Post Session: Quick Review

Indian equity benchmarks traded on a lackluster note on Monday and ended with cut of around half a percent. However, buying in IT stocks helped Nifty to close above 9600 mark. Investors’ maintained cautious approach ahead of key macro data - Index of Industrial Production (IIP) for April and Consumer Price Index-based inflation for May scheduled to be released later today. The equity benchmarks made a pessimistic start and traded in red in early deals after State Bank of India (SBI) expressed concern that demonetization, announced in November 2016, may continue to result in slowing down of the economy, and adversely affect its business. The long-term impact of this move on the Indian economy and the banking sector is uncertain. SBI’s research report Ecowrap pointed out the dangers of targeting food inflation consistently at very low levels as a part of the overall mandate for inflation targeting without adequate agricultural reforms. Food prices are now lower than the average of the last three years. The report highlighted that the forecast of normal monsoon this year is good news for food inflation, but low prices have their own dangers in the form of rural distress without agricultural reforms.

Meanwhile, Maharashtra is the second BJP government governed state after Uttar Pradesh to have announced a farm loan waiver. While the farm loan waiver by Maharashtra is worth Rs 30,000 crore, that by UP had been worth Rs 36,359 crore. Farmers from other states such as Madhya Pradesh and Tamil Nadu are also demanding farm loan waiver. The loan waivers affect state fiscal and ‘impact the credit discipline’ among borrowers. A day after UP government had announced a waiver, governor of the Reserve Bank of India (RBI) Urjit Patel, had denounced it, saying it undermines an honest credit culture and impacts credit discipline. Similarly, SBI chairman Arundhati Bhattacharya has said credit discipline breaks when farm loans are waived off.

On the global front, Asian markets closed mostly in red, amid Central Bank meetings ahead and uncertainty over the chances for a coalition government in Britain turned investors cautious. In a report, Economic and Social Research Institute said that Japan’s Core Machinery Orders fell to -3.1%, from 1.4% in the preceding month. European markets were trading in red as political developments were the major focus, with no major economic reports on Monday’s calendar. The new British cabinet was set for its first meeting on Monday have UK Prime Minister Theresa May saw her government weakened to a minority in elections she herself called hoping to reinforce the Conservative Party’s position.

Back home, select jewellery stocks closed in green after the GST Council decided to reduce GST rates for jewellery making charges to 5% from 18% earlier. The Council’s earlier decision of 18% attracted much discontent among jewellery manufacturers, as impractical and likely to cause immense job losses, as 95% of jewellery is made on the basis of job work.

The BSE Sensex ended at 31084.67, down by 177.39 points or 0.57% after trading in a range of 31044.28 and 31225.43. There were 7 stocks advancing against 23 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index was down by 0.57%, while Small cap index was down by 0.65%. (Provisional)

The few gaining sectoral indices on the BSE were IT up by 0.35%, Healthcare up by 0.15% and TECK up by 0.13%, while Capital Goods down by 1.42%, Consumer Durables down by 1.31%, Industrials down by 1.23%, Bankex down by 0.96% and Auto down by 0.76% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Infosys up by 1.57%, Sun Pharma up by 1.23%, Hindustan Unilever up by 0.66%, Cipla up by 0.34% and NTPC up by 0.19%. (Provisional)

On the flip side, Tata Motors down by 2.44%, Wipro down by 2.11%, Larsen & Toubro down by 2.07%, ICICI Bank down by 1.65% and Bajaj Auto down by 1.53% were the top losers. (Provisional)

Meanwhile, Finance Minister Arun Jaitley, pointing to a large number of structural reforms taken in the last few years, has expressed hope that India’s economic growth will turn around and improve this year, highlighting significant advantages of the demoentisation move which was announced last year.
Jaitley said that the government was aware about the fact that demonetization would cause a cash crunch in India but had envisaged long-term advantages and pointed that the noteban has led to a great and a substantial movement towards digitisation of the economy. He also expects a substantial increase in the tax base on the back of noteban.

Further the FM said that with the upcoming the Goods and Services Tax (GST) and forecast of a good monsoon this year, the county’s growth would increase. The finance minister said that the important challenge is with regard to a private sector investment, however hoping that the problem of the Indian banking system will be addressed over the next one year or so and if it happens, India will again pick up significant growth.

The CNX Nifty ended at 9622.45, down by 45.80 points or 0.47% after trading in a range of 9598.50 and 9647.05. There were 17 stocks advancing against 34 stocks declining on the index. (Provisional)

The top gainers on Nifty were Tech Mahindra up by 2.62%, Infosys up by 1.68%, Sun Pharma up by 1.57%, Tata Power up by 1.35% and Bharti Infratel up by 0.84%. (Provisional)

On the flip side, Bank of Baroda down by 3.02%, Tata Motors - DVR down by 2.41%, Tata Motors down by 2.30%, ICICI Bank down by 1.96% and Larsen & Toubro down by 1.93% were the top losers. (Provisional)

The European markets were trading in reed; UK’s FTSE 100 decreased 23.18 points or 0.31% to 7,504.15, Germany’s DAX decreased 124.26 points or 0.97% to 12,691.46 and France’s CAC decreased 58.64 points or 1.11% to 5,241.07.

Asian equity markets ended mostly in red on Monday as investors awaited central bank meetings in the US, UK, and Japan due this week. The Federal Reserve is widely expected to raise interest rates by 25 bps when it announces its monetary policy decision on Wednesday; however, no changes are expected from the Bank of England and the Bank of Japan. The UK general election result created uncertainty over the policy platform, political cohesion and longevity of the next UK government, Fitch Ratings said. This will have implications for Brexit as well as potentially fiscal policy, the agency said. Meanwhile, markets in Malaysia were closed today for public holidays. French President Emmanuel Macron's party won an overwhelming majority in the first round of parliamentary elections, helping limit regional losses to some extent. Chinese shares ended lower, with worries over tighter credit and slowing growth weighing on markets. Further, Japanese shares ended lower as the yen firmed up in morning trade and official data showed the country's core machinery orders, a popular proxy of capital spending, fell more than expected in April amid a slowdown in construction and public sector investment.