Post Session: Quick Review

Indian equity benchmarks traded on volatile note and ended the session in green near the highest point of the day. The market made a soft start in early deals tracking negative cues from overseas market and on failure to break deadlock on new sales tax. Italian Prime Minister Matteo Renzi announced his resignation on suffering a crushing defeat in a referendum on constitutional reform. Italy citizens’ ‘NO’ in referendum on Sunday has already been priced in by global markets.  Back home, the sentiments were under pressure with Indian Finance Minister Arun Jaitley’s plan to launch a new national sales tax next April got a jolt on Saturday after a two-day meeting with state officials ended without the resolution of a deadlock on who would administer the tax. The long-awaited Goods and Services Tax (GST) would transform Asia’s No.3 economy into a single market, could boost revenues through better compliance and make life simpler for businesses that now pay a host of federal and state levies. Finance Minister Arun Jaitley has said that ‘Discussions on dual control of assessees remain inconclusive. They will be carried forward in the next GST Council meeting, which is slated to meet again on December 11 and 12’. Hit hard by cash shortage, services sector contracted in November -- that too at sharpest rate in three years -- as new orders fell for the first time since June 2015 though subdued inflationary pressure opened up room for RBI to lower rates. The Nikkei IHS Markit stated that the performance of India’s service sector weakened in November as a result of cash shortages. New business declined for the first time since June 2015, leading to a solid reduction in activity. Correspondingly, backlogs of work rose, while employment increased only marginally. Dropping from 54.5 to 46.7 in November, the seasonally adjusted headline Business Activity Index registered in contraction territory for the first time since June 2015 and pointed to the sharpest reduction in output for almost three years.

However, buying crept in taking cues from European counterparts which recovered early losses as investors’ shrugged off the outcome of the Italian constitutional referendum. Investors had widely anticipated the referendum result and subsequent resignation of Prime Minister Matteo Renzi. Separately, Prime Minister Narendra Modi stated that India’s economy is expected to grow five folds by 2040, the government expects growth in manufacturing, transport, civil aviation among other sectors. Modi said while global economy is going through uncertainty, India has shown tremendous resilience. Indian economy is more stable than others with investment in India at the highest levels. The country's current account deficit has improved steadily. Investors will be keeping an eye on RBI monetary policy review scheduled on Wednesday whereby the street expects Reserve Bank Governor Urjit Patel to again go in for a 0.25% interest rate cut with an aim to cushion the impact of demonetization. This will be the first monetary policy review after demonetization of old Rs 500 and Rs 1,000 currency notes following which banks witnessed surge in deposits

On the global front, Asian markets ended mostly in red, while Indonesia stocks closed higher as gains in the Mining, Infrastructure and Consumer Industry sectors led shares higher. Growth in China’s services sector accelerated to a 16-month high in November, a private survey showed, though the increase in new orders dipped slightly and business expectations moderated. European stocks were trading higher as investors’ shrugged off the outcome of the Italian constitutional referendum. After a tepid week marked by thin trading in the run up to the Italian referendum, European equities shrugged off its outcome to rally the most since the US election.

Back home, stocks of select steel companies closed in green, as the government has extended the Minimum Import Price (MIP) for 19 colour-coated and galvanised steel products till February 4, 2017, without tweaking the price range.

The BSE Sensex ended at 26355.50, up by 124.84 points or 0.48% after trading in a range of 26125.35 and 26390.80. There were 22 stocks advancing against 8 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index was up by 0.63%, while Small cap index was up by 0.25%. (Provisional)

The top gaining sectoral indices on the BSE were Auto up by 1.97%, Metal up by 1.71%, FMCG up by 1.18%, Realty up by 1.15% and Bankex up by 0.93%, while IT down by 0.75%, TECK down by 0.35%, Oil & Gas down by 0.13% and Capital Goods down by 0.04% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were Mahindra & Mahindra up by 3.42%, Asian Paints up by 3.36%, Lupin up by 3.18%, Maruti Suzuki up by 2.71% and Bharti Airtel up by 2.65%. (Provisional)

On the flip side, TCS down by 1.61%, HDFC down by 1.60%, GAIL India down by 1.07%, Wipro down by 0.84% and Sun Pharma down by 0.82% were the top losers. (Provisional)

Meanwhile, India’s Services sector activity suffered sharp contraction in November after government’s demonetisation move, as new business declined for the first time since June 2015, leading to a solid reduction in activity. Also, backlogs of work rose, while employment increased only marginally. Ending a 16 month sequence of expansion, the seasonally adjusted Nikkei India Services Business Activity Index contracted steeply to 46.7 in November from 54.5 in October. The index has registered a contraction for the first time since June 2015 and marked the sharpest reduction in output in almost three years.

Factory production rose further during the month, but the rate of growth eased. The seasonally adjusted Nikkei India Composite PMI Output Index dipped to 49.1 in November from October’s 45-month high of 55.4, pointing to a slight contraction in private sector activity overall. According to the report, many surveyed companies commented that the cash shortage restricted client bookings. The currency scarcity also weighed on manufacturing performance where growth of new work flows slowed.

Further, service providers recorded higher levels of outstanding business in November, which they commonly associated with delayed payments from clients. Similarly, unfinished work at manufacturers increased at a softer pace. Input costs in the Indian service sector were broadly unchanged in November as falling prices for petrol and raw materials acted to offset higher staff salaries.  Across the private sector as a whole, input cost inflation softened to the weakest since August. As per the report, a reading above 50 indicates economic expansion, while below that points towards contraction.

The CNX Nifty ended at 8139.05, up by 52.25 points or 0.65% after trading in a range of 8056.85 and 8141.90. There were 36 stocks advancing against 15 stocks declining on the index. (Provisional)

The top gainers on Nifty were Asian Paints up by 3.80%, Hindalco up by 3.79%, Mahindra & Mahindra up by 3.30%, Lupin up by 3.15% and Ambuja Cement up by 3.05%. (Provisional)

On the flip side, Tech Mahindra down by 2.46%, TCS down by 1.50%, HDFC down by 1.44%, Idea Cellular down by 1.09% and GAIL India down by 0.92% were the top losers. (Provisional)

The European markets were trading in green; UK’s FTSE 100 increased 53.1 points or 0.79% to 6,783.82, Germany’s DAX increased 179.27 points or 1.71% to 10,692.62 and France’s CAC increased 63.48 points or 1.4% to 4,592.30.

Most of the Asian markets made a negative closing on Monday, with Japanese shares hurt by concerns about political and economic uncertainty in Europe. Worries related to Italy's banking sector deepened after Italian voters rejected constitutional reform in a referendum Sunday, triggering the resignation of Prime Minister Matteo Renzi who had staked his political career on the result. Chinese shares too ended lower after China's top securities regulator sharply criticized the practice of using borrowed funds to build stakes in companies. Investors ignored the latest survey from Caixin which showed growth in China's services sector accelerated to a 16-month high in November, while the latest survey from Nikkei revealed that the services sector in Japan continued to expand in November, and at a faster pace, with a PMI score of 51.8.