Indian benchmarks extend losses for third straight session

Indian equity benchmarks have prolonged the lull for third straight day and completed the session on a dull note, marginally below the neutral line as market participants at large remained reluctant to build on long positions amid lackluster trading on European and Asian bourses. The session largely remained characterized by choppiness as the aimless indices moved slowly and crept towards the previous closing levels after the early decline. Sentiments remained down-beat for most part of the session on the report that India's trade deficit widened to $13 billion in November, the highest since July 2015 and sharply wider than the $10.41 billion gap in October, as imports, including purchases of gold, outpaced exports of goods. Oil imports rose 5.9% to US$ 6.84 billion, while the non-oil imports gained 11.7% to US$ 26.18 billion in November 2016 over November 2015. Though, for the third consecutive month, exports recorded a positive growth of 2.29 per cent year-on-year to $20 billion, but imports grew at a faster pace of 10.4 percent to $33.02 billion. Meanwhile, Indian market looks more vulnerable than other emerging markets due to the ongoing demonetisation drive and its impact on corporate performances. According to industry body CII, India’s economic growth will see a ‘significant fall’ in the second half of the current fiscal on account of cash crunch following demonetisation.  However, losses remained capped with the report that more than 1,700 new foreign portfolio investors (FPIs) have registered with capital markets watchdog SEBI in the first seven months of the current fiscal, a sign of their willingness to be a part of India’s growth story in the long term. FPIs consider India as a preferred and stable market, given its macro-economic stability, long-term growth prospects and ongoing economic and social reforms. Some support also came with NITI Aayog CEO Amitabh Kant stated that cash shortages following the demonetisation of high value currency notes will end by mid-January.

On the global front, Asian markets ended mostly higher on Friday as investors adjusted their portfolios before year-end to face the prospect of a faster-than-expected pace of U.S. rate hikes next year. Japanese shares rose after scaling a one-year peak on the export prospects from a weaker yen, while China’s central bank has pumped 600 billion yuan into the financial system over the past two days, stabilizing the bond and stock markets. European shares steadied in early dealings, but were heading for a second straight week of gains, with the prospect of more mergers and acquisitions underpinning sentiment. Meanwhile, Oil prices stabilized as evidence rose that producers in the Middle East were informing customers of upcoming supply cuts as part of a coordinated effort to drain a global glut.

Back home, after getting a cautious start, the local benchmarks slipped into lower level in late morning session, tracking weak trade in other regional markets. Thereafter, the frontline indices traded in tight range, below neutral line for most part of the session. Finally, the NSE’s 50-share broadly followed index - Nifty settled with trivial losses of fourteen points below the psychological 8150 levels, while Bombay Stock Exchange’s Sensitive Index - Sensex shed thirty points and closed below the psychological 26500 mark. On the BSE sectoral space, Consumer Durables counter remained the top gainer in the space with over half a percent gains followed by IT index which ended with similar gains. On the other hand, the Metal  index slipped by over one and half a percent followed by Oil & Gas and PSU counters which settled with close to a percent losses. The market breadth remained pessimistic as there were 1121 shares on the gaining side against 1490 shares on the losing side while 164 shares remained unchanged. Finally, the BSE Sensex declined by 29.51 points or 0.11% to 26489.56, while the CNX Nifty dropped 14.15 points or 0.17% to 8,139.45.

The BSE Sensex touched a high and a low of 26594.55 and 26455.21, respectively and there were 11 stocks on gainers side against 19 stocks on the losers side on the index. 

The broader indices made a negative closing; the BSE Mid cap index ended lower by 0.04%, while Small cap index was down by 0.25%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 0.62%, IT up by 0.56%, Auto up by 0.45% and TECK up by 0.33%, while Metal down by 1.58%, Oil & Gas down by 0.93%, PSU down by 0.87%, FMCG down by 0.67% and Bankex down by 0.55% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 1.95%, Cipla up by 1.32%, Infosys up by 1.10%, TCS up by 0.98% and Maruti Suzuki up by 0.62%. On the flip side, Bharti Airtel down by 2.67%, ONGC down by 2.30%, ICICI Bank down by 1.82%, Adani Ports &Special down by 1.56% and ITC down by 1.41% were the top losers.

Meanwhile, warding off the fears of adverse impact of US rate hike on Indian economy, Chief economic Advisor (CEA) Arvind Subramanian has said that though the interest rate hike by the US Federal Reserve will bring volatility and uncertainty in capital flows into emerging market economies, but India is very well cushioned to absorb the impact. He further said that “If at all there is an impact, it would only be for a short term. India will be less affected than other countries.”

Subramanian said the Fed rate hike was “anticipated” and that the Reserve Bank of India (RBI) had a few days ago taken “account of this in a very sensible way”. He added that ever since the US elections, there has been a big flow of funds from emerging markets. Given that we are a bright spot, the impact on us will be much less.
Economic affairs secretary Shaktikanta Das too observing that the Fed rate hike has ended the uncertainty surrounding the major global event, said the Indian markets have already factored in the impact of the increase. “Projection for growth outlook remains fairly stable and only marginally improved. Markets had factored in the rate hike and we expect that our markets, the currency market, to stabilise after initial ripples or volatility.

The CNX Nifty traded in a range of 8,178.70 and 8,127.45. There were 19 stocks in green against 32 stocks in red on the index.

The top gainers on Nifty were Tata Motors up by 2.18%, Bharti Infratel up by 1.34%, Eicher Motors up by 1.30%, Infosys up by 1.23% and ZEEL up by 1.21%. On the flip side, Hindalco down by 3.38%, Ultratech Cement down by 2.65%, Bharti Airtel down by 2.5%, ONGC down by 2.37% and Tata Power down by 1.98% were the top losers.

The European markets were trading in red; UK’s FTSE 100 decreased 3.29 points or 0.05% to 6,995.72, Germany’s DAX decreased 2.57 points or 0.02% to 11,363.83 and France’s CAC decreased 10.88 points or 0.23% to 4,808.35.

Asian equity markets ended mostly in green on Friday, following positive Wall Street close overnight even as investors were still digesting the latest decision by the US Federal Reserve. On Wednesday, the US central bank raised its benchmark interest rate by 25 basis points to between 0.50% and 0.75%, the second rate increase in a decade, and also hinted at three likely rate hikes in 2017, up from two previously. Japanese shares ended higher as the weakening yen helped shares of the country’s exporters. Meanwhile, Chinese policymakers are trying hard to curb capital outflows and spending the foreign exchange reserve to support the yuan, after the Fed's decision to raise rates. The People Bank of China set its currency's mid-point fix at 6.9508, marking the Chinese yuan's lowest point against the dollar since May 2008.