Markets remain under pressure; Sensex below 31,600 mark

Indian equity benchmarks remained under pressure in late morning session, taking cues from global counterparts. Anxiety spread among the investors with the Apparel Export Promotion Council’s (AEPC) report that minimum wages in the garment industry if doubled to Rs 18,000 per month will jack up costs, hit exports and lead to job losses. Selling pressure in IT, TECK and Healthcare stock also weighed on the sentiments. Some concerns also came 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.

On the global front, Asian market were trading mostly in red, as risk sentiments was rattled by rising concerns about U.S. President Donald Trump's ability to pass economic policies and a deadly terror attack in Barcelona. Back home, in scrip specific development, Hindustan Petroleum Corporation (HPCL) was trading higher after the company inked a joint venture agreement (JVA) with the Rajasthan government for the upcoming mega petroleum refinery in Barmer at a cost of Rs 43,129 crore. Under the agreement, HPCL will hold 74% stake in the joint venture, HPCL Rajasthan Refinery, while the state government will hold the rest 26%.

The BSE Sensex is currently trading at 31568.51, down by 226.95 points or 0.71% after trading in a range of 31500.84 and 31729.88. There were 9 stocks advancing against 22 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was up by 0.08%, while Small cap index was down by 0.43%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.57%, Telecom up by 1.41%, Energy up by 0.91%, FMCG up by 0.91% and PSU up by 0.42%, while IT down by 2.39%, TECK down by 1.78%, Healthcare down by 1.53%, Bankex down by 0.78% and Realty down by 0.58% were the top losing indices on BSE.

The top gainers on the Sensex were ITC up by 1.54%, TCS up by 1.51%, Power Grid Corporation up by 1.50%, Hindustan Unilever up by 1.05% and Bharti Airtel up by 1.00%. On the flip side, Infosys down by 7.19%, Sun Pharma down by 3.17%, Lupin down by 1.77%, Adani Ports & SEZ down by 1.47% and HDFC down by 1.43% were the top losers.

Meanwhile, Chief Economic Adviser (CEA) Arvind Subramanian has stated that India's thrust on renewable energy would create a 'double whammy' for the government by reducing the viability of coal-fired thermal power plants and rising non-performing assets (NPAs) of state-run lenders. He also noted that while renewable energy sources must be tapped to bring down the fuel import burden, in short-to-medium run the country ought to focus on traditional sources of energy like coal.

Subramanian has said that over-expansion, fuelled by the growth optimism of the mid-2000s, combined with stresses in the discoms and slowdown in the economy has led to plummeting Plant Load Factors (PLFs), declining profitability, and the spectre of large amounts of stranded power assets, and consequentially stranded coal assets as well. He pointed out that all this can have a harmful effect on the health of the banking sector, especially the public sector banks, in the country, which in turn can adversely impact the health of the Indian economy, already affected by the Twin Balance Sheet challenge. Adding further, he said that the financial impact for the government arises from having to recapitalise the public sector banks that have lent to power companies and to the reduced profitability of the coal industry.

Noting that both coal and renewable sources should be the focus of power generation, CEA said that for India today, the social cost of renewables is higher than that of thermal power and it is highly unlikely for the converse to be true, at least for some time. He stressed that the world collectively needs to embark on a programme similar to the Manhattan project that produced the first nuclear bomb. He further pointed out that for India, which is struggling to provide basic electricity to about 25 per cent of the population, coal will provide about 60 per cent of country’s power needs until 2030. He noted that coal will and perhaps should remain the country's primary energy source because it is the cheapest fuel available. He added that India must shape the national and global narrative and not be stampeded by the rhetoric of carbon imperialism.

The CNX Nifty is currently trading at 9847.50, down by 56.65 points or 0.57% after trading in a range of 9816.30 and 9865.95. There were 22 stocks advancing against 29 stocks declining on the index.

The top gainers on Nifty were BPCL up by 3.39%, Bharti Infratel up by 2.57%, GAIL India up by 2.07%, Indian Oil Corporation up by 1.77% and Tech Mahindra up by 1.71%. On the flip side, Infosys down by 7.13%, Sun Pharma down by 2.99%, Zee Entertainment down by 2.74%, Tata Power down by 1.84% and Lupin down by 1.75% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 decreased 237.61 points or 1.21% to 19,465.02, Hang Seng decreased 122.22 points or 0.45% to 27,222.00, Taiwan Weighted decreased 48.04 points or 0.46% to 10,321.33, FTSE Bursa Malaysia KLCI decreased 3.27 points or 0.18% to 1,773.04 and KOSPI Index decreased 1.94 points or 0.08% to 2,359.73.

On the flip side, Jakarta Composite increased 0.39 points or 0.01% to 5,892.34 and Shanghai Composite increased 4.27 points or 0.13% to 3,272.70.