Indian equity indices fail to maintain gains; settle with moderate cuts

Indian equity markets showed a volte-face on Tuesday as what started on a promising note ended as a dismal show. The optimism in local markets petered out completely by the end of trade and the indices even drifted in to the negative territory despite getting off to a gap-up opening. Marketmen were optimistic for most part of the morning session as World Bank in its report said that Indian economy will claw back to 7.2 percent growth this financial year and rise further to 7.5 percent in 2018-19. It also said that timely and smooth implementation of the GST could prove to a significant benefit to economic activity. However, sentiments got spooked in early afternoon trades following the sell-off in European markets as British Prime Minister May called a snap election for June 8, 2017. The shock announcement comes nearly one month after the UK triggered Article 50 to leave the European Union. Besides, profit booking in Realty and Metal counters exerted downside pressure on the frontline indices and dragged them even below to the psychological 9,150 (Nifty) and 29,400 (Sensex) levels. Sentiments weakened further after Indian Meteorological Department (IMD) released its prediction for this year's monsoon and said that monsoon rainfall may be 96% of the normal with an error margin of 5% on either side. IMD also said that there is more than 50% chance of El-Nino developing from August. Monsoon predictions are considered to be vital for Indian economy as agriculture still largely is dependent on the weather phenomenon.

On the global front, Asian equity markets ended on a mixed note on Tuesday as tensions over the situation on the Korean Peninsula softened somewhat following U.S. Vice President Mike Pence's departure from South Korea for Japan. Chinese market ended lower amid worries over increasing regulation and the sustainability of the country's economic growth. Stronger than expected first quarter GDP and March economic data on Monday failed to impress investors, who fear momentum will begin to fade in coming months. Meanwhile, European stocks were in selloff mode in early trade, with commodity shares struggling and investors nervous ahead of the first round of voting in France's presidential election on Sunday. U.K. stocks contributed to the slide, holding to losses following news of an unscheduled statement to be made by U.K. Prime Minister Theresa May.

Back home, the benchmark got off to a positive start in the morning trade as investors were largely influenced by the supportive leads from Asian markets. Thereafter, the indices climbed to intraday highs in late morning session and traded around the psychological 29,700 (Sensex) and 9,200 (Nifty) levels through the morning trades. But the optimism soon started showing signs of easing in late hours of trade and profit booking in few sectors amid drifting European markets weighed down the local bourses by the end of session. Eventually, the NSE's 50-share broadly followed index - Nifty plunged by over quarter percent to settle just above the crucial 9,100 support level, while Bombay Stock Exchange's Sensitive Index - Sensex took ninety-four points cut and closed above the psychological 29,300 mark. Moreover, the broader markets succumbed to the selling pressure despite showing positive moves early on and settled with large cuts of over half a percent. The market breadth remained pessimistic, as there were 1112 shares on the gaining side against 1771 shares on the losing side, while 143 shares remained unchanged.

Finally, the BSE Sensex decreased 94.56 points or 0.32% to 29319.10, while the CNX Nifty was down by 34.15 points or 0.37% to 9,105.15. 

The BSE Sensex touched a high and a low of 29701.19 and 29286.38, respectively and there were 9 stocks on gainers side as against 21 stocks on the losers side on the index.

The broader indices ended in red; the BSE Mid cap index declined 0.63%, while Small cap index was down by 0.74%.

The only gaining sectoral indices on the BSE were Utilities up by 0.27% and Power up by 0.03%, while Realty down by 3.48%, Metal down by 1.81%, Energy down by 1.04%, Healthcare down by 0.94% and Telecom down by 0.94% were the top losing indices on BSE.

The top gainers on the Sensex were NTPC up by 1.60%, Wipro up by 0.93%, HDFC Bank up by 0.68%, ICICI Bank up by 0.46% and Power Grid up by 0.32%. On the flip side, Tata Steel down by 2.55%, Coal India down by 2.34%, Sun Pharma down by 1.76%, Asian Paints down by 1.68% and Reliance Industries down by 1.48% were the top losers.

Meanwhile, the World Bank in latest report titled ‘Globalization Backlash’, has said that India’s GDP is expected to see uptick from 6.8 per cent in 2016-2017 to 7.2 per cent by current fiscal year and rise further to 7.5 per cent in 2018-19 fiscal. It also forecasted that India’s economic growth will rise slowly to 7.7 per cent in 2019-2020 supported by a recovery in private investments. It noted that the economic growth slowed down to 6.8 per cent in 2016-17 on the back of weak investments and the impact of demonetization. It also stressed that the GDP slowed to 7 per cent during the third quarter of 2016-17, from 7.3 per cent during the first half of the fiscal.

According to the report, the significant risks to economic growth could derive from fallout of note ban on small and informal economy, stress in the financial sector along with uncertainty in global environment. It also pointed out that a rapid hike in the prices of oil and other commodities could have a negative implication for the economy. However, it suggested that timely and smooth implementation of the GST could prove to a significant uptick risk to economic activity in 2017-18.

The report further said that India’s fiscal, inflation and external conditions are expected to remain stable. It also said that the centre will continue to consolidate modestly, while retaining the push towards infrastructure spending. The report stated that the country’s inflation will stabilize, underpinned by favourable weather and structural reforms. It added that normal monsoons have so far offset increases in petroleum prices.

Specifying about the external factor, it said that exchange rate has appreciated, partly reflecting expectations of a narrowing inflation gap between India and the US and limited external vulnerabilities as the current account deficit is expected to remain below 2 per cent of the GDP and fully financed by FDI inflows. It added that challenges to India’s favourable growth outlook could stem from continued uncertainties in the global environment, including rising global protectionism and a sharp slowdown in the Chinese economy, which could further delay a meaningful recovery of external demand.

The CNX Nifty traded in a range of 9,217.90 and 9,095.45. There were 13 stocks in green as against 38 stocks in red on the index.

The top gainers on Nifty were Aurobindo Pharma up by 1.85%, NTPC up by 1.48%, IOC up by 1.33%, Hindalco up by 1.30% and Bank of Baroda up by 0.65%. On the flip side, Tata Steel down by 3.01%, Bharti Infratel down by 2.79%, Ambuja Cement down by 2.75%, Eicher Motors down by 2.51% and Coal India down by 2.31% were the top losers.

European markets were trading in red; Germany’s DAX declined 76.89 points or 0.63% to 12,032.11, UK’s FTSE 100 dropped 71.17 points or 0.97% to 7,256.42 and France’s CAC was down by 64.32 points or 1.27% to 5,006.78.

Asian equity markets ended on a mixed note on Tuesday as geopolitical tensions took a backseat following a failed missile test by North Korea at the weekend and US Vice President Mike Pence continuing his tour of Asia. Pence met with Japanese Prime Minister Shinzo Abe on the second leg of his tour of the region, where he said the US would work with its allies in dealing with North Korea. Chinese shares ended lower amid worries over increasing regulation and the sustainability of the country's economic growth. Stronger than expected first quarter GDP and March economic data on Monday failed to impress investors, who fear momentum will begin to fade in coming months. Hong Kong shares ended down as traders returned from the Easter long weekend. Meanwhile, Japanese shares ended higher as a weaker yen offered some respite to exporters.