Indian benchmarks end a lackluster session with modest cut; Nifty settles above 8900 mark

Indian benchmarks indices extended the sorrow of closing in the red territory for the second consecutive session on Wednesday as caution prevailed ahead of the exit poll results due tomorrow for the ongoing assembly elections. State elections results, including that of Uttar Pradesh, which will have a key influence on Prime Minister Narendra Modi's chances of clinching a second term in 2019, is to be revealed on Saturday. Sentiments remained subdued on the report that sovereign wealth funds (SWFs), considered one of the stickiest foreign portfolio investors (FPIs), are reducing bets on Indian equities. The share of SWFs in the total FPI holding in India shrank to 6% in January compared with 10.4% in July 2016. The AUM of the SWFs stood at Rs 1.4 lakh crore at the end of January, while total FPI AUM was at Rs 21.51 lakh crore. Furthermore, investors also remained nervous with the report that Consumer price inflation is likely to rise in February for the first time since demonetization and this could prompt the Reserve Bank of India (RBI) to hike rates much sooner than most expect. However, downside remained capped with Prime Minister Narendra Modi’s statement that his government has been able to tame inflation which had gone out of control before 2014 and no political party could raise the issue during the polls in five states. PM cited examples of how different organisations around the world including the World Bank, IMF and others have appreciated the demonetisation move. Meanwhile, sugar stocks came under selling pressure after the report that India’s sugar output will fall 19% this season due to poor crop yields in Karnataka, Maharashtra and Andhra Pradesh. According to Indian Sugar Mills Association (ISMA), the country’ output in the 2016-17 season beginning October would be about 20.3 million tonnes, compared with 25.1 million tonnes in the earlier season. Further, some pharma stocks slipped after US President Donald Trump's tweet about lowering drug prices. Trump said he was working on a new system to increase competition in the drugs industry and bring down prices. On the other hand, Aviation stocks gained traction on the reports that the Delhi government will cut tax of air turbine fuel (ATF) to 1% from 25% in a bid to boost connectivity between the capital and northeast areas.

On the global front, Asian markets ended mixed on Wednesday, as investors turned jittery after Wall Street logged first consecutive sessions of declines in more than a month in anticipation that US Federal Reserve will hike interest rates next week. The Federal Reserve has a policy meeting on March 14-15 and markets are expecting a rate hike after recent hawkish comments by policymakers. However, investors got some comfort with the report that China's imports advanced 44.7% year-on-year in February, much bigger than the forecast of 23.1% while exports grew only 4.2% in yuan terms versus a 14.6% annual rise economists had forecast. As a result, the trade balance showed a deficit of CNY 60.4 billion in February compared to the expected surplus of CNY 172.5 billion. Separate data from the People's Bank of China revealed that China's foreign exchange reserves unexpectedly increased by $7 billion to $3.0 trillion in February, marking the first increase in eight months. Meanwhile, European markets were trading in red as investors prepared for a key budget statement from the U.K. government but found solid support from corporate and economic data from Germany.

Back home, after getting a feeble start, the local benchmarks slipped into lower levels in late morning session, but trim some of their losses by the end of the trading day. Finally, the NSE’s 50-share broadly followed index Nifty, took a cut of around quarter percent to settle above the crucial 8,900 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by around hundred points and closed tad above the psychological 28,900 mark. The market breadth on the BSE was pessimistic, as there were 1067 shares on the gaining side against 1755 shares on the losing side, while 164 shares remained unchanged.

Finally, the BSE Sensex declined 97.62 points or 0.34% to 28901.94, while the CNX Nifty was down by 22.60 points or 0.25% to 8,924.30. 

The BSE Sensex touched a high and a low of 29022.32 and 28815.48, respectively and there were 8 stocks on gainers side as against 22 stocks on the losers side on the index.

The broader indices made a negative closing; the BSE Mid cap index declined 0.56%, while Small cap index was down by 0.31%.

