Markets end with modest cut; Nifty fails to hold 10k mark

Indian equity benchmarks ended the volatile day of trade with modest cut on Tuesday, as traders opted to remain on sidelines ahead of Fed’s two-day meeting starting later in the day to discuss its monetary stance. It turned out to be a historic day of trade for Nifty where it breached the 10,000 mark for the first time in opening trade but soon slipped below the landmark, making the affair a touch-and-go one, as traders opted to book profit at higher level. Sensex too hit another record high of 32,374.30 in initial trade before closing lower by 18 points. However, losses remained capped with commerce and industry minister Nirmala Sitharaman’s statement that Foreign Direct Investment (FDI) inflows into the country increased 23 percent in the first two months of the current fiscal from a year ago. The minister said the government has put in place an investor-friendly policy for FDI and except for a small negative list most sectors are open for 100 percent FDI.

Some solace also came with report that India ranked number two on Grant Thornton’s Business Optimism Index in the second quarter of 2017. The Grant Thornton International Business Report (IBR) said that the confidence in Indian businesses is backed by a buoyant economy and continued reforms. According to the IBR survey, India’s ranking has gone up from fourth to the second position in Q2. 94 percent of the surveyed businesses are confident about the growth of the Indian economy. Traders also took some comfort with report that government think tank Niti Aayog has made a strong case for boosting investments and savings, with an aim to push India’s economic growth at a rapid pace. The Aayog stressed on sustaining macro-economic stability in its appraisal of the Twelfth Five Year Plan (2012-17). The document noted that lower savings and investment rates are still a major cause of worry.

On the global front, European markets were trading in green in early deals, as investors monitored earnings and awaited the start of a two-day policy meeting of the Federal Reserve. Asian markets closed mixed. China’s economy is likely to grow at an annual rate of around 6.7 percent in the second half of 2017, slowing slightly from the first half of the year, the State Information Center (SIC) said.

Back home, telecom stocks rang loud on report that telecom operators could get some relief, as a draft recommendations of the government-appointed inter-ministerial group (IMG) were discussed at a recent meeting between the finance ministry and the department of telecommunications, wherein it was decided to provide some cash flow relief to the operators. However, the auto sector edged lower despite the Deputy Chairman of Rajya Sabha PJ Kurien calling for an all-party meeting today to discuss the Motor Vehicle (Amendment) Bill. Meanwhile, Union Road Transport and Highways Minister Nitin Gadkari has said that driverless cars will not be allowed in India because they will lead to more unemployment.

The NSE’s 50-share broadly followed index Nifty slipped marginally but hold its psychological 9,950 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by around twenty points but managed to hold its crucial 32,200 mark. The broader markets, however outperformed benchmarks and ended the session with a gain of around half a percent. The market breadth was in the favour of decliners, as there were 1,209 shares on the gaining side against 1,466 shares on the losing side, while 167 shares remain unchanged.

Finally, the BSE Sensex slipped 17.60 points or 0.05% to 32,228.27, while the CNX Nifty was down by 1.85 points or 0.02% to 9,964.55.

The BSE Sensex touched a high and a low of 32,374.30 and 32,196.86, respectively and there were 13 stocks on gaining side as against 18 stocks on losing side on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.57%, while Small cap index was up by 0.12%.

The top gaining sectoral indices on the BSE were Telecom up by 2.04%, Metal up by 1.43%, Basic Materials up by 0.65%, Realty up by 0.65% and Bankex up by 0.44%, while Industrials down by 0.52%, Capital Goods down by 0.51%, Auto down by 0.41%, Energy down by 0.37% and Healthcare down by 0.33% were the top losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 1.94%, Bharti Airtel up by 1.76%, TCS up by 1.50%, Tata Steel up by 1.03% and Adani Ports & SEZ up by 0.68%. On the flip side, Lupin down by 1.96%, Tata Motors - DVR down by 1.79%, Tata Motors down by 1.61%, Coal India down by 1.07% and Sun Pharma down by 0.81% were the top losers.

Meanwhile, the capital markets regulator the Securities and Exchange Board of India (SEBI) has notified rules to levy fee of $1,000 for each participatory notes (P-Notes) issued by foreign investors and bar issuance of such derivative-based instruments for speculative purposes to check any misuse of these products for channelising black money. The new measures, which follow a slew of other steps taken by the regulator in the recent past, come at a time when the investments in domestic capital markets via P-notes or offshore derivative instruments (ODIs) have surprisingly surged to a seven-month high of Rs 1.81 lakh crore at the end of May.

While such investments used to account for more than half of overall foreign portfolio investments (FPI) at one point, their share has now dropped to just a little over 6 percent. Still, worries remain that P-Notes are misused by some to channelise black money from abroad into the country through the stock markets. The regulator will levy a regulatory fee of $1,000 on each ODI subscriber, to be collected and deposited by the issuing foreign portfolio investor (FPI) once every three years, starting from April 1, 2017.

The markets regulator has amended SEBI (FPI) Regulations, 2014, to implement the decision. P-Notes are issued by registered FPIs to overseas investors who wish to be part of the Indian stock markets without registering themselves directly. They, however, need to go through a proper due diligence process. Earlier, the board of SEBI has decided to prohibit ODIs from being issued against derivatives, except those which are used for hedging purposes.

The CNX Nifty traded in a range of 10,011.30 and 9,949.10. There were 24 stocks in green as against 27 stocks in red on the index.

The top gainers on Nifty were Vedanta up by 3.65%, Indiabulls Housing up by 3.51%, Hindalco up by 2.71%, Axis Bank up by 1.90% and Bharti Airtel up by 1.85%. On the flip side, Zee Entertainment down by 2.39%, Ultratech Cement down by 2.19%, Tech Mahindra down by 1.99%, Lupin down by 1.84% and Tata Motors down by 1.70% were the top losers.

The European markets were trading in green; France’s CAC surged 57.22 points or 1.12% to 5,184.92, UK’s FTSE 100 increased 69.28 points or 0.94% to 7,447.01 and Germany’s DAX was up by 77.01 points or 0.63% to 12,285.96.

Asian equity markets closed mixed on Tuesday as oil extended overnight gains and the Japanese yen weakened ahead of the two-day policy meeting of the Federal Reserve starting later today. The Fed is widely expected to leave interest rates unchanged but investors will be looking for clues on whether the US central bank will raise interest rates again this year. Chinese stocks ended lower as investors booked profits in recent outperformers such as real estate and resource firms. Investors’ sentiments were also dented after China's top decision-making body emphasized stricter financial discipline for the rest of 2017. Japanese shares ended lower in choppy trade, drawing little support from a weaker yen, which pulled back from a five-week high versus the dollar.