Post Session: Quick Review

Indian equity benchmarks traded on a choppy note throughout the day and closed in red as investors remained cautious ahead of Union Budget scheduled on February 1. Technology stocks pulled the market down after a new legislation that has been introduced in the US House of Representatives that seeks to double the minimum salary of H-1B visa holders. The markets made a weak start and traded in red in early deals as traders remained concerned with the CII - IBA Financial Conditions Index for Q4 (January-March) FY2016-17 recording a drop below the 50 mark owing to expectation of banks and financial institutions of deterioration in the overall financial conditions in the economy. Separately, Federation of Indian Chambers of Commerce and Industry (FICCI) in its latest round of Economic Outlook Survey has said that Indian economy will grow 6.8 percent for the year 2016-17 due to a slowdown in the services and infrastructure sectors post demonetization. It added that this is 0.5 percentage points lower than the estimate of 7.3 percent put across in the last round. The economists in the survey have forecasted that the government’s latest demonetization decision will lead to a slowdown in the industrial and services sector growth. Investors took note of the Economic Survey 2016-17, which highlighted the steps that the government was taking and measures it should take to minimize the impact of the demonetization drive. The Economic Survey for 2016-17 said that demonetization will shave off the economic growth for the current fiscal by 0.25 percent to 0.50 percent though it will have long-term benefits for the economy by reducing interest rates and eliminating corruption, besides bringing in more activities in the formal sector. The cash squeeze, following junking of high value notes of Rs 500/1000 on November 8, 2016 will have significant implications for GDP, reducing 2016-17 growth by 0.25 to 0.50 percentage points compared to the baseline of 7 percent.

On the global front, Asian markets ended in red, as stringent curbs on travel to the US ordered by President Donald Trump brought home to investors that he is serious about putting his controversial campaign pledges into action. The Bank of Japan maintained to its ultra-easy monetary policy and held back from raising its inflation forecast for the coming year, signaling its nervousness about the uncertain path of US President Donald Trump’s policy. In a widely expected move, the BoJ maintained the 0.1% interest it charges on a portion of the excess money that financial institutions park with the central bank. European shares were trading in green as a rally in companies such as British online supermarket Ocado on strong results was offset by weaker firms like UPM-Kymmene and Givaudan following their updates.

Back home, IT stocks Infosys, TCS, Wipro and Tech Mahindra closed in red on news of a new US legislation that seeks to double the minimum salary of H-1B visa holders, making it difficult for firms to replace American employees with Indian software professionals. The High-Skilled Integrity and Fairness Act of 2017 introduced by California Congressman Zoe raises the salary level at which H-1B dependent employer are exempt from non-displacement and recruitment attestation requirements to greater than $130,000.

The BSE Sensex ended at 27655.27, down by 194.29 points or 0.70% after trading in a range of 27624.54 and 27867.92. There were 10 stocks advancing against 20 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index was down by 1.20%, while Small cap index was down by 1.10%. (Provisional)

The sole gaining sectoral index on the BSE was FMCG up by 0.07%, while IT down by 2.94%, TECK down by 2.46%, Oil & Gas down by 1.74%, PSU down by 1.44% and Metal down by 0.98% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were Power Grid up by 0.88%, ITC up by 0.82%, Bajaj Auto up by 0.59%, Bharti Airtel up by 0.33% and Dr. Reddy’s Lab up by 0.18%. (Provisional)

On the flip side, TCS down by 4.46%, GAIL India down by 3.75%, Adani Ports & Special Economic Zone down by 3.20%, Sun Pharma down by 2.26% and Tata Motors down by 1.94% were the top losers. (Provisional)

Meanwhile, the CII-IBA Financial Conditions Index based on a survey of leading banks and financial institutions on their expectations of key financial and economic variables determining the financial conditions in the Indian economy, has shown that financial conditions of the Indian economy deteriorated in the fourth quarter. CII - IBA financial Conditions Index for the fourth quarter of FY2016-17 fell below the 50 mark to 48. This shows slowdown in the overall financial conditions in the Indian economy reflecting from expectation of banks and financial institutions that worsening of external financial linkages and domestic economic activity will bring deterioration in economy.

As per the survey signals that the majority of 43 respondents, including public sector banks, private sector banks, foreign banks and non-banking finance companies, have indicated a slowdown in the overall economic conditions of the country. The CII-IBA survey has noted that all the sub-indices witnessed a relative decline which has led deterioration in the Financial Conditions Index. Among the sub-indices, the Economic Activity Index has recorded the lowest level and witnessed maximum decline with expectation of significant deterioration. On the other hand, the Cost of Funds Index and Funding Liquidity Index indicate improvement, reflecting divergence in performance vis-à-vis other sub-indices.

Considering the significant shift in the outlook for financial conditions in the current macroeconomic scenario, CII-IBA has stated that the impact of the contractionary demand shock triggered by the note ban will eventually radiate from cash-intensive activities to virtually every sector of the economy. Further they added that note ban has hit trade and consumption hard and it will impact on the country’s growth and output during the current fiscal. However, the move to a cashless economy will eventually improve savings in financial assets, which will benefit intermediaries such as banks, NBFCs, microfinance and digital money operators.

The CNX Nifty ended at 8556.55, down by 76.20 points or 0.88% after trading in a range of 8552.40 and 8631.75. There were 11 stocks advancing against 40 stocks declining on the index. (Provisional)

The top gainers on Nifty were Idea Cellular up by 12.33%, IndusInd Bank up by 0.97%, Power Grid up by 0.73%, ITC up by 0.68% and Bharti Airtel up by 0.56%. (Provisional)

On the flip side, Bharti Infratel down by 10.86%, Grasim Industries down by 6.00%, TCS down by 4.33%, Tech Mahindra down by 3.95% and BPCL down by 3.64% were the top losers. (Provisional)

The European markets were trading in green; UK’s FTSE 100 increased 38.08 points or 0.53% to 7,156.56, Germany’s DAX increased 44.94 points or 0.38% to 11,726.83 and France’s CAC increased 22.56 points or 0.47% to 4,807.20.

Asian equity markets ended in red on Tuesday after Donald Trump fired Acting Attorney General Sally Yates Monday night, adding to concerns surrounding the unpredictability and protectionist trade stance of the new US President. Japanese shares ended lower as the yen strengthened against the dollar and euro and the Bank of Japan kept its policy settings unchanged at its first meeting of the year, underlining its nervousness about how Trump plans to implement his pro-growth policies. Meanwhile, the BOJ raised its gross domestic product (GDP) forecast to 1.4 percent for the current fiscal year ending March 31, from a previous prediction of 1.0 percent growth made in October. The BOJ said in its policy statement it expected inflation to rise to around its target of 2 percent by fiscal 2018. Financial markets in China, Hong Kong and Taiwan remained closed for the Lunar New Year holidays.