Indian benchmarks slip ahead of inflation data, Fed policy

Indian markets made a nervous start to the week as the benchmarks plummeted over half a percent, as investors took profits off the table ahead of IIP and inflation data due later in the day. Sentiments remained dismal, as the State Bank of India expressed concern that demonetisation, announced in November 2016, may continue to result in slowing down of the economy, and adversely affect its business. It said that the long-term impact of this move on the Indian economy and the banking sector is uncertain. Besides, weak global cues coupled with depreciation in Indian rupee against the dollar too weighed down sentiments.

The frontline indices shaved off over half percent and breached 31,100 (Sensex) and 9,650 (Nifty) levels on the downside. The broader markets too mirrored their larger peers and drifted to lower levels to snap the day on a pessimistic note. Some concerns also came after government of Maharashtra on Sunday announced a loan waiver for farmers and decided to form a committee to decide the criteria of debt relief. The loan waiver of around Rs 30,000 crore will affect the state fiscal and 'impact the credit discipline' among borrowers. Further, market participants failed to get any sense of relief with the report that the southwest monsoon is making a steady advance into Maharashtra & West Bengal and the weatherman has predicted a good week ahead. India Meteorological Department Director General KJ Ramesh said monsoon is in an active phase and has reached Mumbai, Mahabaleshwar (in Maharashtra) and several parts of the Konkan region, apart from Bijapur district in north Karnataka.

On the global front, Asian equity markets ended mostly lower on Monday, as markets turned cautious, ahead of a US Federal Reserve policy meeting that could give hints on the pace of further rate tightening in the months to come and next year. With the Fed widely expected to raise interest rates at its two-day meeting that ends on Wednesday, investors will be focusing on whether the central bank thinks the U.S. economy is robust enough to withstand further rate hikes through 2017 and how it plans to whittle down its massive balance sheet. Further, Japanese shares ended lower after the country's core machinery orders fell more than expected in April, casting doubt on the strength of companies' capital spending and adding to concerns about the country's fragile economic recovery. The 3.1% fall in the core orders from a month earlier was much bigger than the 1.3% decline expected by many economists, potentially dragging on economic growth in the current quarter.  Meanwhile, European markets were in the red, amid a sell-off in the technology sector and uncertainty over Britain's political landscape after the governing Conservative Party lost its parliamentary majority in a general election last week.

Back home, several Jewellery stocks gained 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. On the other hand, banking stocks came under selling pressure, ahead of a meet between Arun Jaitley and public sector banks (PSBs) heads to discuss the issue of non-performing assets (NPAs) and the steps being taken by them to expedite the recovery of bad loans that have crossed Rs 6 lakh crore.

The market breadth remained pessimistic, as there were 1025 shares on the gaining side against 1660 shares on the losing side, while 190 shares remained unchanged.

Finally, the BSE Sensex declined 166.36 points or 0.53% to 31095.70, while the CNX Nifty was down by 51.85 points or 0.54% to 9,616.40. 

The BSE Sensex touched a high and a low of 31225.43 and 31044.28, respectively and there were 8 stocks on gainers side as against 22 stocks on the losers side on the index.

The broader indices ended in red; the BSE Mid cap index declined 0.53%, while Small cap index was down by 0.61%.

The top gaining sectoral indices on the BSE were IT up by 0.42%, Healthcare up by 0.26%, TECK up by 0.18%, while Capital Goods down by 1.58%, Consumer Durables down by 1.32%, Industrials down by 1.31%, Bankex down by 1.02% and Auto down by 0.73% were the top losing indices on BSE.

The top gainers on the Sensex were Infosys up by 1.60%, Sun Pharma up by 1.59%, Hindustan Unilever up by 0.42%, Cipla up by 0.41% and GAIL India up by 0.24%. On the flip side, Larsen & Toubro down by 2.29%, Tata Motors down by 2.29%, Wipro down by 1.95%, ICICI Bank down by 1.88% and Bajaj Auto down by 1.37% were the top losers.

Meanwhile, describing the various economic reforms undertaken by the government to be of vital importance, Union Minister Arjun Ram Meghwal has said that these reforms will lead the country into the league of developed nations, adding that our ranking in ease of doing business has also improved from 142 to 130.

Meghwal said that 'From demonetisation to promoting digital transactions and now implementing the Goods and Services Tax (GST) from July 1 are all steps in this direction. He added that GST is the biggest economic reform to achieve a level playing field with the developed nations of the world'. He said that the various reforms were aimed to help the industry and the government stood by its commitment.

He said that the initiatives like demonetization have helped to promote digital transactions, pulled the shadow economy back and increased the tax base with the addition of 91 lakh taxpayers.

The CNX Nifty traded in a range of 9,647.05 and 9,598.50. There were 13 stocks in green as against 38 stocks in red on the index.

The top gainers on Nifty were Tech Mahindra up by 2.55%, Infosys up by 1.67%, Tata Power up by 1.41%, Sun Pharma up by 1.38% and Bosch up by 0.89%. On the flip side, Bank of Baroda down by 2.85%, Tata Motors - DVR down by 2.84%, Tata Motors down by 2.47%, Wipro down by 2.34% and Larsen & Toubro down by 1.98% were the top losers.

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.