Benchmarks extend losses in morning session

Indian equity benchmarks extended their losses in the morning session to trade near the lowest point of the day on account of selling in frontline blue chip counters. Investors are eyeing cues from Federal Reserve’s monetary policy meeting that will begin tonight. The rupee opened lower against dollar on account of buying of American currency by banks and importers. Foreign Portfolio Investors stood net buyers in domestic equity markets on Monday and bought shares worth Rs 1,117.78 crore with gross purchases and gross sales of Rs 11,782.59 crore and Rs 10,664.81 crore, respectively. Traders also remained on sidelines ahead of meeting of Prime Minister Narendra Modi with Finance Minister Arun Jaitley and other top officials to take stock of the situation and the discussion for remedial measures to bolster growth. PM will analyze the economic situation with Jaitley and secretaries of the finance ministry and explore options to stimulate the economy. Some pessimism also crept in on reports that India could be forced to cut spending on key infrastructure such as railways and highways as lower-than-expected tax collections and sluggish growth have upset the government’s budget calculations. Tax receipts were about $7.8 billion in July - a little over half the monthly target - mostly because millions of firms failed to comply with the new Goods and Services Tax (GST) system that harmonizes all state and federal sales taxes but is still a work in progress. The big worry is that economic growth, which slipped to a three-year low in the last quarter, could take a further hit if the public spending that largely underpinned expansion were to be slashed.

Separately, a foreign brokerage report highlighted that India’s current account deficit is expected to widen to 1.5% of GDP in 2017, from 0.6% in 2016, but net capital flows are expected to more than fund this deficit. The report added that the wider current account deficit in the second quarter and still- elevated trade deficit so far in July-August suggest that the current account deficit is set to widen sharply this year. Meanwhile, former Prime Minister Manmohan Singh warned of demonetization and hasty implementation of GST adversely impacting GDP growth. Singh, who had previously cautioned against note ban shaving off 2% of GDP, said demonetization of 86% of the currency in circulation and the hasty implementation of the GST have impacted informal and small scale sectors, which account of about 40% of the $2.5-trillion economy.

Traders were seen piling up position in Oil & Gas, Auto and Industrials stocks, while selling was witnessed in Capital Goods, Power and Metal sector stocks. In scrip specific development, Biocon was trading in green as the company’s Active Pharmaceutical Ingredients (API) manufacturing facility in Vishakhapatnam, Andhra Pradesh has completed the US Food and Drug Administration (USFDA) inspection and there were no observations (483) during the inspection. The inspection was carried out between September 11, 2017 to September 15, 2017.

On the global front, Asian markets were trading mostly in red, amid traders awaiting a Federal Reserve meeting for clues on US monetary policy. China’s new home prices rose in August at the slowest pace in seven months and fell or leveled off in more cities as government cooling measures dampened speculation, though there were no signs of a sharper correction that could damage the economy. Back home, the BSE Sensex and NSE Nifty were trading below the psychological 32,400 and 10,150 levels respectively. The market breadth on BSE was negative in the ratio of 1037:1118, while 125 scrips remained unchanged.

The BSE Sensex is currently trading at 32370.05, down by 53.71 points or 0.17% after trading in a range of 32358.63 and 32524.11. There were 9 stocks advancing against 22 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was down by 0.01%, while Small cap index was up by 0.03%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 0.64%, Auto up by 0.48%, Industrials up by 0.22%, Utilities up by 0.21% and Realty up by 0.17%, while Capital Goods down by 0.56%, Power down by 0.44%, Metal down by 0.38%, Bankex down by 0.23% and Basic Materials down by 0.18% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 4.29%, Tata Motors - DVR up by 1.99%, Wipro up by 0.42%, HDFC Bank up by 0.32% and Kotak Mahindra Bank up by 0.29%.

On the flip side, Coal India down by 1.76%, Larsen & Toubro down by 1.09%, Axis Bank down by 1.00%, Dr. Reddy’s Lab down by 0.96% and ITC down by 0.86% were the top losers.

Meanwhile, amid the worries of missing the fiscal deficit target, there are reports that the Centre could be forced to cut infrastructure spending as GST glitches hit revenue. Key infrastructure such as railways and highways could see a spending cut as lower-than-expected tax collections and sluggish growth have upset the government`s budget calculations. Without spending cuts, the fiscal deficit could slip to 3.5 percent of GDP, from the target of 3.2 percent that government has set for 2017-18.

Tax receipts were about $ 7.8 billion in July - a little over half the monthly target - mostly because millions of firms failed to comply with the new Goods and Services Tax (GST) system that harmonises all state and central sales taxes.  The revenue shortfall could be at least Rs 800 billion ($12.5 billion) if the current trend continues until the end of the year. The receipts from individual and corporate income tax may slightly overshoot the target of Rs 9.8 trillion ($ 152.8 billion) for the whole year, partly due to a crackdown on tax evaders.

Though, in coming months, GST collections may pick up but the major fall-out to the lower spending in infrastructure could be further hit on economic growth, which slipped to a three-year low in the last quarter to 5.7 percent from 7.9 percent a year earlier, and the decline has been partially said to be the contribution of the introduction of the GST.

The CNX Nifty is currently trading at 10132.00, down by 21.10 points or 0.21% after trading in a range of 10130.00 and 10178.95. There were 15 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were Tata Motors up by 4.37%, GAIL India up by 3.51%, Tata Motors - DVR up by 1.78%, BPCL up by 1.15% and Indian Oil Corporation up by 0.82%.

On the flip side, Coal India down by 1.46%, Larsen & Toubro down by 1.37%, Bank of Baroda down by 1.31%, Axis Bank down by 1.17% and Hindalco down by 1.12% were the top losers.

The Asian markets were trading mostly in red; Taiwan Weighted decreased 62.54 points or 0.59% to 10,569.03, Hang Seng decreased 36.06 points or 0.13% to 28,123.71, Shanghai Composite decreased 6.24 points or 0.19% to 3,356.62, KOSPI Index decreased 4.04 points or 0.17% to 2,414.17, Jakarta Composite decreased 3.66 points or 0.06% to 5,880.95 and FTSE Bursa Malaysia KLCI decreased 2.57 points or 0.14% to 1,781.09.

On the other hand, Nikkei 225 increased 344.29 points or 1.73% to 20,253.79.