Benchmarks pare some losses; Sensex below 27,300 mark

Indian benchmark indices trimmed losses and have continued to trade weak in the noon session on account of selling in frontline bluechip counters. Sentiments remained subdued with the private report indicating that India’s GDP growth numbers are expected to see a decline of 2% in the third and fourth quarters of the current fiscal, as effective currency in circulation has contracted significantly. The report stated that the government’s decision to abolish old stock of high denomination currency (demonetization) and issue new notes (remonetisation) could have a mixed impact on the macro economy over a year. Sharp selling in Infosys and TCS, post Q3 earnings, too dampened sentiments. India's biggest software services firm TCS reported 2.9% jump in profit to Rs 6,778 crore for the third quarter of the current fiscal on sequential basis. Revenue grew 1.5% at Rs 29,735 crore on quarter-on-quarter basis. Investors got some comfort with report that the Index of Industrial Production (IIP) rose to a 13-month high of 5.7% in November, belying expectations of an adverse impact from demonetization and against a contraction of 1.8% in October. Also, the Inflation measured by the Consumer Price Index (CPI) eased to 3.41% in December versus 3.63% seen in November 2016, mainly due to softening of food prices. Some support also came with the report saying that India grew fastest among major economies worldwide at over 7.5 per cent in 2016 and will continue to drive global growth in 2017 with its share in the world GDP expected to rise to 17 per cent.

On the global front, Asian markets were trading mixed on Friday as investors weighed whether President-elect Donald Trump would stress growth-boosting steps when he takes office. The US markets closed modestly in red but were well off the days’ low. Sentiments took a hit on the report that Chinese exports sank 6.1 percent in December from a year earlier. In November, China's exports eked out a 0.1 percent expansion after shrinking for nine straight months. Imports rose 3.1 percent from a year earlier. On Wall Street, major indexes finished lower a day after Trump failed to elaborate on his economic stimulus plans in his first news conference since his November 8 election victory.

Back home, stocks from FMCG, Oil & Gas and Banking counters were supporting the markets, while those from IT, Auto and Capital Goods counters were adding to the underlying cautious undertone. In scrip specific development, Bajaj Corp gained after the company reported 17.22% rise in its net profit at Rs 57.80 crore for the quarter ended December 31, 2016 as compared to Rs 49.31 crore for the same quarter in the previous year.

The market breadth remained pessimistic as there were 1086 shares on the gaining side against 1232 shares on the losing side, while 152 shares remained unchanged.

The BSE Sensex is currently trading at 27242.17, down by 4.99 points or 0.02% after trading in a range of 27143.07 and 27459.75. There were 14 stocks advancing against 16 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was up by 0.06%, while Small cap index down by 0.01%.

The top gaining sectoral indices on the BSE were FMCG up by 0.61%, Oil & Gas up by 0.38%, Bankex up by 0.17% and PSU up by 0.06%, while IT down by 1.41%, TECK down by 1.19%, Auto down by 0.65%, Consumer Durables down by 0.41% and Capital Goods down by 0.39% were the top losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 2.74%, GAIL India up by 2.43%, HDFC up by 2.22%, ONGC up by 1.78% and Sun Pharma up by 1.58%. On the flip side, TCS down by 3.42%, Infosys down by 1.73%, Tata Motors down by 1.58%, NTPC down by 1.06% and Maruti Suzuki down by 0.95% were the top losers.

Meanwhile, the World Bank has said that negative effects of demonetisation of high value currency notes on Indian economy will basically disperse in the medium term as any reform has short-term costs but finally it will bring long-term gains.

The World Bank, Development Prospects Group Director, Ayhan Kose has said that the country has already undertaken a wide range of reforms and expecting that these will help in relaxing domestic supply bottlenecks along with increased productivity. He also said that in the coming years, moderate inflation and civil service pay raise should continue to support real incomes and consumption. 

Ayhan Kose stated that government has made a decision and implemented this decision quickly with the objective that this could help reduce informal the size of the informal economy. He also said that whenever these types of policy changes are implemented, they have effects during the transition. Kose added that the part of the reason the government implemented the scheme was to curb corruption, tax evasion, and counterfeiting. If that were expected, that by broadening the tax base, revenues will eventually go up, besides reducing the size of the informal economy. 

Meanwhile, the World Bank, in its first projection on India post-demonetisation, has lowered its growth forecast for India to 7% from 7.6% in 2016-17, citing a slowdown in consumption and manufacturing due to demonetisation and an ongoing decline in private investment and credit constraints due to impaired bank balance sheets. However, the World Bank is expecting growth picking up momentum in FY18-FY19, supported by private consumption, infrastructure spending and a rebound in investment growth. It also expects private investment to accelerate as firms and banks undertake the necessary measures and the effects of important structural reforms start being felt.  

The CNX Nifty is currently trading at 8401.45, down by 5.75 points or 0.07% after trading in a range of 8373.65 and 8461.05. There were 20 stocks advancing against 31 stocks declining on the index.

The top gainers on Nifty were Axis Bank up by 2.67%, GAIL India up by 2.47%, HDFC up by 2.12%, Aurobindo Pharma up by 1.95% and Tech Mahindra up by 1.83%. On the flip side, TCS down by 3.34%, Hindalco down by 2.15%, Tata Motors down by 1.59%, Infosys down by 1.56% and Idea Cellular down by 1.46% were the top losers.

Asian markets were trading mixed; Taiwan Weighted increased 0.18%, Jakarta Composite 0.03%, Hang Seng increased 0.4% and Nikkei 225 was up by 1.23%. On the flip side, Shanghai Composite declined 0.25%, KOSPI Index shed 0.48% and FTSE Bursa Malaysia KLCI was down by 0.2%.