Indian benchmarks retreat from two-year closing highs; Sensex closes below 29000 mark

Indian benchmark indices, after hitting two-year closing highs in the previous session, ended lower on Tuesday as market participants remained wary over the latest tumult surrounding the Trump administration and geopolitical tensions emanating from North Korea. Traders were also grappled with the likelihood of an interest rate hike by the US Federal Reserve at its meeting next week. Sentiments remained subdued with Deputy Governor of the Reserve Bank of India’s (RBI) statement that the impact of demonetisation on the informal sector is not fully captured in the GDP data and the effects of demonetisation is expected to spill over to certain segments of the economy in this quarter. However, he also said that the impact of the notes ban would only be temporary and would help in bringing informal sector into the mainstream economy. Investors got some comfort with the Global rating agency Fitch’s report that Indian economy will grow by 7.1% in the current financial year before stepping up to 7.7% in the next two financial years. It said the December quarter GDP number suggests that economic activity was ‘hardly hit’ by the cash crunch after the government's move to remove 86 per cent of currency in circulation overnight. Meanwhile, some Pharma stocks came under pressure on the report that growth of the domestic pharmaceutical industry is expected to remain moderate due to slowing growth in the US, increased regulatory scrutiny and consolidation of supply chain in the US market. In near term, the direction of markets will likely hinge on the results of the elections in Uttar Pradesh, due on Saturday, which will have a key influence on Prime Minister Narendra Modi's chances of clinching a second term in 2019.

On the global front, Asian equity markets ended mostly higher on Tuesday as investors digested new economic data and grew optimistic of a new interest rate hike in the U.S. as early as this month.US factory orders rose 1.2% month-on-month and durable goods orders climbed 2%, both beating the market consensus. While Japanese shares ended lower with rising geopolitical tensions, French election uncertainty and overnight losses in the US markets, Chinese markets edged higher, aided by renewed interest in technology shares in late trading after a listless morning session. Market participants piled up tech shares for the second day following Premier Li Keqiang's Work Report on Sunday that identified innovation as a key part of China's economic restructuring. Meanwhile, European stocks traded with mixed signs on Tuesday after Germany reported disappointing data and a third estimate of euro zone gross domestic product (GDP) was left unrevised. 

Back home, after getting positive start, the local benchmarks slipped in to negative territory in early trade and continued to trade choppy throughout the session, as investors remained cautious ahead of key exit poll data for assembly elections in five states. Finally, the NSE’s 50-share broadly followed index Nifty, took a cut of around two tens of a percent to settle below the crucial 8,950 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by around fifty points and closed tad below the psychological 29,000 mark. The market breadth on the BSE was pessimistic, as there were 1185 shares on the gaining side against 1647 shares on the losing side, while 177 shares remained unchanged.

Finally, the BSE Sensex declined 48.63 points or 0.17% to 28999.56, while the CNX Nifty was down by 16.55 points or 0.18% to 8,946.90. 

The BSE Sensex touched a high and a low of 29098.17 and 28957.68, 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 0.03%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 0.41%, Consumer Durables up by 0.37%, Power up by 0.28%, Capital Goods up by 0.18% and Energy up by 0.15%, while Metal down by 1.79%, Basic Materials down by 0.75%, Auto down by 0.50%, Telecom down by 0.47% and Healthcare down by 0.47% were the top losing indices on BSE.

The top gainers on the Sensex were Adani Ports & SEZ up by 1.97%, ONGC up by 1.26%, TCS up by 1.22%, HDFC Bank up by 0.42% and Wipro up by 0.40%. On the flip side, Tata Steel down by 2.22%, Infosys down by 1.37%, Lupin down by 1.36%, Axis Bank down by 1.28% and Maruti Suzuki down by 0.85% were the top losers.

Meanwhile, Union Minister Jayant Sinha has said that overseas investors are very excited about India as structural reforms and investments are giving overall growth a leg-up. He said that overseas investors are noticing that cash to GDP is coming down, while tax to GDP is going up and as a result they believe that it is a very powerful structural reform in India.

Noting that demonetization has resulted in various benefits, Sinha said that the move is over and has led to a dramatic improvement in the country’s economic landscape. He also pointed out that it has helped in strengthening banks as well as improving the overall economy. The minister added that banks have gained considerably from the low cost current account savings account (CASA). On the GST front, Sinha said that GST council has largely approved the draft of the legislation that has to be passed. Therefore, in all, foreign investors are very excited about India. 

The Union Minister further said that the facts are clear and overseas investors are telling them that they have been doing well in the economy and structural reforms that they have unleashed as well as the kind of investments that the government and the private sector in India are making are really contributing to very strong growth. He also noted that there has been a tremendous interest globally in stepping up investments in India and they have built up their positions in India.

The CNX Nifty traded in a range of 8,977.85 and 8,932.80. There were 17 stocks in green as against 34 stocks in red on the index.

The top gainers on Nifty were Adani Ports & SEZ up by 1.93%, TCS up by 1.31%, BPCL up by 1.19%, Indusind Bank up by 1.16% and ONGC up by 1.14%. On the flip side, Hindalco down by 3.26%, Tata Steel down by 2.09%, Infosys down by 1.46%, Lupin down by 1.37% and Axis Bank down by 1.28% were the top losers.

The European markets were trading mostly in green; UK’s FTSE 100 increased 10.07 points or 0.14% to 7,360.19, Germany’s DAX increased 22.46 points or 0.19% to 11,980.86, while France’s CAC decreased 8.63 points or 0.17% to 4,963.56.

Asian equity markets ended mostly higher on Tuesday amid growing expectations among traders that the Federal Reserve could raise interest rates at its March policy meeting next week. Also, US factory orders rose 1.2 percent month-on-month and durable goods orders climbed 2 percent, both beating the market consensus. Chinese shares ended higher, aided by renewed interest in technology shares in late trading after a listless morning session. Investors piled up tech shares for the second day following Premier Li Keqiang's Work Report on Sunday that identified innovation as a key part of China's economic restructuring. Though, Japanese shares ended lower with rising geopolitical tensions, French election uncertainty and overnight losses in the European banking sector.