Indian markets end lower on poor macroeconomic data

Indian equity market commenced the new month on a sluggish note, as the benchmarks showcased an unenthusiastic performance on Thursday and settled with moderate cuts as investors remained cautious after India's economic growth unexpectedly slumped to its lowest in more than two years in the March quarter, stripping the country of its status as the world's fastest growing major economy. The country’s GDP or gross domestic product growth slowed to 6.1% in the fiscal fourth quarter from 7% in the third, while Gross value added (GVA), the difference between gross domestic product (GDP) and net indirect taxes, grew by only 5.6 per cent in Q4 - the lowest in at least eight quarters. Besides, a sharp fall in the output of coal, natural gas and crude oil pulled down growth in the group of eight core sectors to a three-month low in April, also weighed on investors’ morale. The core sector expanded 2.5 per cent in the first month of the new fiscal year, compared with 5.3% in March and 8.7% a year earlier.

Further, market participants also remained jittery after the report that manufacturing sector growth in the country moderated to a three-month low in May amid softer rise in new orders and production. The Nikkei Markit India Manufacturing Purchasing Managers' Index (PMI) -- an indicator of manufacturing activity -- declined from 52.5 in April to a three-month low of 51.6 in May. However, losses remained capped with the report that Fiscal deficit in fiscal 2017 was 3.5% of GDP, in line with the budget projection, reflecting the government's commitment to the process of fiscal consolidation. In fiscal 2016, the deficit was 3.9% of GDP. Furthermore, the government's decision to unveil the budget early seems to have paid off with spending having picked pace in the first month of the financial year itself. The government spent 11.3% of the budgeted expenditure in April, with capital expenditure topping the overall spending. Meanwhile, sugar stocks gained traction after the report that India's 2017/18 sugar production will likely jump a quarter from the previous year to 25 million tonnes as decent monsoon rains are forecast. India's monsoon, which is forecast to deliver normal rainfall in 2017, lashed the country's southwest coast on Tuesday, two days ahead of usual.

On the global front, Asian markets ended mixed on Thursday, as investors keenly awaited Friday's US non-farm payrolls numbers as a positive report could pave the way for a rate hike in mid-June. Chinese market started the month on a bearish note, after a private survey showed that the country's manufacturing activity unexpectedly contracted in May for the first time in 11 months & companies shed more jobs as demand weakened and shrinking factory prices dented profits. The index fell to 49.6, weaker than expected, below the 50-point mark, which demarcates growth and contraction, and marked the third month in which the index has fallen. However, Japan's Nikkei gained after data showing recurring first-quarter corporate profits were the highest on record for the January to March period. Meanwhile, European markets edged higher in early trade, after solid regional manufacturing data underscored the region's ongoing recovery and a weaker pound boosted share prices in the United Kingdom. The pace of expansion in Europe's manufacturing sector continues to hold at six year highs, with employment in the sector running at the highest every for the 20-year survey.  Many investors in Europe also focused on a speech from German centralbank President Jens Weidmann, who said late Wednesday that the European Central Bank should start discussing when to reduce its monetary stimulus.

Back home, after getting a cautious start, the local benchmarks traded in tight range near neutral line, altering between positive and negative, throughout the session and ended the trading day with moderate losses. The NSE’s 50-share broadly followed index - Nifty settled with trivial losses of five points above the psychological 9,600 levels, while Bombay Stock Exchange’s Sensitive Index - Sensex shed eight points and closed above the psychological 31,100 mark. However, broader markets managed to outperform the larger peers today as the BSE’s midcap and smallcap indices settled with strong gains. The market breadth remained in favor of advances, as there were 1412 shares on the gaining side against 1267 shares on the losing side, while 179 shares remain unchanged.

Finally, the BSE Sensex lost 8.21 points or 0.03% to 31137.59, while the CNX Nifty was down by 5.15 points or 0.05% to 9,616.10. 

The BSE Sensex touched a high and a low of 31213.12 and 31062.02, respectively and there were 16 stocks on gaining side as against 14 stocks on the losing side.

