Benchmarks continue weak trade; Nifty below 9750 mark

Indian equity benchmarks trimmed their losses and continue to trade below neutral lines in the morning session amid rising geopolitical tensions. Besides, caution ahead of IIP data for June due later in the day too weighed on the sentiments. The rupee opened lower against dollar on account of buying of American currency by banks and importer. Foreign portfolio investors stood net sellers in domestic equity markets on Thursday and sold shares worth Rs 428.74 crore with gross purchases and gross sales of Rs 3,644.31 and Rs 4,073.05 crore, respectively. 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.

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.

Traders were seen piling up position in Realty, IT and Consumer Durables stocks, while selling was witnessed in Capital Goods, Metal and Industrials sector stocks. In scrip specific development, Cochin Shipyard was trading in green after debuting on the exchanges. The public issue was oversubscribed 76.19 times. The listing premium was much less than the street expectations because of weak market conditions. Banking stock were buzzing after the FICCI-IBA survey 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 were trading 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. Back home, the BSE Sensex and NSE Nifty were trading below the psychological 31,400 and 9,750 levels respectively. The market breadth on BSE was negative in the ratio of 696:1476, while 91 scrips remained unchanged.

The BSE Sensex is currently trading at 31312.09, down by 219.24 points or 0.70% after trading in a range of 31194.87 and 31355.92. There were 5 stocks advancing against 26 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.12%, while Small cap index was down by 0.41%.

The top gaining sectoral indices on the BSE were Realty up by 0.52%, IT up by 0.24%, Consumer Durables up by 0.14% and TECK up by 0.06%, while Capital Goods down by 1.18%, Metal down by 1.16%, Industrials down by 0.97%, Auto down by 0.94% and Consumer Disc down by 0.91% were the losing indices on BSE.

The top gainers on the Sensex were Infosys up by 0.97%, Wipro up by 0.69%, Lupin up by 0.58%, SBI up by 0.49% and Axis Bank up by 0.17%.

On the flip side, Asian Paints down by 2.27%, Larsen & Toubro down by 1.94%, ONGC down by 1.71%, Tata Motors down by 1.69% and Cipla down by 1.43% were the top losers.

Meanwhile, the impact of demonetisaion and the roll-out of the Goods and Services Tax (GST) will result into increase of 30 basis points (bps) each in 2018-19 and 2019-20 in the tax-GDP ratio. The government while tabling the Medium-Term Expenditure Framework (MTEF) Statement in the Lok Sabha, said that the tax-GDP ratio will increase to 11.9 percent by 2019-20, while the gross tax-GDP ratio in 2017-18 is estimated to be around 11.3 percent.

However, the report noted that in the current fiscal, the tax-GDP ratio is expected to see no increase over that of 2016-17 and remain at 11.3 percent. Further elaborating that it said that it is felt that any shocks to tax collections due to the introduction of GST will be absorbed in the current FY and, hence, the tax-GDP ratio will remain at the level of 2016-17.

The finance ministry has projected that in the medium term tax revenues will show the growth anticipated during the presentation of the Budget. Goods and Services Tax was rolled out from July 1 and it is estimated that the new indirect tax regime would add to revenues and boost GDP by about 2 percent. Besides, the demonetisation of Rs 500 and Rs 1,000 notes have brought an additional over 1 crore people in the tax net.

The CNX Nifty is currently trading at 9745.40, down by 74.85 points or 0.76% after trading in a range of 9704.35 and 9757.55. There were 12 stocks advancing against 39 stocks declining on the index.

The top gainers on Nifty were Aurobindo Pharma up by 1.77%, Infosys up by 1.37%, GAIL India up by 1.23%, Tech Mahindra up by 1.23% and Wipro up by 0.61%.

On the flip side, Vedanta down by 2.73%, Asian Paints down by 2.54%, Hindalco down by 2.44%, Larsen & Toubro down by 1.85% and ONGC down by 1.80% were the top losers.

The Asian markets were trading in red; Hang Seng decreased 559.01 points or 2.04% to 26,884.99, Jakarta Composite decreased 62.98 points or 1.08% to 5,762.97, Shanghai Composite decreased 45.96 points or 1.41% to 3,215.79, KOSPI Index decreased 41.59 points or 1.76% to 2,317.88, FTSE Bursa Malaysia KLCI decreased 8.6 points or 0.48% to 1,769.17 and Taiwan Weighted decreased 1.48 points or 0.01% to 10,328.26.

Financial markets in Japan are closed today for a public holiday.