Benchmarks continue to trade in red; IT, TECK drag

Indian equity benchmarks continued their weak trade in late morning session on account of selling in front line blue chip counters and in absence of any upside triggers. Investors awaited cues on market direction amid a number of geopolitical events scheduled later in the day. The rupee depreciated against the dollar in morning trade ahead of former FBI director James Comey’s congressional appearance later in the day. The sentiments remained dampened with Arvind Subramanian expressing his unhappiness over the Reserve Bank's inflexibility on interest rates. He warned that real policy rates are becoming tighter and rising at a time of low inflation and slowing growth. Reserve Bank of India (RBI) in its policy review gave the impression that it had embraced an accommodative stance once again, keeping the possibility of a future rate cut open.  The RBI in its monetary policy review also cut growth projection for current fiscal to 7.3 per cent from 7.4 per cent. The growth of real gross value added (GVA) for 2016-17 has been pegged at 6.6 percent, 0.1 percentage point lower than the second advance estimates released in February 2017. As the RBI left lending rates unchanged, India Inc expressed their disappointment saying the central bank has chosen to remain over-cautious about the inflation outlook. Separately, a global investment bank has downgraded its rating on India to ‘neutral’ from ‘overweight’ initiated earlier in the month of February, citing a sharp surge in valuations which offers limited risk to reward ratio from current levels.

Traders were seen piling up position in Healthcare, Telecom and FMCG stocks, while selling was witnessed in IT and TECK stocks. In scrip specific development, Cyient was trading in green on expanding strategic relationship with United Technologies Corp. It qualified as an approved product supplier to UTC Aerospace Systems.  Healthcare Global Enterprises gains on launching a comprehensive cancer center at Nagpur in state of Maharashtra on June 7, 2017.

On the global front, Asian shares were trading mostly in green, as investors focused on risk events later in the day. South Korea’s Kospi was trading in red after North Korea fired a salvo of land-to-ship missiles on Thursday morning. Back home, the NSE Nifty and BSE Sensex were trading below the psychological 9,700 and 31,300 levels respectively. The market breadth on BSE was positive in the ratio of 1460:1200, while 143 scrips remained unchanged.

The BSE Sensex is currently trading at 31240.39, down by 30.89 points or 0.10% after trading in a range of 31214.35 and 31354.51. There were 11 stocks advancing against 19 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.22%, while Small cap index was up by 0.21%.

The top gaining sectoral indices on the BSE were Metal up by 1.48%, Healthcare up by 1.12%, Basic Materials up by 0.55%, Auto up by 0.10% and Bankex up by 0.09%, while IT down by 1.18%, TECK down by 1.00%, Oil & Gas down by 0.93%, Utilities down by 0.86% and Energy down by 0.64% were the losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 3.55%, Dr. Reddy’s Lab up by 3.21%, HDFC up by 1.93%, Sun Pharma up by 1.82% and Lupin up by 0.91%.

On the flip side, GAIL India down by 2.82%, TCS down by 2.44%, Adani Ports & Special Economic Zone down by 2.09%, ONGC down by 1.65% and Infosys down by 0.96% were the top losers.

Meanwhile, after the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC), kept key interest rates unchanged at 6.25 percent for the fourth successive policy review, Chief Economic Advisor Arvind Subramanian has expressed his sadness over the RBI’s inflexibility on interest rates. He said that deceleration in growth and falling inflation warranted a substantial monetary policy easing.

Subramanian has stated that he respected the decision taken by the RBI, which is in the broader good of the country. However, he said “I wanted to give you my own technical assessment of the inflation and growth outlook”. He also said that there is a plausible alternative macroeconomic assessment as real policy rates are tight and rising at a time of low inflation and slowing growth. He added that off course, the appreciating real exchange rate makes the real monetary policy conditions even tighter.

CEA further said that not just headline inflation has been running well below target and so far in advance but core inflation has also declined sharply. He pointed to the wide divergence between the MPC’s inflation outlook and the actual inflation level, which is well within RBI’s comfort zone of 2-6%. He noted that Inflation forecast errors by the RBI have been large and systematically one-sided in overstating inflation. He added that the outlook also points to a slowdown and not to a rapid acceleration. 

The CNX Nifty is currently trading at 9652.80, down by 11.10 points or 0.11% after trading in a range of 9643.05 and 9688.70. There were 19 stocks advancing against 32 stocks declining on the index.

The top gainers on Nifty were Tata Steel up by 3.64%, Dr. Reddy’s Lab up by 3.13%, HDFC up by 1.87%, Sun Pharma up by 1.85% and Tata Motors - DVR up by 1.57%.

On the flip side, GAIL India down by 2.88%, TCS down by 2.68%, Adani Ports & Special Economic Zone down by 1.96%, Bharti Infratel down by 1.71% and ONGC down by 1.45% were the top losers.

The Asian markets were trading mostly in green; FTSE Bursa Malaysia KLCI increased 1.08 points or 0.06% to 1,787.00, Shanghai Composite increased 4.02 points or 0.13% to 3,144.35, Taiwan Weighted increased 5.03 points or 0.05% to 10,215.02, Nikkei 225 increased 16.07 points or 0.08% to 20,000.69 and Hang Seng increased 47.7 points or 0.18% to 26,021.86.

On the other hand, KOSPI Index decreased 1.13 points or 0.05% to 2,359.01 and Jakarta Composite decreased 0.85 points or 0.01% to 5,716.48.