Dalal Street remains in Bear grip for third straight session on geopolitical worries

Bears continued to rule the roost at Dalal Street for third straight session, with frontline gauges breaching their crucial 31,800 (Sensex) and 9,950 (Nifty) levels, as geopolitical worries mainly weighed on the sentiments with remarks by President Donald Trump adding to concerns about rising tensions between the US and North Korea. Indian markets started on pessimistic note and traded under pressure, as investors continued to remain concerned after capital market regulator SEBI directed exchanges to initiate action against 331 suspected shell companies. SEBI’s restrictions on trading in 331 stocks have impacted about 36 lakh investors. These include some big names, such as Rakesh Jhunjhunwala, DSP Blackrock, HDFC Mutual, Reliance Mutual and UTI among domestic investors. Foreign institutions like Goldman Sachs, Fidelity, Blackrock and Smallcap World too are holders of some of these stocks.

In last leg of trade, markets tried to pare their losses, but immense selling in dying hour of trade shattered all their hopes of getting a positive close. Investors failed to get any support with the government’s statement that job loss through automation in India should not be a matter of concern as the ‘growth momentum’ of the economy will result in new job opportunities. Investors paid no heed towards Niti Aayog Vice-Chairman Rajiv Kumar’s statement that the implementation of Goods and Services Tax (GST) has brought down overall tax burden on the economy. Union Power Minister Piyush Goyal’s statement that the newly-introduced GST is crucial for promoting transparency and a corruption-free business environment in the country, too failed to provide markets any strength.

Weak opening in European counters too dampened sentiments as geopolitical concerns restrained investor sentiments. Asian markets closed mostly in red, as heightened tensions on the Korean peninsula sent caution through markets. China’s annual producer price inflation held steady in July, with prices for key raw materials up slightly on expectations of deeper capacity cuts going into the winter months of heavy pollution, while consumer inflation slowed slightly.

Back home, selling was both brutal and wide-based as none of sectoral indices on BSE were spared. Counters, which featured in the list of worst performers, include healthcare, industrial and auto. Investors shrugged off Finance Minister Arun Jaitley’s statement that the total expenditure of the government increased by 27 percent to over Rs 6.50 lakh crore in first quarter (April-June) of 2017-18, as a result of advancing the budget presentation by a month to February 1.

On the sectoral front, telecom stocks like Bharti Airtel, Reliance Communications, MTNL and TTML remained under pressure as telecom operators failed to meet customer satisfaction benchmark. As per a survey conducted by the sector regulator TRAI across three circles -- Delhi, Madhya Pradesh and Karnataka, a majority of customers in these circles are dissatisfied by efforts of telecom operators to address the call drop issue and other major counts such as network signal, data speed, customer care service, overall telecom service by their service providers etc. Stocks related to sugar space too edged lower despite report that India is planning to allow additional 200,000 tonnes of duty-free sugar imports, as production fell below consumption in 2016/17 marketing year ending on Sept 30.

The NSE’s 50-share broadly followed index Nifty declined over seventy points to end below its psychological 9,950 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex was down by over two hundred and ten points to end below its crucial 31,800 mark. The broader markets too witnessed selling pressure and ended the session with a cut of over one and a half percent. The market breadth was in the favour of decliners, as there were 597 shares on the gaining side against 1,979 shares on the losing side, while 121 shares remain unchanged.

Finally, the BSE Sensex declined 216.35 points or 0.68% to 31,797.84, while the CNX Nifty was down by 70.50 points or 0.71% to 9,908.05.

The BSE Sensex touched a high and a low of 31,967.28 and 31,731.91, respectively and there were 9 stocks on gaining side as against 22 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index declined 1.66%, while Small cap index was down by 1.69%.

The top losing sectoral indices on the BSE were Healthcare down by 3.73%, Industrials down by 2.06%, Auto down by 1.68%, Basic Materials down by 1.31% and Capital Goods was down by 1.10%, while there were no gainers on the BSE sectoral front.

The top gainers on the Sensex were NTPC up by 1.25%, ONGC up by 0.98%, Asian Paints up by 0.84%, HDFC up by 0.63% and Kotak Mahindra Bank up by 0.52%. On the flip side, Sun Pharma down by 5.13%, Adani Ports & SEZ down by 4.12%, Tata Motors down by 3.17%, Cipla down by 2.83% and Bajaj Auto down by 2.79% were the top losers.

Meanwhile, Finance Minister Arun Jaitley has stated that the total expenditure of the government increased by 27 percent to over Rs 6.50 lakh crore in first quarter (April-June) of 2017-18, as a result of advancing the budget presentation by a month to February 1. He noted that the advancement of the Budget by a month was intended to utilise the full working season, including the Q1 FY18 to step up expenditure.

The minister highlighted that the government’s expenditure during the first quarter was Rs 6,50,731 crore, which is 30.3 percent of the amount budgeted for 2017-18 (Budget Estimate or BE) as against Rs 5,11,833 crore (25.9 percent of BE 2016-17) for the corresponding period of the previous year. Adding further, he said that previously when the budget got approved in mid-May, the spending would start only in the second quarter. He also said that this year, the Budget was presented on February 1 and Parliament approved it before the new financial year starts on April 1. He added that the government had brought forward the Budget presentation to provide allocation to the departments from the first day of the new financial year.

According to the data, in the April-June quarter in 2017, spending as a percentage of BE surged for 32 central ministries, including agriculture, defence, home, mines and Panchayati Raj, compared with the first three months of 2016. For the Ministry of Water Resources and Ganga Rejuvenation, it noted that the expenditure as a percentage of BE remained the same as previous fiscal. However, it also pointed out that for 23 ministries including textiles, power, shipping, environment and rural development, the expenditure as a percentage of BE has gone down compared with the last fiscal.

The CNX Nifty traded in a range of 9,969.80 and 9,893.05. There were 10 stocks in green as against 41 stocks in red on the index.

The top gainers on Nifty were Hindalco up by 1.94%, NTPC up by 1.46%, ONGC up by 1.04%, Vedanta up by 0.84% and Asian Paints up by 0.71%. On the flip side, Aurobindo Pharma down by 5.88%, Sun Pharma down by 5.20%, Adani Ports & SEZ down by 4.23%, Tata Motors down by 3.24% and Indiabulls Housing Finance down by 3.08% were the top losers.

European markets were trading in red; Germany’s DAX declined 156.38 points or 1.27% to 12,135.67, France’s CAC decreased 90.71 points or 1.74% to 5,128.18 and UK’s FTSE 100 was down by 58.53 points or 0.78% to 7,484.20.

Asian equity markets closed mostly lower on Wednesday due to selling pressure amid rising geopolitical tensions after US President Donald Trump warned that further threats from North Korea would be ‘met with fire and fury’. In response, North Korea said it was ‘carefully examining’ a plan to launch a missile strike on a US Naval Base in the Pacific. Japanese shares hit 2-1/2-month lows as the yen hit an eight-week high against the dollar and saw broad gains against other peers amid the latest bout of geopolitical tensions stemming from the Korean Peninsula. Further, Chinese shares ended lower amid concerns that regulators will continue to clamp down on debt risks, but strong gains in consumer staples left major indexes only slightly lower on the day. Consumer prices in China rose an annual 1.4 percent in July, the National Bureau of Statistics said today. That was shy of expectations for 1.5 percent, which would have been unchanged from the June reading. The bureau also said that producer prices advanced an annual 5.5 percent, missing forecasts for 5.6 percent which also would have been unchanged. Meanwhile, the Singapore market was closed for the National Day public holiday.