Benchmarks end a disappointing day with around half a percent cut

Indian markets finished last trading session of the week on a daunting note, as the frontline equity indices failed to showcase any kind of resilience and kept drifting around lower levels. Sentiments remained subdued with the report that funding of crop loan waivers is likely to worsen the fiscal deficit and leverage levels of state governments with gross state development loans issued by the state governments expected to rise by Rs 70,000 crore in FY2018. So far, Maharashtra and UP have waived nearly 30-40% of outstanding agri-bank credit, while for Punjab it was 15%. The NSE’s 50-share broadly followed index, Nifty dipped below the psychological 9,600 support level, while the Bombay Stock Exchange’s sensitive index, Sensex a saw triple digit fall to sink below the crucial 31,200 mark. Meanwhile, caution is likely to prevail in the near term as India gears up to unveil a nationwide goods and services tax (GST) on July 1, while monitoring global factors such as falling crude prices.

Some weakness also came with the report that asset quality pain for banks is expected to continue in fiscal year ended March 2018 due to restructuring by banks, weakness in some large corporate accounts and events like waiver of farm loans. It expects gross non-performing assets (GNPAs) of Indian banks to increase to 9.9% to 10.2% by March 2018 from 9.5% in March 2017 with fresh slippages of loans expected at 3% to 4% in the fiscal. Investors failed to get any sense of relief with Reserve Bank Governor Urjit Patel’s statement that he is not 'overly pessimistic' about employment scenario in the IT sector, pointing out that mushrooming startups can compensate for job losses. He also highlighted that the soon-to-be implemented GST will not only create a national market but will also broaden the tax base which in turn will lower the overall taxes in the long-term.

On the global front, Asian equity markets made a mixed closing on Friday, with China in focus after the country’s banking regulator sought more information on credit risks linked to loans to major companies that bought major assets abroad. Crude oil’s extended decline this week and the effect it is having on broader financial markets has been weighing on investor sentiment and dragged down energy shares. Further, the Japanese market is little changed following the mixed cues from Wall Street and as crude oil prices advanced overnight from ten-month lows. Meanwhile, European markets were under pressure as investors monitored the movement of oil prices and focused on developments from the EU Summit in Brussels.

Back home, the market breadth remained pessimistic, as there were 676 shares on the gaining side against 1948 shares on the losing side, while 132 shares remained unchanged.

Finally, the BSE Sensex declined 152.53 points or 0.49% to 31138.21, while the CNX Nifty was down by 55.05 points or 0.57% to 9,574.95. 

The BSE Sensex touched a high and a low of 31365.39 and 31110.39, respectively and there were 11 stocks on gainers side as against 20 stocks on the losers side on the index.

The broader indices ended in red; the BSE Mid cap index declined 1.21%, while Small cap index was down by 1.46%.

The top losing sectoral indices on the BSE were Auto down by 1.54%, PSU down by 1.50%, Industrials down by 1.39%, Consumer Disc down by 1.23%, Oil & Gas down by 1.13%, while there were no gainers on BSE sectoral front.

The top gainers on the Sensex were Power Grid Corporation up by 1.84%, Sun Pharma up by 0.97%, Wipro up by 0.86%, Dr. Reddy’s Lab up by 0.71% and ICICI Bank up by 0.71%. On the flip side, Tata Motors - DVR down by 2.20%, Tata Motors down by 2.14%, Hero MotoCorp down by 1.95%, SBI down by 1.94% and ONGC down by 1.56% were the top losers.

Meanwhile, terming the Goods and Services Tax (GST) as a precursor, Reserve Bank of India (RBI) Governor Urjit Patel has said that the news tax regime will expand the taxation base which in turn will lower the overall tax burden in the long-term. Apart from this, he also said that it will reduce many inefficiencies within the states while moving goods from within a state and also across the country.

Patel further said that GST network itself is part of the digitisation revolution, which along with the reforms on the information tax side in terms of the processes and operations, have the potential to broaden the tax base considerably. He asserted that the broadening of tax base is an important outcome of the new uniform taxation regime and other initiatives on e-payments and digitisation.

With a four-rate structure, the much-speculated tax reform in Indian history, the GST is all set for a big launch on the midnight of June 30. All states and Union Territories, barring Jammu and Kashmir, have passed enabling laws for its implementation. 

The CNX Nifty traded in a range of 9,647.65 and 9,565.30. There were 12 stocks in green as against 39 stocks in red on the index.

The top gainers on Nifty were Power Grid up by 1.83%, Vedanta up by 1.30%, Sun Pharma up by 1.09%, Aurobindo Pharma up by 1.04% and Wipro up by 0.96%. On the flip side, Bank of Baroda down by 2.66%, IOC down by 2.35%, Eicher Motors down by 2.16%, Hero MotoCorp down by 2.15% and Bosch down by 2 % were the top losers.

The European markets were trading in red; UK’s FTSE 100 decreased 30.09 points or 0.4% to 7,409.20, Germany’s DAX decreased 42.02 points or 0.33% to 12,751.98 and France’s CAC decreased 14.44 points or 0.27% to 5,267.49.

Asian equity markets made a mixed closing on Friday as the dollar remained bolstered against the yen and crude oil prices pulled away from ten-month lows. The release of the US Senate's plan to repeal and replace Obamacare evoked muted response as there is opposition to the bill on both sides of the Republican ideological spectrum. Japanese shares closed a tad higher as a recovery in oil prices helped offset a firmer yen. Chinese shares ended higher as tight liquidity conditions eased and investors shrugged off news that the country's banking regulator has ordered lenders to check exposure to rapidly growing firms. Meanwhile, Hong Kong shares ended flat amid concerns that MSCI's decision this week to include China-listed shares to its emerging market benchmark could weaken the city's role as a gateway to investing in China. The markets in Indonesia are closed through June 28 in observance of Eid-ul-Fitr.