Indian equities declines for second straight session; Nifty slips below 8000 mark

Indian benchmarks finished the week on a distressing note as they went on to extend the declining streak for the second successive session as market participants resorted to hefty across the board position squaring. Sentiments remained down-beat on the private report indicating that Cash crunch post demonetisation is expected to slowdown India's GDP growth to 6.5 per cent for the fourth quarter of 2016 and is likely to spill over into the first quarter of 2017. According to the report, cash-dependent sectors (agriculture, trade, real estate, construction and transport) and conspicuous consumption demand (high-end white goods, high-end cars, gold and jewellery and travel) would likely to be 'particularly hit' by demonetisation.  The impact of demonetization was first observed in November’s manufacturing PMI, which fell to 52.3 in November from October's 54.4, its biggest month-on-month decline since March 2013. The demand disruption could take its toll on the economy over the next few quarters. Meanwhile, Reserve Bank of India (RBI) is expanding the tools at its disposal to suck out the surge of liquidity in the banking sector following the government’s decision to scrap high value notes, the central bank said that the government has raised the limit for issuing market stabilization scheme (MSS) bonds to Rs 6 lakh crore compared to Rs 30,000 crore earlier.

Jittery investors lacked conviction to build positions ahead of the release of the US monthly jobs data, a referendum in Italy over its constitution, and the Reserve Bank of India's policy review next week. Also, the GST Council meet is started today, the meeting has become significant in the light of the controversial comments made by West Bengal finance minister Amit Mitra that demonetization - making over 85% of old Rs 500 and Rs 1,000 currency notes illegal - will delay implementation of GST. Meanwhile, auto stocks declined on sharp drop in monthly sales, while stocks of telecom service providers - Bharti Airtel, Idea Cellular - were hit by worries about intensifying competition with the extension of freebies offered by Reliance Jio (RJio) till March 2017. Paints companies came under pressure for the second straight trading session tracking the sharp rally in global crude oil prices. On the other hand, some lower buying witnessed in selected power stocks after Moody’s Investors Service upgraded India’s power sector outlook to stable from negative, because the increased domestic production of coal will ease constraints on fuel supply.

On the global front, Asian markets ended mostly lower on Friday as the oil rally fizzled out and rising US Treasury yields, reflected expectations that inflation will accelerate in 2017, triggering fresh concerns about capital outflows from emerging markets. Investors remained cautious ahead of US nonfarm payrolls data, a key economic indicator that the Federal Reserve eyes, due later in the day. Meanwhile, Stocks in Europe swept lower, as investors stayed cautious before a referendum in Italy that could trigger fresh political uncertainty in the region.

Back home, the local benchmark got off to a weak start as the indices breached the psychological 8,150 and 26,350 levels in the early moments of trade since investors largely remained influenced by the pessimistic sentiments prevailing in Asian markets. Thereafter, the key indices failed to show any kind of fervor due to lack of encouraging leads. The key gauges suffered a setback in afternoon trades as sudden bouts of profit booking emerged in the local markets immediately after a somber European market opening. Eventually the NSE’s 50-share broadly followed index Nifty, took a cut of over a percent to settle below the crucial 8,100 support level while Bombay Stock Exchange’s Sensitive Index Sensex slipped by over three hundred points and closed below the psychological 26,300 mark. On the BSE sectoral space, Consumer Durables and FMCG pockets remained among top laggards in the space as they got lacerated by 2.32% and 1.62% respectively. While sectors like Auto, Capital Goods and Realty too got pounded heavily in the session.

The market breadth remained pessimistic as there were 871 shares on the gaining side against 1794 shares on the losing side while 126 shares remained unchanged. Finally, the BSE Sensex declined by 329.26 points or 1.24% to 26230.66, while the CNX Nifty dropped 106.10 points or 1.30% to 8,086.80.

The BSE Sensex touched a high and a low of 26463.06 and 26182.93, respectively and there were 3 stocks on gainers side against 27 stocks on the losers side on the index.

The broader indices made a negative closing; the BSE Mid cap index ended lower by 1.26%, while Small cap index was down by 1.37%.

The top losing sectoral indices on the BSE were Consumer Durables down by 2.32%, FMCG down by 1.62%, Auto down by 1.61%, Capital Goods down by 1.51% and Realty down by 1.40%, while there were no gainers on BSE sectoral front.

The top gainers on the Sensex were Bajaj Auto up by 0.64%, Cipla up by 0.57% and ICICI Bank up by 0.12%. On the flip side, Asian Paints down by 3.57%, Maruti Suzuki down by 3.44%, Adani Ports &Special down by 3.41%, Tata Motors down by 3.37% and HDFC down by 2.64% were the top losers.

Meanwhile, after calling off the last meeting due to differences between states and demonetization, the two-day meeting of Goods and Service Tax (GST) council is all set to start on December 2, to finalise the three draft legislations for Central Goods and Services Tax (CGST), Integrated Goods and Services Tax (IGST) and compensation law.

The 2-Day GST Council meet is also likely to take up the vexed issue of cross empowerment of states and the Centre to avoid dual control which has remained a contentious one during the previous two GST Council meetings. The informal GST meeting will be chaired by the Union Finance Minister Arun Jaitley and will have Minister of State in charge of revenue and state finance ministers as members. 

On November 20, Union Finance Minister Arun Jaitley had called for an informal meeting with his state counterparts to thrash out a political solution, but the meet failed to arrive at a common ground on how the Centre and states will control assessees under the new regime. With states unrelenting on their position of being given right to control all assessees with up to Rs 1.5 crore annual turnover, it was decided that officials will meet and work out a possible arithmetic for addressing the issue. States like Uttarakhand, West Bengal, Uttar Pradesh, Tamil Nadu and Kerala insisted on exclusive control over small businesses, which earn less than Rs 1.5 crore in annual revenue, for both goods and services. 

The government aims to roll out GST from April 1 next year, which will subsume excise, service tax and local levies. At the last meeting, the Council agreed on a four-slab structure - 5, 12, 18 and 28 per cent along with a cess on luxury and ‘sin’ goods such as tobacco.

The CNX Nifty traded in a range of 8,159.30 and 8,070.05. There were 7 stocks in green against 44 stocks in red on the index.

The top gainers on Nifty were Eicher Motors up by 2.78%, Tata Power up by 0.82%, Idea Cellular up by 0.82%, Bajaj-Auto up by 0.72% and Ultratech Cement up by 0.54%. On the flip side, Maruti Suzuki down by 3.83%, Tata Motors down by 3.59%, Asian Paints down by 3.50%, Adani Ports &Special down by 3.42% and ZEEL down by 3.31% were the top losers.

The European markets were trading in red; UK’s FTSE 100 decreased 53.36 points or 0.79% to 6,699.57, Germany’s DAX decreased 94.4 points or 0.9% to 10,439.65 and France’s CAC decreased 58.64 points or 1.29% to 4,501.97.

Most of the Asian markets made a negative closing on Friday as the oil rally fizzled out and rising US Treasury yields, reflecting expectations that inflation will accelerate in 2017, triggered fresh concerns about capital outflows from emerging markets. US nonfarm payrolls data, a key economic indicator that the Federal Reserve eyes, due later in the day and the weekend's referendum on constitutional reform in Italy also kept investors on the sidelines. US employment is expected to increase by 170,000 jobs in November after climbing by 161,000 jobs in October, while the unemployment rate is expected to hold at 4.9 percent. Chinese shares ended lower as coking coal futures and construction product steel rebar tumbled after recent sharp gains. Further, Japanese shares fell modestly as the dollar pulled back against the yen.