Geo-political worries drag benchmarks lower

Indian equity benchmarks ended the sluggish day of trade with a cut of over half a percent on Monday on geopolitical tensions surrounding around North Korea after its latest hydrogen bomb test. Markets started the session on pessimistic note and extended their fall later on after the country’s former central bank head Raghuram Rajan cautioned the government that short-term costs of a radical ban of high-value currency notes would outweigh the long-term benefits. Report that India’s total public debt (excluding liabilities under the public account) increased by 3.6 percent to Rs 63.35 lakh crore at the end of June 2017, too dampened sentiments. The debt of the government was Rs 61.13 lakh crore at the end of March 2017. According to the report on debt management released by the finance ministry, this indicated a quarter-on-quarter rise of 3.6 percent in Q1 FY18 as compared to a decline of 1.15 percent in the previous quarter (Q4 FY17).

Sentiments also weighed on by foreign brokerage report that investment continued to slip to 27.5 percent of GDP, from 29.2 percent in June 2016, with high lending rates dampening demand and sustaining excess capacity. It added that lending rate cuts are key to economic growth recovery and banks should lower rates by 25 bps before the start of the busy season in October to accelerate reforms momentum. Separately, another global brokerage firm lowered India’s GDP growth forecast to 6.6 percent for this fiscal from 7.2 percent earlier. The brokerage said that the growth is expected to pick up in coming quarters as the economy normalizes post implementation of the GST. According to official data, India’s economic growth slipped to a three-year low of 5.7 percent in April-June as disruptions caused by demonetization spilled over to the third straight quarter amid a slowdown in manufacturing activities.

Weak opening in European counters too dampened sentiments amid fresh concerns over geopolitical tensions in the region. Euro zone producer prices grew more slowly in July than expected by markets. Asian markets ended mostly in red after a weekend nuclear weapons test by North Korea that Pyongyang claimed was a hydrogen bomb capable of fitting onto an ICBM.

Back home, traders failed to get any sense of relief with chairman of the New Development Bank of BRICS, K.V. Kamath’s statement that demonetisation has proved to be good exercise for India, as it has achieved the goals of eliminating illicit and counterfeit cash from the economy. Steel sector stocks which were shining initially too ended in red despite Steel Minister Chaudhary Birender Singh said to produce more special steel to cut imports. He said that PSUs should develop appetite for special steel as value addition remains the mantra for success. Meanwhile, Apex Frozen Foods made a stellar debut on the bourses today and ended with a gain of around 20% at Rs 209.85 per share as against its issue price of Rs 175 per share.

The NSE’s 50-share broadly followed index Nifty edged lower by over sixty points to end below its psychological 9,950 support level, while Bombay Stock Exchange's Sensitive Index -- Sensex declined by around one hundred and ninety points to end below its crucial 31,800 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 993 shares on the gaining side against 1,603 shares on the losing side, while 226 shares remain unchanged.

Finally, the BSE Sensex lost 189.98 points or 0.60% to 31,702.25, while the CNX Nifty was down by 61.55 points or 0.62% to 9,912.85.

The BSE Sensex touched a high and a low of 31,932.20 and 31,560.32, respectively and there were 7 stocks on gaining side as against 24 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index declined 0.68%, while Small cap index was down by 0.62%.

The lone gaining sectoral index on the BSE was Metal up by 0.26%, while Realty down by 1.39%, Telecom down by 1.32%, Industrials down by 1.04%, IT down by 1.02% and TECK was down by 0.94% were the top losing indices on BSE.

The top gainers on the Sensex were Coal India up by 3.38%, Sun Pharma up by 2.79%, ONGC up by 1.06%, Lupin up by 0.24% and Wipro up by 0.19%. On the flip side, Adani Ports & SEZ down by 2.60%, Infosys down by 2.04%, Hindustan Unilever down by 1.94%, Tata Motors - DVR down by 1.87% and Hero MotoCorp down by 1.82% were the top losers.

Meanwhile, the finance ministry has given its nod to four Foreign Direct Investment (FDI) proposals, worth Rs 503.40 crore in the previous two months. The proposals approved, include AMP Solar India that alone will bring investment of Rs 500 crore. One proposal of CVC Asia of entailing investment of Rs 3.32 crore got approval. CVC Asia plans to set up an investment advisory entity exempt from registration with capital market regulator SEBI. Besides, proposals of Aditya Birla Capital and Firstspace Development Management were also cleared by the department.

Inflow of FDI into India increased by 9 percent to record level of $43.48 billion in 2016-17 on account of reform measures undertaken by the government. In May this year, the Union Cabinet decided to abolish the Foreign Investment Promotion Board (FIPB) -- an advisory body comprising of secretaries to various departments for vetting of FDI applications and making recommendations to the government.

The government officially abolished the FIPB in June. It was decided that the approvals would be handled independently by administrative ministries of different sectors. The FIPB was set up after India embarked on its first market reforms in 1991. It was initially constituted under the Prime Minister's Office and subsequently shifted under the Department of Economic Affairs in the Ministry of Finance.

The CNX Nifty traded in a range of 9,988.40 and 9,861.00. There were 11 stocks in green as against 40 stocks in red on the index.

The top gainers on Nifty were Coal India up by 3.18%, Sun Pharma up by 2.89%, Bosch up by 1.41%, ONGC up by 0.91% and Indiabulls Housing Finance up by 0.65%. On the flip side, Indian Oil Corporation down by 4.33%, Adani Ports & SEZ down by 2.70%, ACC down by 2.51%, Tata Motors - DVR down by 2.25% and Infosys down by 2.17% were the top losers.

European markets were trading in red; Germany’s DAX decreased 51.08 points or 0.42% to 12,091.56, France’s CAC shed 14.99 points or 0.29% to 5,108.27 and UK’s FTSE 100 was down by 10.45 points or 0.14% to 7,428.05.

The Asian equity markets ended mostly in red on Monday, as geopolitical tensions flared up again, with U.S. president Donald Trump weighing new economic sanctions that could target China after a nuclear test Sunday by North Korea. The White House warned any nation doing business with Kim Jong Un’s regime would be met with economic sanctions and trade embargoes. The Japanese market was one of the biggest losers amid broad-based selling, down by around a percent as the yen strengthened against dollar on renewed geopolitical tensions and after the release of disappointing U.S. jobs report. Straits Times too sagged upon return from a long Hari Raya weekend, in the wake of Pyongyang's surprise nuclear test. The Chinese market though managed to make a modestly positive close ahead of key economic data later this week, as optimism about the economy helped investors shrug off heightened geopolitical tensions.