The only gaining sectoral indices on the BSE were Healthcare up by 0.21% and Bankex up by 0.16%, while Metal down by 1.91%, Realty down by 1.44%, Oil & Gas down by 1.38%, Energy down by 1.25% and PSU down by 0.88% were the top losing indices on BSE.

The top gainers on the Sensex were SBI up by 0.62%, TCS up by 0.53%, Cipla up by 0.40%, Power Grid up by 0.39% and HDFC Bank up by 0.38%. On the flip side, Tata Steel down by 1.89%, ONGC down by 1.78%, Mahindra & Mahindra down by 1.46%, Infosys down by 1.22% and GAIL India down by 1.18% were the top losers.

Meanwhile, in order to boost the country’s output of oil and gas through greater foreign investment, the government has announced an open acreage licensing policy (OALP), which will allow the bidders to select areas where they want to drill. The policy will also give the operators the much needed freedom in pricing and marketing for oil and gas.

The government has planned to conduct auction of oil and gas blocks under the OALP, twice in a year. The first round of the auction is going to be held in July this year which will be India's first major exploration licensing round since 2010. OALP auction will be held under the overhauled exploration licensing policy which allows pricing and marketing freedom to operators and shifts to a revenue sharing model.

The new policy which is part of the strategy to make India a business and investor friendly destination and cut import dependence will be a departure from the current licensing policy of government identifying the oil and gas blocks and then putting them on auction. In this new policy, the government will not micromanage, micro monitor with producers. It will only share revenue which will be an open and regular affair, instead will give an option to a company looking for exploring hydrocarbons to select the exploration areas on its own. This selection can be done based on the seismic and well data that the Directorate-General of Hydrocarbons has put in a National Data Repository.

At present, India is the third-largest oil consumer behind the U.S. and China whose domestic crude oil production of 36.95 million tons in 2015-16 barely met 20 per cent of its oil needs and natural gas output at 32.249 billion cubic metres, meets less than half of its needs.

The CNX Nifty traded in a range of 8,957.05 and 8,891.95. There were 19 stocks in green as against 32 stocks in red on the index.

The top gainers on Nifty were Bosch up by 2.51%, Yes Bank up by 2.20%, ZEEL up by 1.53%, Eicher Motors up by 1.14% and Kotak Mahindra Bank up by 0.86%. On the flip side, Idea Cellular down by 2.26%, Tata Steel down by 2.10%, ONGC down by 1.91%, Tech Mahindra down by 1.47% and BHEL down by 1.34% were the top losers.

The European markets were trading in green; UK’s FTSE 100 increased 4.14 points or 0.06% to 7,343.13, Germany’s DAX increased 30.52 points or 0.26% to 11,996.66 and France’s CAC increased 0.42 points or 0.01% to 4,955.42.

Asian equity markets ended mixed on Wednesday after the release of strong China trade data. China's imports advanced 44.7 percent year-on-year in February, much bigger than the forecast of 23.1 percent while exports grew only 4.2 percent in yuan terms versus a 14.6 percent annual rise economists had forecast. As a result, the trade balance showed a deficit of CNY 60.4 billion in February compared to the expected surplus of CNY 172.5 billion. Separate data from the People's Bank of China revealed that China's foreign exchange reserves unexpectedly increased by $7 billion to $3.0 trillion in February, marking the first increase in eight months. Chinese shares ended lower as concerns over tighter liquidity offset data showing clear signs of increased domestic demand. Japanese shares ended lower as caution prevailed ahead of the ECB's policy meeting on Thursday, the US jobs report due on Friday and the March 14-15 Federal Open Market Committee meeting. Sentiment was also dampened after data showed the US trade deficit in January hit the highest level in nearly five years, underscoring the challenges facing Trump. However, the sentiment remained cautious amid losses on Wall Street overnight as risk appetite took a hit on rising geopolitical tensions in East Asia, with the arrival of the first components of a US-deployed controversial missile-defense system in South Korea. Meanwhile, the United Nations has called for calm between Malaysia and North Korea after the two banned each other's nationals from exiting their countries following the killing of North Korean leader Kim Jong-un's half-brother.