Markets stabilize after a soft start; auto, telecom lead

Indian markets have made a mildly soft start of the crucial week, extending their weakness of last session. While the global cues remained soft, impacting the sentiments after Italian Prime Minister Matteo Renzi announced his resignation on suffering a crushing defeat in a referendum on constitutional reform. On domestic front traders were concerned with the news of GST tax reforms from next April suffering a major setback after a two-day meeting with state officials ended without the resolution of a deadlock on who would administer the tax. 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”. Back on street, the benchmark indices are slowly stablising and trying to inch in green with some buying emerging at lower levels in the beaten down sectors. There was some strength in rupee too that supported the market sentiments. Steel stocks were in jubilant mood after the government extended the minimum import price (MIP) for 19 colour-coated and galvanised steel products till February 4, 2017, without tweaking the price range.

The broader markets were trading in green outperforming the benchmarks, while most of the sectoral indices were in green led by auto and telecom, some selling was seen in the IT and technology stocks.

The BSE Sensex is currently trading at 26193.26, down by 37.40 points or 0.14% after trading in a range of 26151.16 and 26273.29. There were 18 stocks advancing against 12 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.33%, while Small cap index gained 0.20%.

The top gaining sectoral indices on the BSE were Auto up by 0.87%, FMCG up by 0.55%, PSU up by 0.43%, Oil & Gas up by 0.40% and Power up by 0.21%, while IT down by 0.63%, TECK down by 0.46%, Bankex down by 0.05% and Consumer Durables down by 0.02% were the losing indices on BSE.

The top gainers on the Sensex were Lupin up by 1.99%, Hindustan Unilever up by 1.44%, Asian Paints up by 1.34%, Mahindra & Mahindra up by 1.24% and ONGC up by 1.17%. On the flip side, HDFC down by 2.60%, TCS down by 1.44%, Dr. Reddys Lab down by 0.92%, Wipro down by 0.84% and HDFC Bank down by 0.60% were the top losers.

Meanwhile, the credit rating agency, India Ratings and Research (Ind-Ra) in its latest report has lowered India’s Gross Domestic Product (GDP) forecast by steep 100 basis points (bps) to 6.8 percent from 7.8 percent forecasted earlier for 2016-17, saying that the demonetisation drive will lead to an erosion of Rs 1.5 trillion this financial year. It added that the downward revision is fallout of the disruptions caused at various levels in the economy due to the de-legalisation of banknotes from November 9, which can cost economy Rs 1.5 trillion.

As per the report, the measure, which the government claims root out black money, is likely to destroy Rs 4.004 trillion worth of cash held in black money and fake currencies. It added that this constitutes a mere 12 percent of the black economy, leaving 88 percent of black money to remain in the system. Global experience has shown that the impact of such measures have been fairly short-lived as it does not attack or plug the mechanism that gives rise to black income. The rating agency pointed out that the investment will be worst affected due to the demonetisation. It said that investment, particularly private investment, which is already down and out due to various reasons, will face the brunt of the de-legalisation. Thus, it has lowered gross fixed capital formation forecast to 2 percent, down 306 bps from their earlier forecast.

The rating agency observed that with the decline in cash holdings in the hands of the public and severe restriction in the flow of new cash, consumption demand has also fallen impacting both wholesale and retail sales. Further, they expect private final consumption expenditure to grow at 7.5% this year, 89 bps lower than their earlier projection. However, the report noted that demonetisation and the government efforts to promote the digital platform for transactions will gradually increase the share of the formal sector and expand the tax base of the economy in the medium-to long-term. Also, as transactions through the digital platform increase, it will create financial and transactional history of the informal or cash dependent segment, making them bankable over the medium-to long-term.

The CNX Nifty is currently trading at 8085.00, down by 1.80 points or 0.02% after trading in a range of 8071.90 and 8103.30. There were 30 stocks advancing against 19 stocks declining on the index, while 2 stocks remained unchanged.

The top gainers on Nifty were Bosch up by 2.15%, Lupin up by 2.01%, Hindustan Unilever up by 1.67%, Asian Paints up by 1.50% and Bharti Infratel up by 1.41%. On the flip side, HDFC down by 2.41%, Zee Entertainment down by 1.94%, TCS down by 1.40%, Grasim Industries down by 1.12% and Dr. Reddys Lab down by 1.06% were the top losers.

Most of the Asian markets were trading in red, Nikkei 225 declined by 162.64 points or 0.88% to 18,263.44, Hang Seng was down by 80.58 points or 0.36% to 22,484.24, Shanghai Composite was lower by 42.1 points or 1.3% to 3,201.74, KOSPI Index decreased by 3.77 points or 0.19% to 1,966.84 and Taiwan Weighted was tad down by1.48 points or 0.02% to 9,188.01.

On the other hand, FTSE Bursa Malaysia KLCI which was up by 1.42 points or 0.09% to 1,630.38 and Jakarta Composite higher by 22.72 points or 0.43% to 5,268.68