Benchmarks plunge over half a percent on geopolitical tension

Indian equity benchmarks have made a gap-down opening and are trading with pessimism, as traders opted to book profit after four days of continuous rally amid heightened geo-political worries. Key gauges were trading with a cut of over half a percent, breaching their crucial 31,600 (Sensex) and 9,900 (Nifty) levels. Traders also remained concerned with a NITI Aayog report that it found that there is a huge gap between what the state governments have done to improve ease of doing business and what the enterprises know of these improvements. NITI Aayog has recommended reforming labour laws and a greater flexibility in their implementation to enhance ease of doing business. Traders shrugged off Moody’s Investors Services’ latest note where it has said that merging India’s public sector banks will improve their ratings because it will provide efficiencies of scale and enhance the quality of corporate governance.

Global cues too remained somber with Asian counters trading mostly in red at this point of time on heightened geopolitical tension after North Korea fired a ballistic missile over Japan, promising to fan simmering tensions with the US. The US markets once again made a mixed closing in the last session.

Back home, telecom stocks remained buzzing, as the Telecom Regulatory Authority of India (TRAI) has released a consultation paper on the next round of spectrum auctions seeking stakeholders’ response. Meanwhile, the market breadth indicating the overall health of the market was weak, with 733 shares gaining and 1,102 shares declining, while a total of 59 shares were unchanged.

The BSE Sensex is currently trading at 31560.52, down by 190.30 points or 0.60% after trading in a range of 31540.32 and 31739.80. There were 4 stocks advancing against 27 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index slipped 0.07%, while Small cap index was down by 0.27%.

The few gaining sectoral indices on the BSE were Metal up by 0.27%, Realty up by 0.21% and Oil & Gas was up by 0.13%, while Telecom down by 0.98%, Power down by 0.76%, Utilities down by 0.63%, Capital Goods down by 0.61% and Bankex was down by 0.52% were the top losing indices on BSE.

The few gainers on the Sensex were ICICI Bank up by 0.65%, Lupin up by 0.24%, Tata Steel up by 0.20% and Power Grid Corporation up by 0.09%. On the flip side, NTPC down by 3.12%, HDFC down by 1.48%, Tata Motors - DVR down by 1.35%, Hindustan Unilever down by 1.15% and Coal India down by 1.05% were the top losers.

Meanwhile, domestic rating agency Care Ratings, in its latest report has projected acceleration in the Gross Domestic Product (GDP) growth to 6.5% in the first quarter (April-June) of fiscal year 2017-18 over the last year, up from the 6.1% in the preceding quarter. It said that this growth is contingent on realisation of gross value added (GVA) growth of 6.3%.

The rating agency in its report titled ‘GDP growth: Q1-FY18 Expectations’ has stated that agriculture is expected to grow at 3.5-4% during the reporting quarter, largely due to residual output of the Rabi or the winter crop harvest. It said that the value addition in manufacturing will come between 4.5% and 5%, and added that the index of industrial production is at a positive 1.25% for the same period. It also said electricity growth will be 7%, while mining will be up to 3%. Growth of trade, hotels and transport will be around 7% with prospective GST impacting services to a limited extent.

As per the report, the fastest growing segment will be public administration and defence which is expected to grow 12%, on the back of front-loading of spending by the government wherein 80% of the budgeted fiscal space has already been exhausted. Following the push by government in terms of increased spending on infrastructure, the construction segment is projected to grow at 6% on a GVA basis. Besides, the ratings agency also said that the real estate sector is ‘sluggish’ due to the introduction of a regulatory machinery and estimated that the segment to report a growth of 6.5% during the quarter.

The CNX Nifty is currently trading at 9853.70, down by 59.10 points or 0.60% after trading in a range of 9845.95 and 9887.35. There were 8 stocks advancing against 42 stocks declining on the index, while one stock remained unchanged.

The top gainers on Nifty were BPCL up by 1.20%, Vedanta up by 1.00%, Indian Oil Corporation up by 0.70%, ICICI Bank up by 0.53% and Tata Steel up by 0.33%. On the flip side, NTPC down by 3.00%, Bank of Baroda down by 1.80%, HDFC down by 1.53%, HCL Tech. down by 1.44% and Coal India down by 1.21% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 declined 110.31 points or 0.57% to 19,339.59, Hang Seng shed 100.2 points or 0.36% to 27,763.09, Taiwan Weighted decreased 37.63 points or 0.36% to 10,488.35, Jakarta Composite fell 27.85 points or 0.47% to 5,875.49, KOSPI Index dropped 16.81 points or 0.71% to 2,353.49 and FTSE Bursa Malaysia KLCI was down by 8.74 points or 0.49% to 1,760.75.

On the flip side, Shanghai Composite was up by 2.07 points or 0.06% to 3,364.72.