Benchmarks snap bullish run; Sensex breaches 31,800 mark

Tuesday turned out to be a daunting session of trade for Indian equity benchmarks where frontline gauges ended with a cut of around a percent, breaching their crucial 31,800 (Sensex) and 9,850 (Nifty) levels, as market participants opted to book profit at record levels. Markets started the session on pessimistic note, as traders remained concern with the industry body Associated Chambers of Commerce & Industry of India’s (ASSOCHAM) latest report stating that the inflation outlook is expected to remain quite muted at least till festival season of Durga Puja and Diwali. Adding to the pessimism, a private report showed that India’s Current Account Deficit (CAD) is likely to widen to 1.3% of GDP in 2017 from 0.6% in 2016, largely owing to stronger domestic growth in the second half of this year. The report highlighted that the import demand is expected to resume once GST disruptions settle down after July. The report said lower commodity prices and adverse base effects will continue to cap the year-on-year growth rates in second half of 2017, partly offsetting the continued recovery in advanced economies.

Besides, some concerns also spread among the inventors with Fitch Ratings’ latest report that new indirect tax regime GST will have a negative impact on oil and gas, and SME sectors. Investors shrugged off private survey stating that Indian CEOs are confident about the growth prospects of the country over the next three years, compared to that of global economy. Meanwhile, the Supreme Court granted one week’s time to the Reserve Bank of India (RBI) to respond to a report of a committee appointed to deal with bad loans with banks that have crossed Rs 8 lakh crore.

Weak opening in European counters too dampened sentiments on account of a disappointing set of results from blue chips including Ericsson and Lufthansa, while scaled-back expectations of rate hikes at central banks spurred some profit-taking in financials. Asian markets ended mixed, as passage of a US healthcare Bill grew doubtful, and as investors bet the Federal Reserve will be more cautious about raising interest rates.

Back home, stocks related to cigarette space remained under pressure, as the GST Council raised the cess on cigarettes to take away an estimated Rs 5,000 crore annual ‘windfall’ manufacturers could have reaped from lower GST rates. The telecom stocks too edged lower despite the Telecom Minister Manoj Sinha’s statement that the Communications Ministry will 'analyse' the impact of GST on telecom subscribers, and approach the Finance Ministry in case consumers or players face “genuine problems”.

However, pharma stocks remained on buyers’ radar after CARE Ratings report highlighted that despite pricing pressure and stiff competition, the Indian Pharma exports to the USA may go up in 2017-18 as $50 billion worth of drugs are expected to become off-patented during the current year giving hope to boost export market. Banking stocks exhibited mixed trend with India Ratings and Research enlightening that Indian banks, taking 12 of the country’s largest defaulters to bankruptcy court under a central bank directive will need to make additional provisioning of at least 180 billion rupees ($2.8 billion).

The NSE’s 50-share broadly followed index Nifty declined by around ninety points to end below its psychological 9,850 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex tumbled by over three hundred and sixty points to end below its crucial 31,800 mark. The broader markets too witnessed pressure and ended the session with a cut of over half a percent. The market breadth remained in favour of decliners, as there were 998 shares on the gaining side against 1,691 shares on the losing side, while 146 shares remain unchanged.

Finally, the BSE Sensex declined 363.79 points or 1.13% to 31,710.99, while the CNX Nifty was down by 88.80 points or 0.90% to 9,827.15. 

The BSE Sensex touched a high and a low of 31,911.61 and 31,626.44, respectively and there were 19 stocks on gaining side as against 12 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index shed 0.60%, while Small cap index was down by 0.58%.

The top gaining sectoral indices on the BSE were IT up by 0.24%, Auto up by 0.20%, Healthcare up by 0.18%, TECK up by 0.17% and Consumer Disc up by 0.05%, while FMCG down by 6.12%, Energy down by 1.13%, Realty down by 1.10%, Utilities down by 0.83% and Oil & Gas down by 0.79% were the top losing indices on BSE.

The top gainers on the Sensex were Asian Paints up by 1.82%, Axis Bank up by 1.18%, Sun Pharma up by 1.18%, ONGC up by 1.06% and Dr. Reddy's Lab up by 0.83%. On the flip side, ITC down by 12.63%, Reliance Industries down by 2.03%, SBI down by 0.80%, Power Grid Corporation down by 0.55% and Tata Motors - DVR down by 0.24% were the top losers.

Meanwhile, The Department of Commerce under the commerce and industry ministry is setting up four new additional centres to develop expertise for handling contemporary and future requirements like international trade law, regional studies, trade promotion and capacity building. The Central government has already given its approval to set up these centres.

The centre for trade and investment law would create a dedicated pool of legal experts who can advise the government on trade and investment issues. The centre for regional trade would analyse economic developments in different regions and assessing their implications for India. On the other hand, centre for trade-related capacity building would undertake training for government officials/stake holders of India.

In the current financial year, two of the centres - Centre for Trade and Investment Law and Centre for Regional Trade, have already become operational. These centres would help to expand the research capabilities of the centre for WTO studies under renamed Institution Centre for Research and International Trade (CRIT). The objective of the CRIT is to influence international discourse on trade and investment issues in consonance with India's interest.

The CNX Nifty traded in a range of 9,885.35 and 9,792.05. There were 29 stocks in green as against 22 stocks in red on the index.

The top gainers on Nifty were Eicher Motors up by 1.92%, Asian Paints up by 1.88%, HCL Tech up by 1.45%, Sun Pharma up by 1.19% and Zee Entertainment up by 1.19%. On the flip side, ITC down by 12.49%, Aurobindo Pharma down by 2.30%, Reliance Industries down by 2.05%, GAIL India down by 1.84% and Tata Power down by 1.14% were the top losers.

The European markets were trading mostly in red; Germany’s DAX decreased 68.07 points or 0.54% to 12,519.09 and France’s CAC was down by 13.8 points or 0.26% to 5,216.37, while UK’s FTSE 100 was up by 3.57 points or 0.05% to 7,407.70.

Asian equity markets made a mixed closing on Tuesday and the dollar extended losses after two more Republican Senators opposed the Republican healthcare bill, casting doubts over prospects for reforms backed by US President Donald Trump. Japanese shares ended lower as trading resumed after a long holiday weekend, and as the yen gained against the dollar on concerns about Trump's economic agenda and cautious rhetoric from Fed Chair Janet Yellen. Chinese stocks ended on a steady note as investors hunted for bargains after sharp drop in small-cap shares the previous day. Meanwhile, Hong Kong stocks rose as gains in the technology and energy sectors offset losses in financial stocks.