The broader indices ended in green; the BSE Mid cap index gained 0.48%, while Small cap index was up by 1.02%.

The top gaining sectoral indices on the BSE were FMCG up by 1.18%, Healthcare up by 1.17%, Capital Goods up by 0.92%, Industrials up by 0.75% and Consumer Disc up by 0.51%, while Oil & Gas down by 1.58%, Metal down by 1.12%, Energy down by 1.10%, PSU down by 0.66% and Bankex down by 0.48% were the top losing indices on BSE.

The top gainers on the Sensex were Adani Ports & SEZ up by 3.20%, Hindustan Unilever up by 2.68%, Larsen & Toubro up by 1.82%, Sun Pharma up by 1.42% and ITC up by 0.87%. On the flip side, ICICI Bank down by 1.92%, ONGC down by 1.81%, GAIL India down by 1.77%, Tata Steel down by 1.39% and Bharti Airtel down by 1.25% were the top losers.

Meanwhile, with the banks, especially public sector, reeling under a mountain of bad debt, they have sought a few relaxations from the Reserve Bank of India (RBI) in the current scheme for Sustainable Structuring of Stressed Assets (S4A) including waiver of promoters' personal guarantee, for speedy resolution of the non-performing assets (NPAs). They have also requested the regulator to allow fresh moratorium or extend repayment schedule or reduction of rate of interest under the scheme, which are not allowed in the exiting S4A guidelines.

Under the S4A scheme, the joint lender forum is required to obtain promoters personal guarantee before implementing the stress asset resolution plan. For stressed companies, the factors causing the stress are beyond the control of the promoters. Therefore, it is impractical to require furnishing of personal guarantee, especially in case of listed companies. So, the requirement of furnishing personal guarantee must be waived.

Lenders have said that the purpose of S4A is to remove the financial stress of companies for which some relaxation in terms of repayment schedule or reduction in rate of interest is needed. They also said that the RBI should allow them to grant fresh moratorium or extension of repayment schedule or reduction of rate of interest to help companies come out of stress. According to bankers, the level of sustainable debt should be based on an independent techno-economic viability (TEV) study and not be constrained by the minimum percentage of debt that will be sustainable.

The CNX Nifty traded in a range of 9,634.65 and 9,589.90. There were 24 stocks in green as against 27 stocks in red on the index.

The top gainers on Nifty were Adani Ports & SEZ up by 3.39%, Bharti Infratel up by 2.84%, Hindustan Unilever up by 2.58%, Tech Mahindra up by 2.18% and Bosch up by 2.03%. On the flip side, IOC down by 3.68%, Vedanta down by 3.16%, ICICI Bank down by 2.01%, Hindalco down by 1.49% and Bharti Airtel down by 1.48% were the top losers.

The European markets were trading in green; UK’s FTSE 100 increased 23.08 points or 0.31% to 7,543.03, Germany’s DAX increased 39.84 points or 0.32% to 12,654.90 and France’s CAC increased 34.46 points or 0.65% to 5,318.09.

Asian equity markets made a mixed closing on Thursday, with Chinese shares starting the month on a bearish note after a private business survey showed manufacturing activity unexpectedly contracted in May, fuelling worries that the economy may be cooling more rapidly than expected. The latest survey from Caixin revealed a manufacturing PMI score of 49.6, down from 50.3 in April and missing forecasts for a score of 50.1. Other regional manufacturing reports painted a mixed picture, with activity in Japan's manufacturing sector expanding at a faster rate in May and Australia's manufacturing sector expanding at a slower pace, while South Korea's manufacturing activity remained in contraction. Investors keenly awaited Friday's US non-farm payrolls numbers as a positive report could pave the way for a rate hike in mid-June. Traders also awaited US President Donald Trump's decision on whether the US will pull out of the historic Paris climate accord. Meanwhile, Japanese shares snapped a four-day losing streak, lifted by upbeat domestic data.