Benchmarks extend losses; Nifty below 9,900 mark

Indian equity benchmarks extended their losses in the morning session on account of selling in frontline blue chip counters as growing concerns over another test by North Korea is keeping investors across the globe on the edge. The rupee extended losses for the fourth straight session and opened lower against dollar on account of selling of American currency by banks and exporters. Foreign Portfolio Investors stood net sellers in domestic equity markets on Tuesday and sold shares worth Rs 846.53 crore with gross purchases and gross sales of Rs 2236.20 crore and Rs 3082.73 crore, respectively. Sentiments also remained dampened with government saying that names of over 2.09 lakh firms have been struck off from register of companies for failing to comply with regulatory requirements and action has been initiated to restrict operations of their bank accounts. The Centre has also stepped up action against such entities by bringing in restrictions on the operation of their bank accounts by their existing directors and authorized representatives. Besides, cracking the whip, SEBI barred 19 domestic and foreign entities from securities markets for manipulation in issuances of global depository receipts and warned several others including FIIs.

Investors took note that demonetization has hurt the informal economy and triggered a rush for distress labour under job guarantee scheme (MGNREGA), says Economic Survey-II, though the wages available under the scheme may also have helped contain rural unrest and a political backlash to some extent. The official document capturing the state of economy for 2016-17, noted that there was a 14-week stretch when demand for work surged before falling into a familiar groove following March, 2017. Separately, this year’s kharif harvest may be lower than 2016 because of floods in several states and lower planting of some crops. The output of pulses and oilseeds is expected to fall because of lower planting, while production of rice, the main kharif crop, is likely to be the same as last year as higher yields will offset lower sowing.

Traders were seen piling up position in Consumer Durables, Energy and Utilities stocks, while selling was witnessed in Realty, Healthcare and FMCG sector stocks. In scrip specific development, ITC was trading in red after a brokerage firm downgraded cigarette major to neutral and preferred to switch to Hindustan Unilever, citing fall in cigarette volumes. The research house also slashed target price downwards, following cut in FY18/19 earnings by 2-5 percent on lower volume assumptions.

On the global front, Asian markets were trading mostly in red, as tension on the Korean peninsula weighed on sentiment. A poll showed that Japan’s economy likely grew at a slower pace than initially estimated in the second quarter, on expected downward revisions in capital spending growth. Back home, the BSE Sensex and NSE Nifty were trading below the psychological 31,700 and 9,900 levels respectively. The market breadth on BSE was negative in the ratio of 916:1152, while 99 scrips remained unchanged.

The BSE Sensex is currently trading at 31608.86, down by 200.69 points or 0.63% after trading in a range of 31586.53 and 31713.50. There were 8 stocks advancing against 23 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.18%, while Small cap index was down by 0.01%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 0.48%, Energy up by 0.17%, Utilities up by 0.12%, Oil & Gas up by 0.10% and Basic Materials up by 0.04%, while Realty down by 1.26%, Healthcare down by 1.08%, FMCG down by 0.91%, IT down by 0.66% and TECK down by 0.61% were the top losing indices on BSE.

The top gainers on the Sensex were Kotak Mahindra Bank up by 0.62%, Reliance Industries up by 0.51%, NTPC up by 0.47%, Asian Paints up by 0.31% and Hero MotoCorp up by 0.21%.

On the flip side, Sun Pharma down by 2.78%, ITC down by 1.97%, Tata Motors - DVR down by 1.96%, Lupin down by 1.78% and Bajaj Auto down by 1.73% were the top losers.

Meanwhile, in one of the biggest crackdown on shell companies, the finance ministry has restricted directors of over 200,000 dormant companies struck off from official records from accessing their firms’ bank accounts. Names of over 2.09 lakh firms have been struck off from register of companies under section 248 of the Companies Act for reasons including not commencing operations within a year of incorporation or for not carrying out any business in the preceding two fiscal years.

The finance ministry in a release stated that directors of these firms will be able to access the bank accounts only after they get legally restored by an order of the National Company Law Tribunal and action will be taken against companies detected to have been used for money laundering and tax evasion.

The Department of Financial Services (DFS) has, through the Indian Banks’ Association (IBA), advised banks to take “immediate steps” to put restrictions on bank accounts of such “struck-off” companies. Banks have been advised to go in for enhanced diligence while dealing with companies in general and not only on “struck off” companies. DFS also cautioned banks in dealing with companies that are listed as active in RoC records, but have not been filing annual records disclosing any charge on their assets for the benefit of stakeholders.

The CNX Nifty is currently trading at 9894.50, down by 57.70 points or 0.58% after trading in a range of 9882.55 and 9911.90. There were 16 stocks advancing against 35 stocks declining on the index.

The top gainers on Nifty were GAIL India up by 1.61%, Reliance Industries up by 0.52%, Indiabulls Housing up by 0.48%, Ultratech Cement up by 0.47% and Kotak Mahindra Bank up by 0.36%.

On the flip side, Sun Pharma down by 2.52%, ITC down by 2.12%, Tata Motors - DVR down by 1.99%, Lupin down by 1.92% and Axis Bank down by 1.49% were the top losers.

The Asian markets were trading mostly in red; Hang Seng decreased 267.01 points or 0.96% to 27,474.34, Taiwan Weighted decreased 70.18 points or 0.66% to 10,547.66, Nikkei 225 decreased 35.02 points or 0.18% to 19,350.79, Jakarta Composite decreased 14.98 points or 0.26% to 5,815.00, Shanghai Composite decreased 6.75 points or 0.2% to 3,377.57 and KOSPI Index decreased 6.58 points or 0.28% to 2,320.04.

On the other hand, FTSE Bursa Malaysia KLCI increased 0.63 points or 0.04% to 1,770.26.