven operators were in the fray includes Reliance Jio, Bharti Airtel, Vodafone, Idea Cellular, Tata Teleservices, Reliance Communications and Aircel. Vodafone emerged as the highest bidder with bids worth over Rs 20,000 crore, followed by Airtel at Rs 14,244 crore. Newcomer Reliance Jio won airwaves across key 4G bands for Rs 13,672 crore. Idea procured 349.2 MHz of spectrum for Rs 12,798 crore securing additional airwaves in 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz bands.

The CNX Nifty traded in a range of 8,723.70 and 8,663.80. There were 20 stocks in green against 31 stocks in red on the index.

The top gainers on Nifty were Tata Steel up by 4.45%, Tata Motors - DVR up by 3.65%, Zee Entertainment up by 2.97%, Bajaj Auto up by 2.73% and Tata Motors up by 2.46%. On the flip side, Bharti Infratel down by 2.92%, Asian Paints down by 2.19%, Eicher Motors down by 1.78%, HDFC down by 1.67% and Infosys down by 1.60% were the top losers.

The Asian markets ended in red on Friday as investors awaited the all-important US jobs report due tonight that could bolster the case for a Fed rate hike in 2016. US employment is expected to increase by 168,000 jobs in September after climbing by 151,000 jobs in August. The unemployment rate is expected to hold at 4.9 percent. Japanese stocks slipped after the sterling's selloff spurred risk aversion and supported safe haven bids for the yen in late Asian deals. Further, Hong Kong shares ended lower after disappointing forex reserves data from China. The country's foreign exchange reserves shrank at a faster pace to extend declines for the third consecutive month in September. The Chinese markets remained closed for the Golden Week holidays and will reopen on Monday.