Markets continue to trade weak; Nifty below 9400 levels

Indian equity indices continued to trade weak under heavy selling pressure hovering around the lowest point of the day as funds and retail investors engaged in reducing positions amid weak global cues. The explosion struck an Ariana Grande concert in northern England late yesterday, killing at least 19 people and injuring dozens. Britain’s terrorist threat level has been set at ‘severe’ in recent years, indicating an attack is highly likely. Investors failed to get any sense of relief with a new survey by the Confederation of Indian Industries (CII) and Indian Bank’s Association (IBA) showing that the outlook towards the financial condition of the country has taken a positive turn during the first quarter of the ongoing fiscal. The CII-IBA Financial Conditions Index stood at 56.9 for first quarter of 2017-18, as compared to 48 during the previous quarter. Meanwhile, overseas investors have pumped in more than $2 billion so far in the country’s capital market this month, helped by the stable outlook for the rupee. According to latest depository data, foreign portfolio investors (FPIs) invested a net Rs 4,157 crore in equities during May 2-19, while they poured Rs 12,941 crore in the debt markets during the period under review, translating into a net inflow of Rs 17,099 crore ($2.66 billion).

On the global front, Asian markets were trading mixed on Tuesday, as investors focused on Korean Peninsula tensions and Chinese economic data due later in the morning. North Korea tested a missile, which ‘blew up’ soon after launch, following a military parade to commemorate the birthday of Kim Il-Sung over the weekend. The test came before US Vice President Mike Pence arrived in Seoul for a trip that aims to reassure American allies in Asia. Further, Oil prices fell after US President Donald Trump proposed the sale of half of the country’s strategic oil reserves in his budget plan, just as producer club OPEC and its allies are cut back output to tighten the market.

Back home, barring Auto index, which gained 0.30%, all the other indices were in the negative, with Healthcare, Utilities and Realty indices being significant losers. In scrip specific development, GAIL (India) dipped after the company reported 69% year-on-year (YoY) decline in its March 2017 (Q4FY17) net profit to Rs 260 crore. Moreover, Bank of India declined after the bank reported a net loss of Rs 1045.54 crore for the quarter ended March 31, 2017 as compared to a net loss of Rs 3587.11 crore for the same quarter in the previous year.

The market breadth remained pessimistic, as there were 690 shares on the gaining side against 1699 shares on the losing side, while 119 shares remained unchanged.

The BSE Sensex is currently trading at 30407.06, down by 163.91 points or 0.54% after trading in a range of 30377.77 and 30610.64. There were 9 stocks advancing against 21 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.79%, while Small cap index down by 2.22%.

The sole gaining sectoral index on the BSE was Auto up by 0.30%, while Healthcare down by 3.16%, Utilities down by 2.15%, Realty down by 2.06%, Power down by 1.91% and Consumer Durables down by 1.75% were the top losing indices on BSE.

The top gainers on the Sensex were Maruti Suzuki up by 2.28%, Wipro up by 1.08%, Hindustan Unilever up by 0.85%, Mahindra & Mahindra up by 0.68% and Tata Motors up by 0.58%. On the flip side, Sun Pharma down by 6.14%, Cipla down by 3.93%, GAIL India down by 3.82%, Adani Ports & SEZ down by 2.95% and Bajaj Auto down by 2.15% were the top losers.

Meanwhile, as the implementation of Goods & Service Tax (GST) is nearing, there are concerns that it could put pressure on the working capital of industries. According to credit rating agency- India Ratings and Research (Ind-Ra), GST implementation will affect the working capital cycle of business in the initial phase owing to the lock up of input credit and noted that easy liquidity in the system is essential to minimise the magnitude of such disruption at the earliest and to absorb the sudden changes in requirement of short term finance.

The agency’s study on a sample set of 11,000 corporates has found that the input credit lock up for this sample could be Rs 1 trillion of which about Rs 500 billion could be blocked for about two months and this may result in higher short term working capital requirement for businesses in the near term. Ind-Ra has further said that the task is humongous and can be gauged from the size of closing inventory of around Rs 11.2 trillion as at fiscal year 2016, which are at various stages of production process. Besides, service tax rates which are likely to increase by 3 percent to 18 per cent from 15 per cent may put further pressure on short-term working capital needs.

The credit agency further said that though the GST impact on individual companies could vary widely, around 85 per cent of the blocked input credit will be with companies having more than Rs 5 billion of revenue and added that larger companies may be in a better position to deal with the problems during transition compared to the smaller ones. Besides, it has noted that since the overall credit offtakes is low and banking system liquidity is at its high level, banks will also be in a position to tackle any unanticipated volatility in fund requirements.

The CNX Nifty is currently trading at 9387.60, down by 50.65 points or 0.54% after trading in a range of 9374.20 and 9448.05. There were 15 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were Maruti Suzuki up by 2.07%, Eicher Motors up by 1.65%, Wipro up by 1.11%, Hindustan Unilever up by 0.89% and ICICI Bank up by 0.86%. On the flip side, Sun Pharma down by 7.05%, Aurobindo Pharma down by 5.12%, Cipla down by 4.46%, GAIL India down by 3.63% and Adani Ports & SEZ down by 3.09% were the top losers.

Asian markets were trading mixed; KOSPI Index rose 10.53 points or 0.46% to 2,314.56, Taiwan Weighted increased by 10.58 points or 0.11% to 10,007.84 and Hang Seng was up by 46.03 points or 0.18% to 25,437.37.

On the other hand, Nikkei 225 decreased by 65 points or 0.33% to 19,613.28, Jakarta Composite declined by 14.32 points or 0.25% to 5,735.12, Shanghai Composite slipped 11.18 points or 0.36% to 3,064.50 and FTSE Bursa Malaysia KLCI was down by 3.72 points or 0.21% to 1,771.23.