Markets continue to trade under pressure; Sensex below 31,400 mark

Indian equity benchmark continued to trade under pressure in late morning session, following global sell-off triggered by mounting geo-political tensions between the US and North Korea. Besides, caution ahead of IIP data for June due later in the day, too weighed on the sentiments. Investors remained concerned with report stating that the Reserve Bank of India (RBI) has halved its dividend payout to the government to Rs 30,659 crore for the fiscal ended June 2017. Last fiscal, the RBI had transferred Rs 65,876 crore surplus as dividend to the government. On the sectoral front, tyre stocks were buzzing with ICRA’s latest report that tyre volume demand is expected to grow by seven to eight per cent during FY18 and FY19 on the back of higher OEM demand and stable replacement demand.

On the global front, Asian markets were trading in red, as tensions ramped up between the United States and North Korea, sending investors fleeing to less risky assets such the yen, the Swiss franc and U.S. Treasuries. Back home, in scrip specific development, Punj Lloyd edged higher after the company won an EPC Railway Contract worth Rs 478 crore for 108.75 km of doubling work between Phulera - Degana in Rajasthan, awarded by North Western Railway. This is the first EPC contract awarded by North Western Railways for Doubling of BG line.

The BSE Sensex is currently trading at 31326.80, down by 204.53 points or 0.65% after trading in a range of 31194.87 and 31355.92. There were 8 stocks advancing against 23 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was up by 0.30%, while Small cap index was down by 0.01%.

The top gaining sectoral indices on the BSE were Realty up by 0.71%, Consumer Durables up by 0.49%, Healthcare up by 0.32%, IT up by 0.13% and TECK up by 0.02%, while Metal down by 1.49%, Capital Goods down by 1.00%, Auto down by 0.74%, Energy down by 0.73% and Consumer Disc down by 0.70% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors - DVR up by 0.95%, Lupin up by 0.86%, Infosys up by 0.71%, Axis Bank up by 0.70% and Wipro up by 0.68%. On the flip side, Asian Paints down by 2.15%, Larsen & Toubro down by 1.92%, ONGC down by 1.74%, Adani Ports & SEZ down by 1.27% and Hero MotoCorp down by 1.26% were the top losers.

Meanwhile, the government had expected Rs 58,000 crore in dividend from the RBI in 2017-18
The Reserve Bank of India (RBI) has made a surprise move by halving its dividend payout to the government to only Rs 30,659 crore for the fiscal ended June 30, 2017, less than half of the Rs 65,876 crore it paid the previous year. For the year 2014-15, the RBI had paid Rs 65,896 crore dividend and Rs 52,679 crore in the year prior to that. However, the central bank hasn’t given any specific reasons for the sharp fall in the surplus income for the year ended June 2017.

The government had expected Rs 58,000 crore in dividend from the RBI in 2017-18. In the Union Budget for 2017-18, the government had accounted for a dividend of Rs 74,901 crore from the RBI, nationalised banks and financial institutions for this fiscal. The dividend reduction by the RBI may put pressure on fiscal maths and the government has to find resources to meet its fiscal deficit target of 3.2 per cent for 2017-18.

Explaining the rationale, former RBI Deputy Governor R Gandhi has pointed out that for the past few years, returns have been coming down on the back of negative interest rates in the developed countries. He also explained that due to increased liquidity in the system, the RBI has been borrowing money under reverse repo and paying interest which has implications on the revenue.

The CNX Nifty is currently trading at 9747.00, down by 73.25 points or 0.75% after trading in a range of 9704.35 and 9757.55. There were 13 stocks advancing against 38 stocks declining on the index.

The top gainers on Nifty were GAIL India up by 1.64%, Aurobindo Pharma up by 1.62%, Dr. Reddy’s Lab up by 1.04%, Axis Bank up by 1.02% and Infosys up by 0.95%. On the flip side, Vedanta down by 3.48%, Hindalco down by 3.17%, Asian Paints down by 2.05%, ONGC down by 1.86% and Larsen & Toubro down by 1.81% were the top losers.

All the Asian markets were trading in red; Hang Seng decreased 545.93 points or 1.99% to 26,898.07, Jakarta Composite decreased 62.98 points or 1.08% to 5,762.97, Shanghai Composite decreased 44.5 points or 1.36% to 3,217.25, KOSPI Index decreased 42.26 points or 1.79% to 2,317.21, FTSE Bursa Malaysia KLCI decreased 8.6 points or 0.48% to 1,769.17 and Taiwan Weighted decreased 0.17 points or 0% to 10,329.57.