Indian benchmarks add losses; Nifty slips below 8150 mark

Indian equity benchmarks adding losses, continued to trade in red in the noon session, with the Sensex losing over 150 points and Nifty falling below the 8150 level, weighed down by profit booking in frontline line blue-chip stocks. Sentiments came under serious pressure after Indian factory activity plunged into contraction last month as a cash crunch following Prime Minister Narendra Modi's currency crackdown severely hurt output and demand. The Nikkei India Manufacturing Purchasing Managers' Index, or PMI, dropped to 49.6 in December from November's 52.3, showing the first business activity contraction in 12 months. Cash flow issues among firms also led to reductions in purchasing activity and employment. Moreover, continuous selling by FIIs coupled with depreciation in rupee value also weighed on the sentiment. On Friday, foreign institutional investors sold cash shares worth Rs 586 crore. Meanwhile, shares of real estate and cement companies were trading firm after Prime Minister Narendra Modi announced a slew of incentives to boost rural and urban housing post demonetization. Prime Minister has announced interest subsidy of up to 4% on loans taken in the New Year under the Pradhan Mantri Awaas Yojana (PMAY). Loans of up to Rs 900,000 taken out in 2017 to receive interest rebate of 4%, while loans of up to Rs 1,200,000 taken out in 2017 to receive interest rebate of 3% and loans of up to Rs 200,000 taken in 2017 for new housing, or extension of housing in rural areas, to receive an interest rebate of 3%

On the global front, after a late-year rally fueled by the U.S. election pushed stocks to surprising new peaks, investors are wary that the market could be primed for a spill to start 2017. US markets ended in red on the last session of the year but were well off the day’s low. While globally, Japan, China, Hong Kong, Singapore, the US and the UK will be closed for the day on account of New Year's Day, the People’s Bank of China has said that China should set a more flexible 2017 economic growth target to give policy makers more room to enact reform.

Back home, stocks from Realty, Oil & Gas and Metal counters were supporting the markets, while those from Banking, FMCG and PSU counters were adding to the underlying cautious undertone. In scrip specific development, Eicher Motors has rallied after the company reported a 42% jump in December motorcycle sales at 57,398 units. On the other hand, Bajaj Auto declined after the company 22% decline in total sales in December at 225,529 units as against 289,003 units in the same month last year.

The market breadth remained optimistic as there were 1409 shares on the gaining side against 830 shares on the losing side, while 104 shares remained unchanged.

The BSE Sensex is currently trading at 26475.92, down by 150.54 points or 0.57% after trading in a range of 26447.06 and 26720.98. 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 0.09%, while Small cap index up by 0.46%.

The top gaining sectoral indices on the BSE were Realty up by 2.84%, Oil & Gas up by 0.72%, Metal up by 0.57%, Capital Goods up by 0.46% and Power up by 0.39%, while Bankex down by 1.75%, FMCG down by 0.43% and PSU down by 0.14% were the few losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 1.20%, Dr. Reddys Lab up by 1.03%, Maruti Suzuki up by 0.84%, ONGC up by 0.78% and Lupin up by 0.70%. On the flip side, HDFC down by 3.24%, SBI down by 2.44%, Bajaj Auto down by 2.31%, ICICI Bank down by 2.23% and Axis Bank down by 1.47% were the top losers.

Meanwhile, Industry body, Associated Chambers of Commerce and Industry of India (Assocham) in its latest report has said that banning of high value notes would lower growth rate due to economic slowdown in the third and fourth quarters of fiscal 2016-17. Apex industry body admitted that it was not easy to predict precisely the impact of note withdrawal with far-reaching implications and also said that the growth momentum would be restored by the normal monsoon raising agricultural growth and rural demand.

The report said that consumption, which accounts for 60 percent of the GDP, is expected to recover in the first quarter (April-June) of 2017-18 on spending from the disbursement of pay, pension and arrears following the implementation of the seventh Central Pay Commission’s award. The report also noted that demonetisation would adversely impact many sectors of the economy in the short run and hence government revenue through indirect taxes. It added that the extent to which the shortfall would be offset would depend on direct tax collection, especially tax on undeclared income. Though, in the medium term, demonetisation is expected to boost tax revenues and translate into higher capital expenditure and faster fiscal consolidation.

On the real estate sector Assocham said that the sector could bring much needed correction in the housing market as, property prices would decline in the absence of huge cash for transactions, fuelled by unaccounted income. It further said that similarly, prices of consumer goods may fall due to moderation in demand as use of cards and cheques will compensate for some purseses. On the flip side, greater formalisation of economic and financial activity will help broaden the tax base and expand usage of the financial system. It added that corporates will see economic activity decline with lower sales volumes and cash flows. Companies doing retail sales will be most affected.

The CNX Nifty is currently trading at 8139.20, down by 46.60 points or 0.57% after trading in a range of 8133.80 and 8212.00. There were 31 stocks advancing against 20 stocks declining on the index.

The top gainers on Nifty were Eicher Motors up by 3.24%, Ultratech Cement up by 2.24%, Ambuja Cement up by 1.67%, BHEL up by 1.07% and Dr. Reddys Lab up by 0.97%. On the flip side, Bank of Baroda down by 3.72%, HDFC down by 3.41%, SBI down by 2.82%, ICICI Bank down by 2.43% and Bajaj Auto down by 2.33% were the top losers.

Equity markets in China, Japan, Hong Kong, and Australia are all shut on account of the New Year holiday. The only counter opened today was KOSPI Index, decreased 0.92 points or 0.05% to 2,025.54.