Benchmarks make soft start on geopolitical concerns

Indian equity benchmarks have made a soft start and are trading in red with a cut of over quarter a percent on geopolitical concerns as US President Donald Trump ordered a targeted military strike against an airfield in Syria from which a deadly chemical attack was launched this week. Sentiments also remained dampened with Reserve Bank of India (RBI) projecting retail inflation to increase to 5 percent in the second half of the current fiscal citing risks of El Nino impacting the monsoon and one-off effects of the Goods and Services Tax. However, losses remained capped up-to certain extent with the Rajya Sabha passing four supplementary legislations which will enable the government to rollout the landmark Goods and Services Tax Bill on July 1. Also, the Lok Sabha passed a bill which will ensure continuance of levy of excise on petroleum products and abolition of cess on some other items following GST rollout from July 1.

On the global front, stocks slumped and safe haven bonds and the yen jumped in Asia on Friday after the United States launched cruise missiles against an air base in Syria, potentially escalating the conflict and spooking investors globally. The US markets closed modestly higher in last session but were off the highs of the day, as traders looked ahead to the release of the Labour Department’s closely watched monthly jobs report on Friday.

Back home, finance minister Arun Jaitley said that once the new regime is implemented harassment of businesses by different authorities will end, and India will have one rate for one commodity throughout the country. The market breadth indicating the overall health of the market was strong, with 1,148 shares gaining and 927 shares declining, while a total of 84 shares were unchanged.

The BSE Sensex is currently trading at 29844.88, down by 82.46 points or 0.28% after trading in a range of 29763.02 and 29863.74. There were 11 stocks advancing against 19 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.13%, while Small cap index was up by 0.21%.

The top gaining sectoral indices on the BSE were Telecom up by 1.20%, Realty up by 1.05%, Capital Goods up by 0.92%, Oil & Gas up by 0.71% and Industrials up by 0.23%, while Healthcare down by 0.78%, FMCG down by 0.33%, Power down by 0.32%, Metal down by 0.29% and Utilities was down by 0.20% were the top losing indices on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 1.63%, Bharti Airtel up by 1.54%, TCS up by 0.65%, ICICI Bank up by 0.52% and Bajaj Auto up by 0.41%. On the flip side, Sun Pharma down by 2.69%, Adani Ports & SEZ down by 2.13%, Coal India down by 1.38%, Power Grid down by 1.17% and HDFC down by 1.07% were the top losers.

Meanwhile, the six-member monetary policy committee (MPC), headed by Reserve Bank of India (RBI)  Governor Urjit Patel, has kept the policy rate under the liquidity adjustment facility (LAF) unchanged at 6.25 percent, shifting focus to ways to mop up excess cash in the banking system that threatens to stoke inflation. It revised the reverse repo rate upward by 25 basis points to 6 percent. Also, the Marginal Standing Facility (MFS) has been revised by 25 basis points to 6.5 percent. MSF is RBI's lending rate for banks against government securities.

In its first bi-monthly monetary policy review of 2017-18 RBI said that all the six members of the MPC voted in favour of the decision. RBI governor said that liquidity management has become important now to contain inflation, which faces more upside risks due to monsoon uncertainty and the impact of the Seventh Pay commission on housing allowances and the GST implementation. The RBI has projected retail inflation to average 4.5 percent in the first half of the year and 5 percent in the second half, citing risks of El Nino impacting the monsoon and one-off effects of the Goods and Services Tax (GST).

Moreover, the central bank said that Gross Domestic Product (GDP) growth will be at 7.4 percent for the current fiscal, up from 6.7 percent in 2016-17. It also said that with progressive remonetisation, the surplus liquidity in the banking system has declined from a peak of Rs 7,956 billion on January 4, to an average of Rs 6,014 billion in February and further down to Rs 4,806 billion in March. Currency in circulation expanded steadily during this period. Its impact on the liquidity overhang was, however, partly offset by a significant decline in cash balances of government up to mid-March which released liquidity into the system.

The CNX Nifty is currently trading at 9235.50, down by 26.45 points or 0.29% after trading in a range of 9212.60 and 9240.15. There were 16 stocks advancing against 35 stocks declining on the index.

The top gainers on Nifty were Indian Oil Corporation up by 2.66%, BPCL up by 1.90%, Larsen & Toubro up by 1.60%, Bharti Airtel up by 1.39% and Tech Mahindra was up by 1.12%. On the flip side, Sun Pharma down by 2.54%, Adani Ports & SEZ down by 2.26%, Zee Entertainment down by 1.83%, Bank of Baroda down by 1.32% and Tata Motors - DVR down was by 1.29% were the top losers.

Asian markets were trading mostly in red; Hang Seng decreased 136.61 points or 0.56% to 24,137.11, Taiwan Weighted shed 44.45 points or 0.45% to 9,853.35, Jakarta Composite fell 30.03 points or 0.53% to 5,650.21, KOSPI Index slipped 2.03 points or 0.09% to 2,150.72 and FTSE Bursa Malaysia KLCI was down by 1.52 points or 0.09% to 1,738.04.

On the flip side, Shanghai Composite increased 8.09 points or 0.25% to 3,289.09 and Nikkei 225 was up by 95 points or 0.51% to 18,692.06.