Weakness in global markets, Infosys drag markets lower for second straight session

Indian equity benchmarks failed to hold on to their initial gains and ended in red terrain on Monday, breaching their crucial 9,800 (Nifty) and 31,300 (Sensex) levels, as weak global cues and fall of over 5% in Infosys continued to hurt sentiments. Markets, soon after a positive opening, started moving southward to enter into negative trajectory in second half of trade. Afterwards, key gauges never looked confident of recovering and gradually extended its losses till end to close near intraday lows, as investors opted to remain on sidelines ahead of the PM Narendra Modi’s meet with industry leaders for policy inputs to build a ‘New India’. Sentiments remained dampened after the private report highlighted that consumer confidence in India declined in the second quarter of this year amid concerns regarding job security and lower optimism on employment prospects. Besides, cautionary spending by consumers towards the end of 2016 still had some impact on the quarter under consideration.

Adding to the pessimism, the India Meteorological Department’s (IMD) weekly press release highlighted that about a quarter of the country has received deficient rainfall in the first half of the monsoon, but hopes the situation will improve in the second half. The Met department states that there is a 4% deficit rain across the country, but 26% part of the country has received deficient rain. Markets extended losses on report that as many as 322 infrastructure projects worth Rs 150 crore or above each have seen cost overrun of Rs 1.71 lakh crore due to delays and other reasons by March 2017. Furthermore, according to the RBI data during the week to August 4, there was an incremental credit de-growth of Rs 1.1 trillion. This comes after a record low full year credit growth in FY17 when credit growth slipped to the lowest in the past six decades at 5.1%. This was the lowest since fiscal 1953 when it grew a tepid 1.8%.

Weak opening in European counters too dampened sentiments, as geopolitical tensions continued to weigh on markets’ sentiments, dampening demand for risk-related assets such as equities. Asian markets ended mostly in red; as US-South Korea joint military drills kicked off and a key meeting of global central bankers loomed.

Back home, selling was both brutal and wide-based as none of sectoral indices on BSE were spared. Counters, which featured in the list of worst performers include, software, technology and public sector undertakings. Infosys closed in red after multiple brokerages have downgraded the stock following Vishal Sikka’s resignation as the chief executive and managing director. The research house sees significant senior level departures over next six months till new CEO is found and also sees downside risks to guidance for FY18/19. On the sectoral front, banking stocks ended in red despite reports that the government and RBI are in talks to shore up public sector bank capital in a time-bound manner due to the higher provisioning burden on these lenders. These measures could include a combination of capital raising from the market, dilution of government holding, additional capital infusion by the government, mergers based on strategic decision and sale of non-core assets.

The NSE’s 50-share broadly followed index Nifty edged lower by over eighty points to end below its psychological 9,800 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by around two hundred and seventy points to end below its crucial 31,300 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 863 shares on the gaining side against 1,724 shares on the losing side, while 157 shares remain unchanged.

Finally, the BSE Sensex lost 265.83 points or 0.84% to 31,258.85, while the CNX Nifty was down by 83.05 points or 0.84% to 9,754.35.

The BSE Sensex touched a high and a low of 31,641.81 and 31,220.53, respectively and there were 6 stocks on gaining side as against 25 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index declined 1.45%, while Small cap index was down by 0.96%.

The top losing sectoral indices on the BSE were IT down by 2.04%, TECK down by 1.89%, PSU down by 1.81%, Healthcare down by 1.61% and Oil & Gas was down by 1.57%, while there were no gainers on the BSE sectoral front.

The top gainers on the Sensex were Axis Bank up by 0.70%, TCS up by 0.34%, Mahindra & Mahindra up by 0.27%, HDFC up by 0.22% and ITC up by 0.12%. On the flip side, Infosys down by 5.37%, Adani Ports & SEZ down by 2.74%, Dr. Reddy’s Lab down by 2.51%, Sun Pharma down by 2.01% and ONGC down by 1.99% were the top losers.

Meanwhile, the Telecom Regulatory Authority of India (TRAI) has issued stringent rules to curb call drops with a maximum penalty of Rs 10 lakh on cellular service providers if they fail to meet the voice quality benchmarks for three successive quarters. The regulator also noted that this would be effective from October 1, 2017.

TRAI Chairman RS Sharma has said that they have proposed financial disincentive in the range of Rs 1 lakh to Rs 5 lakh. He also said that it is a graded penalty system depending on the performance of the telecom network. Besides, TRAI Secretary in-charge S K Gupta has explained that if an operator failed to meet call drop benchmark in the consecutive quarter, the penalty amount would be increased 1.5 times, and for failure in the third consecutive month, this will be doubled. However, he said that there is a cap of Rs 10 lakh on financial disincentive. 

Under the previous Quality of Service Rule, telcos need to pay Rs 50,000 to 1 lakh for call drops or if they are not meeting the norms. Now the regulator has made measurement of call drop rate more granular from circle level to mobile towers in a circle. Under the revised rule, 90% of base transceiver station or mobile site in a telecom circle 90% of time should not fail to handle 98% of the call, which means not more than 2% calls handled by them should drop. During busy hours of the day, not more than 3% call drop should be registered on 90% of mobile towers in a telecom circle. Besides, the regulator also fixed the benchmark for radio-link time out technology, reportedly used by telecom operators for masking call drops.

The CNX Nifty traded in a range of 9,884.35 and 9,740.10. There were 9 stocks in green as against 41 stocks in red, while one stock remained unchanged on the index.

The top gainers on Nifty were Axis Bank up by 0.90%, Mahindra & Mahindra up by 0.63%, TCS up by 0.60%, Tech Mahindra up by 0.52% and Eicher Motors up by 0.39%. On the flip side, Infosys down by 5.40%, Bank of Baroda down by 3.46%, Indian Oil Corporation down by 3.31%, Adani Ports & SEZ down by 2.65% and Dr. Reddy’s Lab down by 2.57% were the top losers.

European markets were trading mostly in red; Germany’s DAX decreased 22.34 points or 0.18% to 12,142.85 and France’s CAC was down by 9.82 points or 0.19% to 5,104.33, while UK’s FTSE 100 was up by 2.03 points or 0.03% to 7,326.01.

Asian equity markets closed mostly lower on Monday after the ouster of White House chief strategist Steve Bannon by US President Donald Trump and the start of joint military drills by the US and South Korea today. The dollar edged away from four-month lows against the yen and oil held stable while gold prices were little changed ahead of the US Federal Reserve's annual central banking symposium in Jackson Hole, Wyoming on Thursday and Friday. Japanese stocks fell to a fresh 3-1/2-month low as global investors remained cautious amid worries over whether the Trump administration will be able to implement growth boosting measures. However, Chinese shares ended higher after the country's securities regulator said China Unicom's $11.7 billion ownership reform plan hasn't violated rules.