Indian benchmarks erase all early gains; Sensex ends below 26,800 mark

Indian equity markets showed a volte-face on the last day of the week as what started on a cheerful note ended as a dismal show. The optimism in local markets petered out completely by the end of trade and the indices even drifted in to the negative territory, despite getting off to a gap-up opening. Sentiments got a hit after President Pranab Mukherjee issued a note of caution that the Narendra Modi government’s demonetization decision could likely lead to a temporary slowdown in the economy and hurt the poor. The President called for policymaking that would reduce the suffering of the poor, and seemed to question the focus shift in the government’s poverty alleviation programmes and policies from an entitlement-based approach to an entrepreneurial one. Furthermore, a private report highlighted that India’s GDP is likely to have grown at a much slower-than-expected pace of 5 percent in the October-December period and may see a 6 percent growth in the following quarter due to a slowdown in manufacturing and services sectors post demonetization. Besides, sharp selling in IT counter also weighed on investor sentiments. Technology stocks came under pressure on reports that two US Congressmen have reintroduced a bill to curb the use of H-1B visas, on which the Indian IT sector is particularly dependent. The new bill would require workers on the H-1B visa pay a minimum of $100,000, up from $60,000 currently. However, losses remained capped in local markets with the report of Financial Stability and Development Council (FSDC), headed by Finance Minister Arun Jaitley indicated that India appears to be much better placed with improved macro-economic fundamentals, as measures to eliminate shadow economy and tax evasion are expected to have positive impact on GDP. India expects to grow at around 7 percent in the first half of the next financial year. Market participants got some relief with the report that Reserve Bank of India (RBI) replaced as much as 44% of the currency extinguished by demonetisation with new notes by December 30, 2016. The report also expresses hopes that India's currency supply is likely to return to near normal by February end and growth, which has been hit by the withdrawal of Rs 500 and Rs 1,000 notes, is likely to bounce back faster than earlier expected. 

On the global front, Asian markets ended mostly higher on Friday as uncertainty over incoming President Donald Trump's policies weighed on the dollar and U.S. bond yields, boosting risk appetite for emerging markets. However, investors are cautious ahead of the release of the closely-watched US monthly jobs data to be released later in the day. Employment is expected to increase by about 175,000 jobs in December, while the unemployment rate is expected to tick up to 4.7 percent. The lead from Wall Street provides little clarity as stocks turned in a lacklustre performance as uncertainty over some of President-elect Donald Trump's policies gave investors pause, despite solid economic data.

Back home, the benchmark got off to a positive start in the early trade as investors were largely influenced by the supportive leads from Asian markets. The indices soon gathered momentum and touched intraday highs in early hours but the optimism fizzled out sooner and the indices sea-sawed around the neutral line throughout the morning session. But fresh bouts of selling pressure surfaced after weak European opening post, which the indices found it hard to claw back into the green terrain and eventually settled in the negative zone. Eventually, the NSE’s 50-share broadly followed index Nifty, suffered over quarter percent cut to settle below the crucial 8,250 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by over a hundred points and closed below the psychological 26,800 mark. Moreover, the broader markets too failed to show any kind of fervor and settled with cuts of over quarter percent. On the BSE sectoral space, barring the Banking counters, all the gauges closed in the negative territory with indices like IT and Teck witnessed brutal assaults of 2.54% and 2.16% respectively. While counters like Realty, FMCG and Consumer Durables too suffered severe pounding.

The market breadth remained pessimistic as there were 1195 shares on the gaining side against 1537 shares on the losing side, while 161 shares remained unchanged.

Finally, the BSE Sensex declined 119.01 points or 0.44% to 26759.23, while the CNX Nifty was down by 30 points or 0.36% to 8,243.80. 

The BSE Sensex touched a high and a low of 27009.61 and 26733.33, respectively and there were 13 stocks on gainers side against 17 stocks on the losers side on the index.

The broader indices made a negative closing; the BSE Mid cap index ended lower 0.27%, while Small cap index was down by 0.43%.

The only gaining sectoral index on the BSE was Bankex up by 0.86%, while IT down by 2.54%, TECK down by 2.16%, Realty down by 0.97%, FMCG down by 0.81% and Consumer Durables down by 0.46% were the top losing indices on BSE.

The top gainers on the Sensex were ONGC up by 1.40%, Asian Paints up by 1.23%, Dr. Reddys Lab up by 1.01%, HDFC Bank up by 0.82% and HDFC up by 0.46%. On the flip side, Infosys down by 2.50%, TCS down by 2.18%, Wipro down by 2.18%, ITC down by 1.56% and Power Grid down by 1.07% were the top losers.

Meanwhile, in order to provide some relief to Indian exporters, the revenue department of the finance ministry has decided to refund as much as 90% of their duty claims within seven days under the proposed Goods and Services Tax (GST) regime. Addressing a major concern of the sector, Commerce and Industry Minister Nirmala Sitharaman has said that ninety percent of the amount claimed by exporters as credit drawbacks will be refunded within seven days. She added that in an undue delay beyond two weeks, interest will be paid on the amount due.

Sitharaman has said that exporters have been demanding exemption from new tax regime on the grounds that delay in refunds often takes months and also results in blocking of working capital. She also said that exports need to be encouraged in view of the global slowdown. In GST council meeting with finance minister Arun Jaitley and others, Sitharaman had stressed there was a need to review the current time-consuming process of refunds claimed by exporters against the duty paid on imports of raw materials or other items under various schemes in the new tax regime. The Commerce and Industry Ministry has recently suggested to the GST Council to exempt leather and plantations sector from the GST ambit.

Commenting on the issue, Commerce Secretary Rita Teaotia has also said that the Department of Commerce has been taking up this matter with the Department of Revenue (DoR). The Secretary also said that the issue about interest payment, what that amount would be and whether it would kick in after two weeks that detail DoR would decide.

The CNX Nifty traded in a range of 8,306.85 and 8,233.25. There were 22 stocks in green against 29 stocks in red on the index.

The top gainers on Nifty were Yes Bank up by 3.25%, Kotak Mahindra Bank up by 2.28%, Eicher Motors up by 2.27%, Bank of Baroda up by 1.85% and Asian Paint up by 1.54%. On the flip side, Tech Mahindra down by 3.98%, HCL Tech down by 3.69%, Idea Cellular down by 2.61%, Wipro down by 2.25% and TCS down by 2.16% were the top losers.

The European markets were trading in red; UK’s FTSE 100 decreased 5.73 points or 0.08% to 7,189.58, Germany’s DAX decreased 33.03 points or 0.29% to 11,551.91 and France’s CAC decreased 24.49 points or 0.5% to 4,876.15.

Asian equity markets ended mostly in green on Friday, except for Chinese and Japanese shares that ended in red, tracking exchange rate fluctuations ahead of the closely-watched US jobs report due later on Friday that Fed officials will factor into future decisions on interest rate policy, with expectations for a gain of 178,000 in December. But a soft reading on Thursday of 153,000 from ADP, the private sector payroll processor, is sowing some doubt. While China's yuan gave up some gains after a two-day surge, the Japanese yen strengthened further against the dollar on expectations of slow pace of rate hikes in the US.