Benchmarks end with modest cut; RIL Q1 earnings eyed

Indian equity benchmarks undo all the good work done in early part of the session and ended the lackluster day of trade slightly in red, as traders remained on sidelines ahead of Reliance Industries (RIL) Q1FY18 numbers. Though, markets made an optimistic start with Finance Minister Arun Jaitley’s statement, describing the Goods and Services Tax (GST) as a ‘win- win’ deal for all as it will expand the tax net, end ‘inspector raj’ and bring down prices of goods. Jaitley added that prices of goods have come down between four to eight percent since its roll-out on July 1. Traders also took some encouragement with a private report that India will reclaim its position as the fastest growing major global economy this year, partly propelled by benefits from a new tax system and bolstered by an expected central bank interest rate cut.

Market took U-turn in second half of trade where traders opted to book profit ahead of RIL’s Q1 numbers slated to be announced after market hours. According to a private poll, the company is expected to post consolidated net sales of Rs 76,326 crore and net profit of Rs 7,764.5 crore for the three months ended 30 June. Though, downside remained capped, as traders get some solace with the Asian Development Bank’s report stating that the South Asia will remain the fastest growing of all sub-regions in Asia and the Pacific, while Indian economy is expected to achieve previous growth projections 7.4 percent in 2017 and 7.6 percent in 2018 on the back of strong consumption demand.

On the global front, European markets were trading in green in early deals, supported by a surge in global stocks, as investors awaited a rate decision by the European Central Bank (ECB). Asian markets ended mostly in green on Thursday. The Bank of Japan kept monetary policy steady and pushed back again the timing for achieving its 2 percent inflation target, reinforcing expectations it will lag well behind major global central banks in dialing back its massive stimulus programme.

Back home, the government said that tax rates under the Goods and Services Tax (GST) will not be revised unless there is an anomaly, but promised to go slow on enforcement actions in the first six months on genuine mistakes. On the sectoral front, oil and gas stocks remained in focus after the government cleared the sale of Hindustan Petroleum to flagship explorer ONGC with the aim of creating an integrated oil company.

Mixed reactions were displayed in banking stocks taking clues from CRISIL’s report which stated that the banks may have to incur significant losses in the process of resolving the mammoth bad loans. Lenders may have to forget 60 percent of their outstanding dues or about Rs 2.4 lakh crore from top 50 stressed companies that could not repay their loans leading to insolvency battles.

The NSE’s 50-share broadly followed index Nifty declined by around thirty points to end below its psychological 9,900 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped by over fifty points but managed to hold its crucial 31,900 mark. The broader markets too witnessed selling pressure and ended the session mixed. The market breadth remained in favour of decliners, as there were 1,286 shares on the gaining side against 1,436 shares on the losing side, while 147 shares remain unchanged.

Finally, the BSE Sensex lost 50.95 points or 0.16% to 31,904.40, while the CNX Nifty was down by 26.30 points or 0.27% to 9,873.30.

The BSE Sensex touched a high and a low of 32,057.12 and 31,859.50, respectively and there were 7 stocks on gaining side as against 24 stocks on losing side on the index.

The broader indices ended mixed; the BSE Mid cap index declined 0.52%, while Small cap index was up by 0.16%.

The few gaining sectoral indices on the BSE were Realty up by 0.47%, Capital Goods up by 0.22%, Bankex up by 0.19% and Industrials was up by 0.05%, while Metal down by 0.96%, Basic Materials down by 0.84%, IT down by 0.82%, TECK down by 0.69% and Healthcare was down by 0.69% were the top losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 3.87%, ONGC up by 1.75%, HDFC Bank up by 0.92%, Mahindra & Mahindra up by 0.67% and Cipla up by 0.61%. On the flip side, Tata Steel down by 2.64%, Kotak Mahindra Bank down by 1.44%, NTPC down by 1.22%, Infosys down by 1.11% and Sun Pharma down by 1.05% were the top losers.

Meanwhile, with the transition to a new realty regulatory framework under the Real Estate (Regulation and Development) Act (RERA), which came into force on May 1, domestic rating agency, ICRA in its latest report has said that the move is expected to slow down the upcoming real estate project launches, increase working capital requirements of developers, thus putting pressure on their operational performance during the financial year 2017-18. 

The rating agency has stated that the effective implementation of RERA is expected to increase customer confidence and improve demand prospects over the long term, but in the short-term, it may pose various challenges for developers. It also observed that the current transition period of RERA implementation is likely to be challenging for developers as they need to realign their business operations to comply with the new regulations.

Adding further, ICRA has said that constraints imposed by the Act will adversely impact the business model of unorganized developers and it can be expected that there will be some level of consolidation in the industry. However, it clarified that this will benefit larger developers who have the resources and financial flexibility to withstand the near term challenges and scale up execution levels as required.

Under the Act, state governments need to frame rules with respect to the various provisions, and set up a state level regulatory authority to implement these norms. While many states have notified their real estate rules, certain states are yet to be complete this step. Even fewer states have set up the regulatory authority as required under the Act.

The CNX Nifty traded in a range of 9,922.55 and 9,863.45. There were 12 stocks in green as against 39 stocks in red on the index.

The top gainers on Nifty were Axis Bank up by 3.81%, ONGC up by 1.75%, HDFC Bank up by 1.10%, Mahindra & Mahindra up by 0.80% and Indiabulls Housing Finance up by 0.80%. On the flip side, Tata Steel down by 2.45%, Bharti Infratel down by 2.18%, Aurobindo Pharma down by 2.00%, Bank of Baroda down by 1.55% and Ultratech Cement down by 1.53% were the top losers.

European markets were trading mostly in green; France’s CAC gained 16.91 points or 0.32% to 5,232.98, UK’s FTSE 100 increased 51.15 points or 0.69% to 7,482.06 and Germany’s DAX was up by 57.97 points or 0.47% to 12,510.02.

Asian equity markets ended mostly in green on Thursday after oil prices hit six-week high and the Bank of Japan kept its lavish monetary stimulus intact, as widely expected. The European Central Bank reviews its monetary policy later today, with investors looking for any hints that it could start to remove some of its extraordinary levels of support for the euro zone economy. Oil prices held steady after climbing nearly 2 percent overnight on data showing another big weekly decline in US crude oil and gasoline stockpiles, while gold edged lower ahead of ECB rate decision. Chinese shares ended higher on expectations of solid earnings from cyclical sectors such as mining and steel. Further, Japanese shares rose as the yen weakened following the BOJ’s decision to leave its monetary policy on hold. Investors’ sentiments were also buoyed by upbeat trade data pointing to sustained economic recovery. Japan's trade balance returned to surplus in June, though the net balance came in below expectations.