Post Session: Quick Review

Indian equity benchmarks slumped in today’s trade and ended in red for fifth consecutive session, with Nifty and Sensex ending at over 1 month closing lows, on account of geopolitical tensions. Reliance and SBI drag the Nifty index the most. Besides, caution ahead of IIP data for June due later in the day, too weighed on the sentiments. The equity benchmarks made a gap-down start and traded dreadfully in early deals as the sentiments were under pressure amid a persistent war of words between the US and North Korea. Geopolitical tension gained momentum after a North Korean army commander said, sound dialogue isn’t possible with President Donald Trump and only absolute force can work on him. Traders also took note that the Reserve Bank of India (RBI) would pay Rs 30,659 crore as dividend to the government, less than half the surplus it transferred the previous year. This would potentially impact the government’s fiscal math this financial year, which is under pressure due to state-run banks’ sluggish earnings growth. In the budget for fiscal year 2017-18, finance minister Arun Jaitley had pegged dividend income from RBI, public sector banks and financial institutions at Rs 74,901 crore.

Some selling also crept in on report that there were downside risks to India’s projected growth of 6.75-7.5 percent growth in 2017-18, the finance ministry’s Mid-Term Economic Survey said in a guarded forecast, indicating that multiple pain points continue to hinder growth in the broader economy amid an uncertain fiscal outlook. The second part of the Economic Survey for 2016-17, which besides giving an overview of India’s economy, was also critical about ad hoc state-sponsored farm loan write-offs to deal with rural distress. The fiscal outlook for 2017-18 still remains uncertain while deflationary impulses continue to weigh on the economy. The survey also said that farm loan waivers could cut overall demand in the economy by 0.7 percent. Separately, flows from foreign portfolio investors into India have slowed of late as rich valuations and delay in corporate earnings recovery have reduced their appetite for domestic stocks. According to data available with depository NSDL, after pouring over Rs 50,000 crore in equity markets during February-July, foreign portfolio investors have sold shares worth Rs 1,080 crore in August so far.

Meanwhile, PSU Banking sector slumped after State Bank of India (SBI) reported its earnings for the quarter ended June which was a mixed bag. The net profit came above estimates but asset quality remains a drag. Gross non-performing assets stood at Rs 1.88 lakh crore or 9.97 percent of gross advances. Net non-performing assets (NPAs) rose to Rs 1.07 crore (Rs 334 crore). In percentage terms, it was 5.97 percent to net advances. Provision coverage ratio was 60.79 percent. Besides, the FICCI-IBA survey also highlighted that banks with operations in India witnessed a significant rise in non-performing assets during the first half of 2017. The survey carried out for January-June revealed that NPAs in public sector banks shot up considerably, with 91% respondents from public sector banks reporting an increase. 71% private and 50% foreign bank respondents stated that their bad loans have increased during January-June.

On the global front, Asian markets closed in red, hit by tough language between North Korea and Washington that has sparked safe haven demand. China’s fiscal spending rose at a slower pace in July due mainly to larger expenditure earlier, but a government-led infrastructure push has kept spending brisk this year. European stocks were trading in red putting them on track for their worst week this year as ratcheting political tensions dented equities worldwide.

The BSE Sensex ended at 31222.75, down by 308.58 points or 0.98% after trading in a range of 31128.02 and 31379.20. There were 7 stocks advancing against 24 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index was down by 0.08%, while Small cap index was down by 0.10%. (Provisional)

The only gaining sectoral indices on the BSE were Consumer Durables up by 0.86% and Healthcare up by 0.29%, while Metal down by 3.24%, PSU down by 1.42%, Basic Materials down by 1.41%, Auto down by 1.33% and Energy down by 1.11% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Dr. Reddy’s Lab up by 3.35%, Tata Motors - DVR up by 1.55%, Axis Bank up by 0.70%, Power Grid up by 0.67% and Lupin up by 0.60%. (Provisional)

On the flip side, SBI down by 5.13%, Mahindra & Mahindra down by 2.91%, Reliance Industries down by 2.34%, Larsen & Toubro down by 2.33% and Sun Pharma down by 2.21% were the top losers. (Provisional)

Meanwhile, in order to enable the textile industry achieve its full potential of production, exports and employment, the government has set up institutional mechanisms including a Steering Committee, an Inter-Ministerial Synergy Group and a Task Force. These mechanisms will synergize efforts of the Ministry of Textiles, related Ministries and state governments to achieve the aim of the government.

The government in a notification said that it has received several recommendations for this, which is being carry forwarded to form institutional mechanisms including relevant Ministries, State Governments and Industry partners.  The government has set up a Steering Committee to oversee implementation of a Knowledge Network Management System (KNMS) to facilitate exchange of knowledge amongst academia, farming community and the industry on the productivity of natural fibres and diversification of their bye-products.

A Task Force has been set up to steer follow-up action on various outcomes of Textiles India 2017 for growth of the textiles sector, while an Inter-Ministerial Synergy Group on Man-Made Fibre (MMF) would formulate policy interventions to enhance growth and competitiveness of MMF industry in India.

The CNX Nifty ended at 9712.95, down by 107.30 points or 1.09% after trading in a range of 9685.55 and 9771.65. There were 15 stocks advancing against 36 stocks declining on the index. (Provisional)

The top gainers on Nifty were Dr. Reddy’s Lab up by 3.68%, Aurobindo Pharma up by 3.14%, GAIL India up by 1.23%, Yes Bank up by 0.57% and Infosys up by 0.54%. (Provisional)

On the flip side, Hindalco down by 6.72%, Vedanta down by 6.51%, SBI down by 5.49%, Bosch down by 4.00% and Bank of Baroda down by 3.67% were the top losers. (Provisional)

The European markets were trading in red; UK’s FTSE 100 decreased 79.16 points or 1.07% to 7,310.78, Germany’s DAX decreased 35.18 points or 0.29% to 11,979.12 and France’s CAC decreased 46.18 points or 0.9% to 5,069.05.

Asian equity markets closed lower on Friday as the escalation in tensions surrounding North Korea continued to push investors towards safe-haven assets such as the Japanese yen, the Swiss franc and gold. Hong Kong shares fell, dragged down by a sell-off in internet-related shares and fears over the impact of rising tensions between the United States and North Korea. Meanwhile, China stocks stumbled as a growing war of words between the United States and North Korea combined with profit-taking in cyclical sectors to send shares down for the week. Seoul shares ended lower amid selling by foreign investors following Trump's fresh warning to North Korea. The Japanese market was closed in observance of the Mountain Day holiday.