Late hour selloff drag benchmarks lower; Nifty settles April F&O expiry below 9,350

Indian equity markets truly depicted the choppiness of F&O expiry session and ended the session slightly in red on Thursday. Final hour of trade mainly played spoil sports for the markets and bourses settled below their crucial 30,100 (Sensex) and 9,350 (Nifty) levels. However, for the April series, Nifty garnered gains of 1.84 percent, while Sensex ended the series with a gain of 1.29 percent. Today, markets made a cautious start after Finance Minister Arun Jaitley expressed concern over the worrying signs of economic protectionism and has said the continued unpredictability in ties between major powers has brought new uncertainties to the fore. Separately, investors took note that a stronger rupee can help check inflation as it will pull down commodity prices, but export-reliant companies such as IT firms and drug makers are likely to take up to 4% hit on their earnings. Exporters’ body Federation of Indian Export Organisations (FIEO) said the rupee appreciation during the last two months has negatively impacted the country’s exports, and demanded immediate support from the government.

However, markets made smart recovery and entered into green terrain in afternoon session, as some support with the report that the Securities and Exchange Board of India (Sebi) approved a slew of reform measures to provide a fillip to the domestic markets, which include approval to options trading in commodity derivatives, unified licence for brokers, mutual fund investments through digital wallets, stricter public offer norms and enhanced safeguards to curb illicit fund flows. Sentiments also got soothed with report that bank credit growth improved to 5.52 percent in the first fortnight of the financial year (FY18), after falling to a whopping six-decade low of 5.08 per cent in the previous financial year (FY17). Some support also came with Finance Minister Arun Jaitley asserting that the government was giving top priority to addressing the issue of bad loans while acknowledging that the problem of non-performing assets was ‘adversely impacting’ the Indian banking system.

Selling in last hour of trade mainly dragged benchmarks lower, as traders opted to book their profits at higher levels. Weak opening in European counters too dampened sentiments. CAC, DAX and FTSE trading lower, as investors waited to hear from European Central Bank President Mario Draghi and digested fresh corporate earnings. However, Asian markets exhibited mixed trend on Thursday.

Back home, the Indian rupee on Thursday erased most of the initial gains and was trading little changed against the US dollar at the time of equity markets closing. The NSE’s 50-share broadly followed index Nifty slipped by 10 points to end below the psychological 9,350 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by over one hundred points to finish below its psychological 30,100 mark. Broader markets too traded in-line with benchmarks and ended mixed on Thursday. The market breadth remained in favor of decliners, as there were 1,309 shares on the gaining side against 1,566 shares on the losing side, while 160 shares remain unchanged.

Finally, the BSE Sensex declined 103.61 points or 0.34% to 30,029.74, while the CNX Nifty was down by 9.70 points or 0.10% to 9342.15. 

The BSE Sensex touched a high and a low of 30,184.22 and 29,973.40, respectively and there were 8 stocks on gainers side as against 21 stocks on the losers side, while one stock remained unchanged on the index.

The broader indices ended mixed; the BSE Mid cap index gained by 0.07%, while Small cap index was down by 0.02%.

The top gaining sectoral indices on the BSE were Realty up by 0.69%, IT up by 0.52%, Oil & Gas up by 0.41%, TECK up by 0.40% and Capital Goods was up by 0.33%, while Metal down by 1.03%, FMCG down by 0.72%, Healthcare down by 0.71%, Consumer Disc down by 0.26% and Basic Materials was down by 0.23% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 1.22%, GAIL India up by 1.18%, Cipla up by 1.11%, Infosys up by 1.08% and Wipro up by 1.04%. On the flip side, Lupin down by 2.48%, Axis Bank down by 2.19%, ITC down by 1.91%, Tata Steel down by 1.87% and SBI down by 1.55% were the top losers.

Meanwhile, the domestic rating agency, ICRA in its latest report has said that the current surge of foreign portfolio investors’ (FPIs) investments into the domestic debt market is unlikely to sustain through the rest of financial year 2018, mainly due to the factors such as a likely compression of the spreads, geopolitical tension and the sharp increase in the rupee.

Report also highlighted that, after reporting outflows of $7.1 billion during October 2016-January 2017, foreign institutional investors (FIIs) have invested $ 7.4 billion in the Indian debt market since February 2017. It also noted that inflows stood at $3.9 billion in the month of March, the highest monthly tally since December 2011. Adding further, it said that this was mainly supported by factors such as a widening of the spreads between 10-year US and domestic G-secs yields, the receding impact of the government’s demonetization move on economic activity and investor sentiment, as well as policy reforms including the passage of all the GST laws.

ICRA further said that aggregate FPI utilization of debt cap increased from 64.5% in January to 72.1% in March, and further to 74.7% in April, despite the planned rise in the limits for government securities as well as state development loans. However, the report also warned that this trend of large monthly FPI inflows into the debt markets is unlikely to sustain in coming months.

Based on the expected rate actions by the Reserve Bank of India and US Fed, it expects the spread between the US and Indian yields to decline, reducing the attractiveness of holding Indian debt for FPIs. It noted that this could lead to lower monthly inflows relative to the trend seen in the recent months, as well as sporadic outflows of FII investments in domestic debt.

The CNX Nifty traded in a range of 9,367.15 and 9,322.65. There were 22 stocks in green as against 29 stocks in red on the index.

The top gainers on Nifty were Yes Bank up by 3.81%, Indian Oil Corporation up by 2.20%, ACC up by 2.15%, Kotak Mahindra Bank up by 1.81% and Ambuja Cement up by 1.42%. On the flip side, Aurobindo Pharma down by 2.82%, Lupin down by 2.54%, Axis Bank down by 2.04%, ITC down by 1.75% and Tata Steel was down by 1.75% were the top losers.

European markets were trading in red; UK’s FTSE 100 decreased 44.86 points or 0.62% to 7,243.86, Germany’s DAX shed 33.62 points or 0.27% to 12,439.18 and France’s CAC was down by 23.22 points or 0.44% to 5,264.66.

Asian equity markets ended mixed on Thursday with Japanese market snapping four-day rally, as the Bank of Japan (BoJ) kept its policy steady while sounding more upbeat on the economy, citing a pick-up in overseas demand. Even though Trump’s proposed changes in the tax system that includes a cut in the corporate tax rate from the current 35 percent to 15 percent, the plan left investors with questions on whether the changes would increased the budget deficit. Chinese shares ended higher after official data showed profits earned by Chinese industrial firms climbed markedly in March, though at a slower pace than in the first two months of the year. Industrial profits surged an annual 23.8 percent, well below the 31.5 percent spike in the January to February period. However, it was much faster than the 8.5 percent growth in the whole year 2016.