Benchmarks continue weak trade; Infosys cracks on Sikka’s exit

Indian equity benchmarks continued their weak trade in the morning session on account of selling in frontline blue chip counters. After consecutive sessions of positive movements in the ongoing week, benchmark indices witnessed a gap-down opening, dragged by weak movements on Infosys on the back of developments in the top management exit. IT sector was under pressure with Infosys cracking around 7% after the IT major announced that its board of directors has accepted the resignation of Vishal Sikka as the Managing Director and CEO with immediate effect. Pharma stocks were trading under pressure as the government proposes to revamp the country’s drug pricing regulator, allowing it to set prices of only essential medicines. The latest draft proposals suggest amendments to the drug pricing policy and inducting advisory body of experts in a move to strengthen the regulatory body, but at the same time may take away its absolute power to fix drug prices in public interest. Investors took note of foreign brokerage report that economic growth and inflation are expected to trend higher in the next 6-12 months and the Reserve Bank is likely to stay on a prolonged pause. The brokerage report highlighted that the MPC minutes suggest low inflation and growth concerns led to policy easing earlier this month, and going ahead the RBI is expected to stay on hold.

Traders were seen piling up position in Telecom, FMCG and Oil & Gas stocks, while selling was witnessed in IT, TECK and Healthcare sector stocks. In scrip specific development, Talbros Engineering was trading firm on the back of bonus shares approval. The company at its meeting held on August 17 has approved the capitalization of free reserve by issuance of bonus equity shares in the ratio of 1:1 to the members of the company. United Breweries (Holdings) (UBHL) was locked at lower circuit limit on report that leading bourses BSE and NSE will suspend trading in the shares of UBHL from September 8 while the entire promoter shareholding has been frozen with immediate effect. Fugitive liquor baron Vijay Mallya is a promoter of UBHL.

On the global front, Asian markets were trading mostly in red, taking a cue from a nervous Wall Street as political woes for President Donald Trump imperil his tax cut and infrastructure spending plans. Growth in new home prices slowed in China in July with Beijing prices down for a second straight month, reinforcing expectations of further slowing later this year. Back home, the BSE Sensex and NSE Nifty were trading below the psychological 31,600 and 9,850 levels respectively. The market breadth on BSE was negative in the ratio of 665:1331, while 93 scrips remained unchanged.

The BSE Sensex is currently trading at 31552.99, down by 242.47 points or 0.76% after trading in a range of 31500.84 and 31729.88. There were 8 stocks advancing against 23 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.11%, while Small cap index was down by 0.48%.

The top gaining sectoral indices on the BSE were Telecom up by 1.30%, FMCG up by 0.77%, Oil & Gas up by 0.75%, Consumer Durables up by 0.36% and Energy up by 0.21%, while IT down by 2.33%, TECK down by 1.74%, Healthcare down by 1.17%, Bankex down by 0.82% and Realty down by 0.63% were the top losing indices on BSE.

The top gainers on the Sensex were Power Grid up by 1.48%, TCS up by 1.45%, ITC up by 1.41%, Hindustan Unilever up by 0.80% and Bharti Airtel up by 0.68%.

On the flip side, Infosys down by 6.95%, Sun Pharma down by 2.11%, HDFC down by 1.42%, Tata Motors - DVR down by 1.31% and NTPC down by 1.27% were the top losers.

Meanwhile, global rating agency, Moody's Investors Service in its latest report on Asian steelmakers has forecasted that Indian steel makers' earnings will be stable or rise in the next 12 months on the back of rising domestic demand and protectionist measures. It expects operating conditions in India to be the most supportive among major steel-producing Asian countries.

The rating agency added that this expectation comes despite an increase in raw material prices and higher production volumes arising from new capacity additions. It also said that healthy gross domestic product (GDP) growth of 7.5-7.8 percent during 2017 and 2018 as well as the Indian government's measures related to fiscal stimulus and rising infrastructure spending will underpin the demand.

Moody’s has changed the outlook for Asian steel industry to ‘stable’ from ‘negative’ on the expectation that profitability will remain steady. It has changed the outlook primarily because it expected the profitability of rated Asian steel companies -- measured by EBITDA per tonne -- to remain stable during the coming 12 months following a significant improvement that began in the second half of 2016.

The CNX Nifty is currently trading at 9839.95, down by 64.20 points or 0.65% after trading in a range of 9816.30 and 9865.95. There were 19 stocks advancing against 32 stocks declining on the index.

The top gainers on Nifty were Bharti Infratel up by 2.43%, Ultratech Cement up by 1.83%, GAIL India up by 1.81%, BPCL up by 1.70% and Power Grid up by 1.50%.

On the flip side, Infosys down by 6.96%, Zee Entertainment down by 2.56%, Sun Pharma down by 2.10%, HDFC down by 1.58% and Bank of Baroda down by 1.48% were the top losers.

The Asian markets were trading mostly in red; Nikkei 225 decreased 256.8 points or 1.3% to 19,445.83, Hang Seng decreased 171.78 points or 0.63% to 27,172.44, Taiwan Weighted decreased 51.61 points or 0.5% to 10,317.76, Shanghai Composite decreased 6.03 points or 0.18% to 3,262.40, FTSE Bursa Malaysia KLCI decreased 3.27 points or 0.18% to 1,773.04 and KOSPI Index decreased 2.98 points or 0.13% to 2,358.69.

On the other hand, Jakarta Composite increased 0.39 points or 0.01% to 5,892.34.