Indian equities continue their lackadaisical trade

Indian equities continued their lackadaisical trade hovering below neutral line in the noon session on sustained selling by investors and funds amid weak Asian cues. Sentiments took a hit after the report that foreign investors have pulled out more than Rs 19,500 crore from the capital market this month so far amid rate hike by the US Federal Reserve and higher oil prices. The FPI outflows took place following a withdrawal of over Rs 49,700 crore on net basis from the capital market (equity and debt) in last two months (October-November). Investors also remained cautious with the industry body ASSOCHAM’s report saying that prospects of interest rate cut in near future may be bleak due to factors like continuous pressure on rupee against dollar, firming of the US interest rates and hardening of crude oil prices. However, the downside remained capped with Finance Minister Arun Jaitley’s statement that infrastructure investment needs a booster and his next Budget in February will focus on encouraging more public as well as private spending to boost economic growth. Some support also came with Union Transport Minister Nitin Gadkari statement that India’s infrastructure sector has the potential of boosting GDP growth up to 3% and efforts are being put in by the centre to achieve this objective.

On the global front, Asian markets trading lower on Monday as investors trimmed their equity holdings following hawkish comments from the US Federal Reserve on interest rate hikes last week. Richmond Fed President Jeffrey Lacker said that the U.S. central bank will likely need to raise interest rates more than three times next year. However, market participants got some comfort after China agreed to return a US drone it had seized, easing worries about rising diplomatic tensions between the world's two biggest economic powers. A Chinese warship seized a US underwater drone in the South China Sea, which triggered a formal diplomatic protest and a demand for its return.

Back home, stocks from Oil & Gas, PSU and Power counters were supporting the markets, while those from Consumer Durables, Realty and Teck counters were adding to the underlying cautious undertone. In scrip specific development, JK Lakshmi Cement gained after the company received shareholders’ approval to raise up to Rs 500 crore by issue of Non-Convertible Debentures (NCDs) on private placement basis. Moreover, Laurus Labs debuted at Rs 490.00 on the BSE, up by 62 points or 14.49% from its issue price of Rs 428.

The market breadth remained optimistic as there were 1111 shares on the gaining side against 1073 shares on the losing side, while 137 shares remained unchanged.

The BSE Sensex is currently trading at 26435.72, down by 53.84 points or 0.20% after trading in a range of 26369.28 and 26505.66. There were 11 stocks advancing against 18 stocks declining on the index, while one stock remained unchanged.

The broader indices were trading in red; the BSE Mid cap index was down by 0.14%, while Small cap index down by 0.05%.

The few gaining sectoral indices on the BSE were Oil & Gas up by 1.24%, PSU up by 0.42% and Power up by 0.22%, while Consumer Durables down by 0.55%, Realty down by 0.40%, TECK down by 0.38%, Capital Goods down by 0.36% and IT down by 0.32% were the top losing indices on BSE.

The top gainers on the Sensex were GAIL India up by 2.00%, Cipla up by 1.10%, Lupin up by 1.05%, Reliance Industries up by 0.73% and ICICI Bank up by 0.70%. On the flip side, Adani Ports &Special down by 1.29%, Asian Paints down by 1.26%, Sun Pharma down by 0.87%, Maruti Suzuki down by 0.85% and Hindustan Unilever down by 0.83% were the top losers.

Meanwhile, the Associated Chambers of Commerce & Industry of India (Assocham) in its latest report has said that the interest rates cut prospects in the near future by the Reserve Bank of India (RBI) may be adversely affected due to factors such as continuous pressure on rupee against dollar, firming of the US interest rates and hardening of the crude oil prices.

The report further pointed out that even though there is a sufficient liquidity in the banking system after demonetization and lowering of inflation both at the WPI and CPI levels, this cannot be regarded as a normal situation. It also noted that once the scrapped Rs 500 and Rs 1000 notes are exchanged and fresh currency is injected back into the banking system fully, the ball game would change. Besides, there are certain commodities like sugar and wheat which are witnessing firming of prices.

As per the Assocham, the biggest risks are deriving from the unfolding global scenario marking sharp firming of the U.S. dollar and raking in international money back into the US economy. It added that most of the emerging markets have witnessed huge outflows, exerting pressure on their currencies. India may get consolation from the fact that it will be less affected as it is amongst the largest crude oil importers in the world and net importing country. Therefore, the dollar strengthening has a direct and immediate impact on the country’s overall balance of payment position and would lead to inflation in the medium term.

According to the report, while rupee depreciation is good news for the Indian exporters, they would face greater competition from the peers like China, Vietnam, the Philippines and Bangladesh. The Chinese currency is melting against dollar and helping its exporters in the process. The report also noted that the play-out of the November 8 demonetisation measure remains to be seen in terms of impact on the Gross Domestic Product (GDP), while uncertainty over implementation of the Goods and Services Tax (GST) has increased.

The CNX Nifty is currently trading at 8124.00, down by 15.45 points or 0.19% after trading in a range of 8105.35 and 8132.50. There were 22 stocks advancing against 29 stocks declining on the index.

The top gainers on Nifty were Aurobindo Pharma up by 2.24%, GAIL India up by 2.12%, Tata Power up by 1.17%, Cipla up by 1.10% and Lupin up by 0.96%. On the flip side, Bharti Infratel down by 1.56%, Adani Ports &Special down by 1.46%, Asian Paints down by 1.36%, Maruti Suzuki down by 1.03% and Sun Pharma down by 0.95% were the top losers.

Asian markets were trading in red; Hang Seng decreased 0.81%, Taiwan Weighted dropped 0.94%, Nikkei 225 slipped 0.09%, FTSE Bursa Malaysia KLCI shed 0.16%, KOSPI Index dipped 0.06%, Shanghai Composite edged lower 0.11% and Jakarta Composite was down by 0.05%.