Post Session: Quick Review

Indian equity markets traded in red for most part of the day and ended the session near day’s low as RBI maintains neutral policy stance. 11 out of 12 Nifty Bank stocks close in red as 25 bps rate cut was factored in by the market. The rupee appreciated past 64 per dollar and trades at highest level in 2 years. The equity benchmarks made a flat opening and traded near neutral line in early deals as traders remained concerned after finance minister Arun Jaitley cautioned that the fiscal deficit of states may rise this year, with states likely to tap the markets to raise funds to finance farm debt waivers. Some cautiousness also came with the Central Electricity Authority’ (CEA) statement that about 7 percent of India's coal-fired power plants may never be able to comply with new environmental norms because they lack the space to install emission-cutting equipment, potentially leading to their shutdown. Some selling crept in after the much expected Reserve Bank of India’s Monetary Policy Committee (MPC) cut the repo rate by 25 basis points to 6 percent, while the reverse repo rate was cut by 25 basis points to 5.75 percent. The quarter percentage point cut means that the key lending rate is at its lowest since November 2010, after a slump in food prices sent June consumer inflation to a more than five-year low of 1.54 percent. RBI in its third bi-monthly policy review for FY18 enlightened that external demand conditions are gradually improving and should support the domestic economy, although global political risks remain significant. Keeping in view these factors, the projection of real GVA growth for 2017-18 has been retained at the June 2017 projection of 7.3 per cent.  Investors shrugged off Minister of State for Finance Santosh Kumar Gangwar’s statement that the government has collected over Rs 1.80 lakh crore in direct tax till July 15 in the current fiscal, an increase of 21.4 per cent year-on-year, belying fears of slowdown in economic activities. The current growth rate is higher than the target rate of 15.32 percent required to achieve the Budget Estimate.

On the global front, Asian markets closed mostly in green, barring Shanghai Composite. Bank of Japan board member Yukitoshi Funo called for structural reforms to boost demand and productivity in a tacit acknowledgement that massive monetary stimulus alone cannot accelerate inflation to the central bank’s 2 percent target. European markets were trading in red as investors focused on a fresh batch of corporate earnings and began to prepare for the Bank of England’s policy statement on Thursday. UK construction sector activity dropped more than expected in July, hitting an 11-month low.

Back home, RCF, Chambal Fertilizers, FACT, GSFC, Coromandel International, GNFC, NFL and SPIC closed in green on hopes of robust demand of fertilizers during the first half of FY18. ICRA in its report highlighted that given the subdued raw material prices and satisfactory progress of monsoon, urea players should see stable profitability while non-urea players will see their moderation in profits due to the inverted duty structure under GST in FY18.

The BSE Sensex ended at 32407.40, down by 167.77 points or 0.52% after trading in a range of 32394.89 and 32686.48. There were 6 stocks advancing against 25 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index was down by 0.38%, while Small cap index was down by 0.18%. (Provisional)

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.17%, Energy up by 0.51%, Utilities up by 0.21%, Consumer Disc up by 0.11% and Power up by 0.02%, while IT down by 1.10%, TECK down by 0.97%, FMCG down by 0.85%, Capital Goods down by 0.84% and Bankex down by 0.76% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were NTPC up by 4.31%, Adani Ports & Special Economic Zone up by 2.25%, Hero MotoCorp up by 2.08%, Reliance Industries up by 1.52% and Lupin up by 1.38%. (Provisional)

On the flip side, Dr. Reddy’s Lab down by 1.89%, ONGC down by 1.85%, Tata Motors down by 1.77%, Sun Pharma down by 1.63% and TCS down by 1.52% were the top losers. (Provisional)

Meanwhile, in order to write down non-performing loans and to meet rising Basel III requirements, the public sector banks (PSU) may need at least Rs 1.9 trillion additional capital over the next two years. Credit rating agency, S&P Global Ratings in its latest report has also noted that the lack of capital will put restriction on the lenders' ability while making haircuts on these loans.

The rating agency said that weak profitability along with rising capital demands from Basel III implementation will also continue to pressure the capitalisation of many of PSU banks and further suggested to look for alternate sources to increase their capitalisation. The report is also expecting that the government's commitment of support to PSU banks will remain in place.

As per the report, Indian PSU banks face difficulties to raise funds from the equity capital markets due to low equity valuations, overcrowding in the market, and regulations. Besides, it said that amid rising risk of default on additional Tier-1 capital instruments, PSU banks would also find it hard to raise money via the issuance of these instruments.

Furthermore, S&P mentioned that weak PSU banks would continue to lose market share to the better-performing private sector banks & profitable PSU banks and non-bank finance institutions or domestic debt capital markets, adding that the banking sector may witness consolidation over time as public sector banks with lower capitalisation and internal generation of capital could become takeover targets.

The CNX Nifty ended at 10078.20, down by 36.45 points or 0.36% after trading in a range of 10066.95 and 10137.85. There were 13 stocks advancing against 38 stocks declining on the index. (Provisional)

The top gainers on Nifty were NTPC up by 3.81%, Ambuja Cement up by 2.45%, Lupin up by 2.19%, Adani Ports & Special Economic Zone up by 2.10% and ACC up by 1.97%. (Provisional)

On the flip side, Indiabulls Housing down by 2.38%, Dr. Reddy’s Lab down by 2.20%, Tata Motors down by 1.59%, Sun Pharma down by 1.46% and Bharti Infratel down by 1.45% were the top losers. (Provisional)

The European markets were trading in red; UK’s FTSE 100 decreased 29.85 points or 0.4% to 7,393.81, Germany’s DAX decreased 21.63 points or 0.18% to 12,229.66 and France’s CAC decreased 14.4 points or 0.28% to 5,112.63.

Asian equity markets closed mostly higher on Wednesday as Apple reported better-than-expected financial results and weak US personal income and manufacturing data helped investors pare back their expectations for rate increases this year. Japanese shares hit a 1-1/2-week high as solid quarterly results from domestic companies helped offset concerns over a rising yen. However, Chinese shares ended lower, with continued strength in materials shares offset by weakness in small-cap firms.