Post Session: Quick Review

Indian equity markets traded in red throughout the day and ended the session with cut of around eight tenth of a percent. Negative global cues, coupled with heavy selling pressure in banking and metal stocks, dragged the Indian equity markets lower. Nifty Bank posts biggest 1-day loss in nine months. All Nifty Bank stocks closed in red. The equity benchmarks made a pessimistic start and traded in red in early deals as traders remained on sidelines after the panel maintained the neutral policy stance, citing uncertainties in the inflation trajectory stemming from factors such as the impact of farm loan waivers on state finances. NITI Aayog Member Bibek Debroy said that while the rate cut by the RBI was warranted, a reduction of barely 25 basis points won’t matter significantly except to serve as a signal. Separately, IHS Markit survey said business conditions in India’s service economy deteriorated markedly in July following the implementation of the goods and services tax (GST). The seasonally adjusted Nikkei India Services PMI Business Activity Index plunged from June’s eight-month high of 53.1 to 45.9 in July, its lowest level since September 2013. Output and new work declined for the first time since January, with rates of reduction the quickest since September 2013. This had an adverse effect on the labour market, with employment contracting over the month.

Investors took note of private survey which enlightened that more than 31% of the Chief Financial Officers (CFOs) from various companies feel implementation of GST is challenging and manufacturing is the most affected sector. Further, over 54% CFOs believe that the impact of demonetization has been neutral, while 56% are highly optimistic of the country’s macro-economic growth in the next 4-5 years. Besides, mobile industry body Indian Cellular Association (ICA) criticized the business climate in India saying cumbersome processes have emerged out of distrust between tax officials and customs authorities.

On the global front, Asian markets closed mostly in red, barring KLSE Composite, on weak regional data. China’s services sector expanded at a slightly slower pace in July as new business growth eased, pointing to potential softening in a key part of the world’s second-largest economy.  European markets were trading mostly in green as a fresh round of corporate earnings is set to be released and as investors eyed the Bank of England’s monetary policy decision due later in the day. The volume of euro zone retail sales increased much more than forecast in June, in a new sign of the robust domestic consumption that is sustaining output expansion in the 19-country currency bloc.

Back home, mixed reactions were witnessed in fertilizer stocks as investors cheered the progress of the government’s Direct Benefit Transfer (DBT) scheme. The government may be looking to roll out the scheme earlier than expected. The introduction of the DBT will be significant for companies with wide retailer networks

The BSE Sensex ended at 32214.76, down by 261.98 points or 0.81% after trading in a range of 32194.58 and 32502.55. There were 10 stocks advancing against 21 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index was down by 0.49%, while Small cap index was down by 0.95%. (Provisional)

The few gaining sectoral indices on the BSE were Oil & Gas up by 1.57%, Energy up by 1.29% and Telecom up by 0.77%, while Bankex down by 1.72%, Metal down by 1.67%, Healthcare down by 1.18%, Industrials down by 0.95% and Basic Materials down by 0.81% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Bharti Airtel up by 1.56%, Reliance Industries up by 1.47%, Hero MotoCorp up by 1.05%, TCS up by 0.98% and Bajaj Auto up by 0.75%. (Provisional)

On the flip side, Lupin down by 4.32%, Coal India down by 3.42%, Tata Motors - DVR down by 2.57%, SBI down by 2.16% and ICICI Bank down by 2.12% were the top losers. (Provisional)

Meanwhile, showing similar trend to the contraction in manufacturing sector, activity in India's dominant service sector too contracted in the month of July to its lowest level since September 2013, on the back of the implementation of the goods and services tax (GST).  The seasonally adjusted Nikkei Services Business Activity Index fell to 45.9 in July from 53.1 in June. The Nikkei India Composite PMI Output Index which measures both manufacturing and services also plunged to 46.0 in July from 52.7 in June.

The report also signaled the first downturn in output and new work since January which had an adverse effect on the labour market, with employment contracting over the month. Similarly, factory orders decreased in July and at the quickest pace since February 2009. The report further said that outstanding business in the service economy rose to the greatest extent in five months.

On the price front, services charges rose at the sharpest rate in almost four and a half years during July, while manufacturers offered discounts in order to stimulate demand. As per survey report, even though the higher tax rates and salaries awarded to staff resulted in another monthly increase in input costs, the rate of inflation softened since June, remaining well below its long-run average and the factory charges were also dropped first time in 17 months. However, Indian service providers exhibited optimism towards the 12-month outlook for activity, with hopes of a better understanding around the new tax regime boosting confidence.

The CNX Nifty ended at 10004.35, down by 77.15 points or 0.77% after trading in a range of 9998.25 and 10081.15. There were 20 stocks advancing against 31 stocks declining on the index. (Provisional)

The top gainers on Nifty were Indian Oil up by 4.71%, ACC up by 2.58%, Bharti Airtel up by 1.82%, Ambuja Cement up by 1.78% and Reliance Industries up by 1.37%. (Provisional)

On the flip side, Lupin down by 4.58%, Coal India down by 3.53%, Hindalco down by 3.18%, Bank of Baroda down by 3.06% and Tata Motors - DVR down by 2.69% were the top losers. (Provisional)

The European markets were trading mostly in green; UK’s FTSE 100 increased 5.2 points or 0.07% to 7,416.63, France’s CAC increased 9.3 points or 0.18% to 5,116.55 and Germany’s DAX decreased 23.97 points or 0.2% to 12,157.51.

Asian equity markets closed mostly lower on Thursday as investors locked in recent gains, awaiting fresh direction from the Bank of England's interest rate decision later in the day and the all-important US jobs report, due on Friday. Chinese shares lost ground as liquidity concerns persisted and a private survey showed growth in China's services sector slowed in July as new business growth eased. The Caixin China services PMI slipped to 51.5 from 51.6 in June. Further, Japanese shares ended lower as the yen's strength pulled down exporters and investors took profits in tech shares. Market participants also digested the latest news from Prime Minister Shinzo Abe's cabinet reshuffle and disappointing data on service sector growth.