Weak global cues, Sikka’s resignation drag benchmarks lower

Friday turned out to be a disappointing day of trade for Indian equity benchmarks, as key indices traded sluggish through the session and settled below their crucial 31,600 (Sensex) and 9,850 (nifty) levels. Traders opted to book profits in risky assets after three days of continuous rally amid weak global cues. Heavy selling in IT pack mainly dampened sentiments with Infosys leading the fall on the back of developments in the top management exit. IT major announced that its board of directors has accepted the resignation of Vishal Sikka as the Managing Director and CEO with immediate effect. Some pessimism also crept in with Chief Economic Adviser Arvind Subramanian’s statement that  overemphasis on renewable energy would create a 'double whammy' for the government by reducing the viability of thermal power plants and raising bad loans of state-owned banks.

Traders shrugged off report by real estate consulting firm CBRE South Asia that India has surpassed China in the global Retail Development Index in 2017, indicating growing prominence of the country as a preferred retail destination for global brands. Traders failed to get any sense of relief with report that the government gave some relief to taxpayers availing of transitional input tax credit under the Goods and Services Tax (GST) regime by giving them an extra week till 28 August 28 to file tax returns.

Weak opening in European counters too dampened sentiments with CAD, DAX and FTSE all were trading in red in early deals, as market sentiments weakened following news of a terrorist attack in Barcelona, Spain. Asian markets ended 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.

Back home, 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.

On the sectoral front, pharma stocks edged lower despite reports that the government proposed to revamp the country’s drug pricing regulator National Pharmaceutical Pricing Authority (NPPA), allowing it to set prices of only essential medicines. However, telecom stocks rang loud despite report that the Indian telecom watchdog announced stricter rules over call drops and said telecom operators who don't meet the norms can be fined at least Rs 5 lakh.

The NSE’s 50-share broadly followed index Nifty edged lower by around seventy points to end below its psychological 9,850 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by over two hundred and seventy points to end below its crucial 31,600 mark. The broader markets too struggled to get traction and ended the session in red. The market breadth was in the favour of decliners, as there were 994 shares on the gaining side against 1,543 shares on the losing side, while 121 shares remain unchanged.

Finally, the BSE Sensex lost 270.78 points or 0.85% to 31,524.68, while the CNX Nifty was down by 66.75 points or 0.67% to 9,837.40.

The BSE Sensex touched a high and a low of 31,729.88 and 31,349.13, respectively and there were 10 stocks on gaining side as against 21 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index slipped 0.13%, while Small cap index was down by 0.49%.

The top gaining sectoral indices on the BSE were Telecom up by 1.52%, Oil & Gas up by 0.92%, FMCG up by 0.76%, Energy up by 0.58% and Consumer Durables was up by 0.21%, while IT down by 3.53%, TECK down by 2.67%, Healthcare down by 1.60%, Realty down by 0.92% and Metal down by 0.73% were the top losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 2.23%, Power Grid Corporation up by 1.85%, TCS up by 1.32%, Bharti Airtel up by 1.21% and ITC up by 0.84%. On the flip side, Infosys down by 9.60%, Sun Pharma down by 3.81%, NTPC down by 2.01%, HDFC down by 1.60% and Coal India down by 1.52% were the top losers.

Meanwhile, a joint study carried out by the industry body Associated Chambers of Commerce & Industry of India (ASSOCHAM) and KPMG has found out that the telecommunications sector in India will create as many as 30 lakh jobs by 2018 on the back of rapid 4G technology deployments, rising data consumption, introduction of digital wallets and popularity of smartphones. In addition, study revealed that emerging technologies such as 5G, M2M and the evolution of Information and Communications Technology (ICT) are expected to create employment avenues for almost 870,000 individuals by 2021. 

The study stated that the optimistic job assessment comes at a time when the large telecom companies are battling financial stress and competition has led to a free fall in tariffs, putting revenue and profitability of all telcos under severe pressure. Further, it pointed out that the existing manpower in the sector may not be adequate both in number as well as in skill to cater to the upcoming demand. It also noted that the gaps in skills will need to be closed for diverse roles such as infra and cyber security experts, application developers, sales executives, infrastructure and handset technicians, and re-skilling will have to be undertaken for the existing manpower, given the technological advancements.

Assocham-KPMG study further said that Indian telecom sector is a highly price-sensitive market with a subscriber base that has majority pre-paid subscribers with lower average revenue per user (ARPU). It also explained that the increased debt burden on operators coupled with continuous pressure on profitability has affected the financial health of the telecom sector. It mentioned that with 646 million unique mobile subscribers, India is the second-largest mobile market in the world and will add more than 300 million new unique subscribers by 2020. It added that sector contribution to GDP is likely to touch 8.2 per cent by 2020. The study further pegged the capex investment during 2016-20 at $35 billion.

The CNX Nifty traded in a range of 9,865.95 and 9,783.65. There were 25 stocks in green as against 26 stocks in red on the index.

The top gainers on Nifty were Bharti Infratel up by 4.20%, Hindustan Unilever up by 2.12%, Ultratech Cement up by 2.07%, BPCL up by 1.94% and Eicher Motors up by 1.89%. On the flip side, Infosys down by 9.56%, Sun Pharma down by 3.71%, Zee Entertainment down by 2.88%, Vedanta down by 2.10% and NTPC down by 1.92% were the top losers.

European markets were trading in red; UK’s FTSE 100 declined 74.64 points or 1.01% to 7,313.23, Germany’s DAX decreased 69.44 points or 0.57% to 12,134.02 and France’s CAC was down by 57.5 points or 1.12% to 5,089.35.

Asian equity markets closed mostly lower on Friday as the ongoing political turmoil in Washington put President Donald Trump's stimulus and tax plans in jeopardy and a deadly attack in Spain that killed at least 13 people and injured more than 100 others left the world shocked. Investors also adopted a cautious stance ahead of controversial joint military exercises of South Korea and the US, scheduled to start next week. Japanese stocks fell to 3-1/2-month lows, hit by losses on Wall Street and a weaker dollar as doubts grow over whether President Donald Trump will be able to push through policies to boost US economic growth. Meanwhile, Chinese shares closed on a steady note amid optimism over earnings and improving growth.