Benchmarks reverse gears; slip into negative territory

After showing some signs of recovery in early part session, Indian benchmark indices have plunged to intraday lows in noon trades on Tuesday. Jittery investors lacked conviction to build positions after Global financial services major Nomura has revised upwards India's current account deficit (CAD) forecast to 1.4% of GDP for the current fiscal from 0.4% earlier. According to Nomura, India's trade deficit widened to a 16-month high of $13 billion in November from $10.4 billion in October, as a result of a sharp slowdown in exports after demonetization and a pickup in imports, led by gold and higher commodity prices. For the fourth quarter (October-December) of 2016 Nomura expects a current account deficit of 2.5% of GDP (versus 0.9% earlier) and for the January-March period, it is likely to be around 2% of GDP. Moreover, the broader markets too traded on a daunting note with around half a percent losses, underperforming their larger peers by quite a margin. Trading sentiments weakened further on report that foreign portfolio investors (FPIs) sold shares worth a net Rs 535.77 crore on December 19, 2016. However, losses remained capped with NITI Aayog member Ramesh Chand’s statement that despite the impact of demonetisation, growth in agriculture for the current year will still be above 5 per cent, though he pointed that the prevailing cash crunch has hit the growers of perishables more compared to those who grow bulk crops such as paddy and cotton. Meanwhile, Tata group companies were in focus after Cyrus Mistry yesterday quit from the boards of six listed companies, including Tata Motors and Indian Hotels. He vowed to shift his fight to a larger platform as the ‘coercive action taken by Tatas against various stakeholders was making him uneasy’. He would, however, continue to remain a director on the board of Tata Sons.

On the global front, Asian markets were trading mostly lower on Tuesday, despite modest overnight gains on Wall Street as attacks in Germany and Turkey kept investors' appetite for risk in check. Market participants turned cautious after U.S. Federal Reserve Chair Janet Yellen gave an upbeat view of the jobs market, strengthening the rate hike outlook for next year. Yellen said on Monday that the U.S. labour market had improved to its strongest in nearly a decade, suggesting that wage growth was picking up and underscoring expectations that the central bank would continue to raise interest rates next year. Separately, the Bank of Japan kept monetary policy steady and gave a more upbeat view of the economy on Tuesday, reinforcing market expectations that its future policy direction could be an increase - not a cut - in interest rates.

Back home, stocks from IT, Consumer Durables and Capital Goods counters were supporting the markets’ uptrend, while those from Banking, Metal and PSU counters were adding to the underlying cautious undertone. In scrip specific development, Opto Circuits surged after the company and its subsidiaries have received an order worth Rs 91 crore from Philips Health Care for various products manufactured by the Opto Group of Companies.  Moreover, KEI Industries gained after the company signed a foreign Technical Collaboration agreement with Brugg Kabel AG, Switzerland based 116 years old group to manufacture Extra High Voltage cables above 220kV and up to 400kV at its manufacturing plant / facility located at Chopanki, District, Alwar, Rajasthan.

The market breadth remained pessimistic as there were 865 shares on the gaining side against 1329 shares on the losing side, while 141 shares remained unchanged.

The BSE Sensex is currently trading at 26309.80, down by 64.90 points or 0.25% after trading in a range of 26302.98 and 26435.56. There were 8 stocks advancing against 22 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.72%, while Small cap index down by 0.32%.

The top gaining sectoral indices on the BSE were IT up by 1.21%, TECK up by 0.93%, Consumer Durables up by 0.54%, Capital Goods up by 0.26% and Realty up by 0.25%, while Bankex down by 1.21%, Metal down by 1.09%, PSU down by 0.76%, Auto down by 0.72% and Oil & Gas down by 0.48% were the top losing indices on BSE.

The top gainers on the Sensex were TCS up by 2.12%, Infosys up by 1.33%, Coal India up by 1.01%, GAIL India up by 0.99% and ITC up by 0.88%. On the flip side, Bajaj Auto down by 2.24%, SBI down by 1.97%, Tata Steel down by 1.90%, ICICI Bank down by 1.54% and Axis Bank down by 1.45% were the top losers.

Meanwhile, Provident Fund (PF) subscribers will get lower saving rate on their deposits this year as retirement fund body Employees Provident Fund Organisation (EPFO) has taken decision to reduce interest rate on provident fund deposits to 8.65 per cent for 2016-17 from the current 8.8 per cent. The lower interest rate on PF deposits has come in tandem with declining trend in interest rates on savings due to rise in bank deposits post demonetisation.

As per the EPFO’s income projections of Rs 39,084 crore for the current fiscal, providing 8.8 per cent rate of interest on EPF deposits would have left a deficit of Rs 383 crore and at  a lower interest rate of 8.7 per cent, there would have been a marginal surplus of 69.34 crore. At 8.65 per cent, the projected surplus for 2016-17 is pegged at Rs 295.91 crore.

The minister of CBT said that the overall scenario is such that interest rates are coming down and we are giving the highest interest rate for workers. It indicates our Ministry and our Prime Minister's commitment to protect the interest of employees and it is to be noted that interest earned on various deposit schemes is taxable, whereas the interest on EPF is exempted from tax.

The CNX Nifty is currently trading at 8092.25, down by 12.10 points or 0.15% after trading in a range of 8085.80 and 8124.10. There were 20 stocks advancing against 31 stocks declining on the index.

The top gainers on Nifty were TCS up by 2.15%, Tech Mahindra up by 1.35%, Ultratech Cement up by 1.26%, Infosys up by 1.13% and Coal India up by 1.13%. On the flip side, Bosch down by 2.51%, Aurobindo Pharma down by 2.29%, Bajaj Auto down by 1.96%, Hindalco down by 1.86% and Idea Cellular down by 1.77% were the top losers.

Asian markets were trading mostly in red; Hang Seng dropped 0.48%, Shanghai Composite declined 0.77%, Jakarta Composite shed 0.22% and FTSE Bursa Malaysia KLCI was down by 0.04%. On the flip side, Taiwan Weighted rose 0.03%, KOSPI Index increased 0.24% and Nikkei 225 was up by 0.51%.