Benchmarks end lower on geopolitical concerns

Wednesday turned out to be a disappointing day of trade for Indian equity benchmarks, with frontline gauges ending below their crucial 31,700 (Sensex) and 9,950 (Nifty) levels, as tensions over North Korea’s latest nuclear test showed few signs of abating and continued to spook global investors. Markets started off on pessimistic note as sentiments 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 authorised 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.

However, markets trimmed some of their initial losses in second half of the trade, as market participants took some solace with the new Commerce and Industry Minister Suresh Prabhu’s statement that the Ministry will soon bring out a policy framework for facilitating access to global markets for the Indian agriculture produce. The recovery proved short lived and was not able to take markets into green, as investors took note of Economic Survey-II saying that demonetization has hurt the informal economy and triggered a rush for distress labour under job guarantee scheme (MGNREGA), though the wages available under the scheme may also have helped contain rural unrest and a political backlash to some extent. Meanwhile, private report said that economic activity in the country lost some pace amid GST related disruptions but underlying growth momentum remains strong and the country may clock 6.7 percent growth this fiscal.

Weak opening in European counters on the eve of a European Central Bank meeting too dampened sentiments. The ECB’s latest interest rate decision is due on Thursday with no major policy changes expected. The euro zone monetary authority is unlikely to provide big hints on its strategy for eventually winding down, or tapering, its asset purchase program. Asian markets ended mostly in red, as tension on the Korean peninsula weighed on sentiments.

Back home, 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. On the sectoral front, stocks related to banking counters edged lower, as former RBI Governor Raghuram Rajan said that the biggest challenge is cleaning up the balance sheets of public sector banks. Garment and textile stocks remained buzzing, as the garment exporters have asked the Centre for clarity on the refund process for Integrated Goods and Services Tax (IGST) paid on import of machinery as they were not in a position to use input tax credit.

Finally, the BSE Sensex lost 147.58 points or 0.46% to 31,661.97, while the CNX Nifty was down by 36.00 points or 0.36% to 9,916.20.

The BSE Sensex touched a high and a low of 31,727.85 and 31,586.53, respectively and there were 10 stocks on gaining side as against 20 stocks on losing side on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.17%, while Small cap index was up by 0.35%.

The top gaining sectoral indices on the BSE were Metal up by 0.67%, Basic Materials up by 0.55%, Energy up by 0.19%, Realty up by 0.16% and Consumer Discretionary Goods & Services was up by 0.09%, while Healthcare down by 1.35%, FMCG down by 1.07%, IT down by 0.64%, Capital Goods down by 0.59% and TECK was down by 0.58% were the top losing indices on BSE.

The top gainers on the Sensex were Kotak Mahindra Bank up by 0.93%, Reliance Industries up by 0.71%, Coal India up by 0.69%, NTPC up by 0.50% and Maruti Suzuki up by 0.40%. On the flip side, Sun Pharma down by 3.73%, ITC down by 2.43%, Tata Motors - DVR down by 2.26%, Lupin down by 2.05% and Axis Bank down by 1.79% were the top losers.

Meanwhile, in a bid to give a push to digital payment adoption, traders body the Confederation of All India Traders (CAIT) has suggested measures including tax benefits to consumers as well as merchants and also recommended formulation of a digital payments policy. For achieving a target of Rs 2,500 crore digital transactions till March 2018, it said that the government needs to set up a regulatory authority for digital payment systems.

Traders’ body also suggested implementation of reward scheme for merchants and consumers, faster adoption of mobile QR code-based card acceptance solutions, formation of digital payments Board and an authority to monitor RuPay. CAIT also urged the government to implement the recommendations of the Watal Committee report on digital payments at the earliest. Besides, CAIT Secretary General Praveen Khandelwal has stated that the Centre should provide tax rebates and incentives for consumers of certain types of digital payments (government receipts, petrol and education). He also said that there should also be tax rebates for merchants either in the form of sales tax.

In order to encourage universal adoption and socialisation of digital payments, Khandelwal said that the government should remove the requirement for banks to report electronic transactions and make consumers fearless to go for cashless economy. He also said that there should be no card refusal and no surcharge should be levied on digital payments as it would act as a deterrent to promote such payments. He also noted that there is a need to increase Point of Sale (PoS) terminals besides allowing non-bank finance companies to issue digital payment products. He further highlighted that today 96 percent of transactions in India are done in cash and the country has only about 25 lakh PoS terminals.

The CNX Nifty traded in a range of 9,931.55 and 9,882.55. There were 19 stocks in green as against 32 stocks in red on the index.

The top gainers on Nifty were Indiabulls Housing Finance up by 1.95%, Hindalco up by 1.69%, Coal India up by 1.28%, Ultratech Cement up by 1.27% and GAIL India up by 0.91%. On the flip side, Sun Pharma down by 3.61%, Bosch down by 3.29%, ITC down by 2.56%, Lupin down by 2.28% and Axis Bank down by 2.12% were the top losers.

European markets were trading in red; UK’s FTSE 100 decreased 45.1 points or 0.61% to 7,327.82, Germany’s DAX shed 11.63 points or 0.1% to 12,112.08 and France’s CAC was down by 11.3 points or 0.22% to 5,075.26.

Asian equity markets ended mostly lower on Wednesday as tensions between the US and North Korea persisted and investors kept an eye on Hurricane Irma, which is bearing down on the Caribbean islands and Florida, just days after Harvey disrupted refineries along the Texas coast. Also, the European Central Bank meets on Thursday and it isn't entirely clear whether the central bank will send a new policy message regarding the timing of an exit from its ultra-loose monetary policy. Japanese shares ended almost on a flat note even as the dollar edged lower against the yen to hover near a 4-1/2-month low amid the simmering North Korea tensions. Meanwhile, Chinese shares pared early losses to end little changed on expectations that Beijing will step up reform of state-owned enterprises.