Indian benchmarks once again settle in red zone

Indian benchmark indices once again settled in the red zone on the last trading day of the month as investors stayed cautious ahead of GDP data scheduled to be released later in the day. According to private report, the second official estimate of GDP growth is likely to show the economy expanded below 7% in FY17, tripped by the November 8 demonetisation that dented the consumption demand. Sentiments weakened further with India Ratings and Research’s (Ind-Ra’s) estimates that aggregate fiscal deficit of Indian states will increase marginally to 3.3% of gross domestic product (GDP) in FY18 from its forecast of 3.2% for FY17. It expects states’ debt/GDP ratio may increase marginally to 24.3% in FY’18 from 24% forecasted for FY’17. However, the downside remained capped with Finance Minister Arun Jaitley’s statement that India has potential to grow faster and plans are underway to reduce poverty and create jobs in rural areas. Adding optimism among inventors, Economic Affairs Secretary Shaktikanta Das said Goods and Services Tax (GST) will be implemented from July 1, as all states have agreed on the implementation date. The government plans to get the GST Council's approval on integrated GST (iGST), central GST (cGST) and state GST (sGST) drafts at its March 4-5 meeting before the second half of the budget session of Parliament begins on March 9. Das also said that the positive effects of demonetisation will be visible from April and the completion of remonetisation process will drive consumption going forward. Meanwhile, shares of smallcap companies were in focus with the BSE Smallcap index touched a fresh nine-year high on the BSE in intra-day trade after a sharp rally in select Tata Group companies, logistics, auto ancillary, steel and banking stocks. Tata Teleservices (Maharashtra), TRF, Tata Metaliks and Tata Sponge Iron from Tata Group have surged between 5% and 20% on the BSE.

On the global front, Asian markets ended on a mixed note on Tuesday as market participants awaited US President Donald Trump's address before a joint session of Congress tonight, where he is expected to lay out plans for pro-business policies including tax reform, health care and infrastructure spending. Besides, hawkish comments from Federal Reserve Bank of Dallas President Robert Kaplan overnight renewed market expectations for more U.S. rate increases in the coming months. However, Japanese shares ended higher despite a stronger yen and comments from BOJ Governor Haruhiko Kuroda that Japan was still distant from achieving its 2 percent inflation target. Also, Japan posted its first drop in industrial output in six months in January, as production of cars fell and the Lunar New Year holiday lowered demand from China, an important export market. Chinese shares too inched higher in thin trading after Trump said the United States attaches great importance to cooperative relations with China. Meanwhile, European markets edged higher in early trade as investors waited for details on tax reform in the U.S. and digested fresh corporate earnings.

Back home, after getting a cautious start, the local benchmarks traded on a subdued note for most part of the session and ended the day with moderate cuts. The NSE’s 50-share broadly followed index Nifty, took a cut of around quarter percent to settle below the crucial 8,900 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by around seventy points and closed above the psychological 28,700 mark. However, the broader markets managed to escape heavy losses and settled on a flat note with positive bias, outperformed their larger peers. The market breadth on the BSE was optimistic, as there were 1470 shares on the gaining side against 1320 shares on the losing side, while 216 shares remained unchanged.

Finally, the BSE Sensex declined 69.56 points or 0.24% to 28743.32, while the CNX Nifty was down by 17.10 points or 0.19% to 8,879.60. 

The BSE Sensex touched a high and a low of 28876.54 and 28721.12, respectively and there were 10 stocks on gainers side as against 20 stocks on the losers side on the index.

The broader indices made a positive closing; the BSE Mid cap index gained 0.14%, while Small cap index was up by 0.59%.

The top gaining sectoral indices on the BSE were Telecom up by 1.69%, Realty up by 1.44%, Basic Materials up by 0.70%, Capital Goods up by 0.67% and Industrials up by 0.43%, while Oil & Gas down by 1.34%, Energy down by 0.99%, PSU down by 0.40%, FMCG down by 0.33% and IT down by 0.25% were the top losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 2.66%, Asian Paints up by 2.29%, Adani Ports & Special economic zone up by 1.68%, Mahindra & Mahindra up by 1.45% and Sun Pharma up by 0.61%. On the flip side, Coal India down by 2.48%, Bajaj Auto down by 1.56%, NTPC down by 1.24%, Hero MotoCorp down by 1.05% and TCS down by 0.90% were the top losers.

Meanwhile, in order to bring down the crude import bill by Rs 1 lakh crore, the government is planning to formulate policies on the second-generation ethanol as well as methanol, non-conventional fuel resources. Union road transport and highways Minister Nitin Gadkari has said that draft policies on the two fuels would be prepared by the oil ministry for approval of the Cabinet.

Gadkari has said that if second-generation ethanol can be produced from bamboo, cotton straw, wheat straw, rice straw and bagass etc, it could lead to creation of 25 lakh rural jobs mostly in villages. He also said that it was decided to take second generation ethanol production on mission mode as India accounted for a huge Rs 6 lakh crore imports bill on crude per annum and exploring and generating indigenous alternative would cut crude imports by at least Rs 1 lakh crore. He noted that at present ethanol is derived from molasses, which is barely 119 crore litres as against a minimum requirement of about 500 crore litres.

The minister said that they get hardly 3% ethanol whereas they can mix 22% in petrol, therefore there is a shortage of 19%. He said the biofuel was not only cost-effective but a pollution free import substitute. The Minister said that in countries like the US and Brazil, there are flex engines of cars where 22% ethanol could be easily blended in petrol. The transport minister further said that in view of surplus cola production it has been decided to promote methanol output and oil Ministry will also bring a policy for production of methanol from coal. He said that as many as 150 petroleum products could be made from coal.

The CNX Nifty traded in a range of 8,914.75 and 8,867.60. There were 20 stocks in green as against 31 stocks in red on the index.

The top gainers on Nifty were BHEL up by 6.09%, Bharti Airtel up by 3.61%, Asian Paints up by 2.38%, Yes Bank up by 2.12% and Hindalco up by 1.96%. On the flip side, Grasim Industries down by 3.36%, BPCL down by 2.72%, Coal India down by 2.47%, Tech Mahindra down by 1.74% and Bajaj Auto down by 1.57% were the top losers.

The European markets were trading mostly in red; UK’s FTSE 100 decreased 2.58 points or 0.04% to 7,250.42, Germany’s DAX decreased 9.46 points or 0.08% to 11,813.21, while France’s CAC increased 1.5 points or 0.03% to 4,846.68.

Asian equity markets ended on a mixed note on Tuesday as investors awaited US President Donald Trump's address before a joint session of Congress tonight, where he is expected to lay out plans for pro-business policies including tax reform, health care and infrastructure spending. Chinese shares ended higher in thin trading after Trump said the United States attaches great importance to cooperative relations with China. Japanese shares too inched higher despite a stronger yen and comments from BOJ Governor Haruhiko Kuroda that Japan was still distant from achieving its 2 percent inflation target. The day's economic reports also painted a mixed picture, with Japan's industrial output declining for the first time in six months in January, while housing starts expanded at a faster pace and retail sales increased for a third straight month. Meanwhile, the Taiwanese market was closed for the Peace Memorial Day holiday.