Benchmarks end slightly in red ahead of Fed meet

Tuesday turned out to be a choppy day of trade for Indian equity benchmarks, with frontline gauges ending slightly in red, as traders remained on sidelines ahead of the US Federal Reserve and Bank of Japan’s meetings later this week. After a cautious start, frontline gauges traded near neutral lines swinging between green and red for most part of the day. Investors stayed away from picking any risky assets 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 analyse the economic situation with Jaitley and secretaries of the finance ministry and explore options to stimulate the economy. Some concern also crept in the market on report that the Centre could be forced to cut infrastructure spending, as GST glitches have hit revenue. Lower-than-expected tax collections and sluggish growth have upset the government`s budget calculations.

However, losses remained capped as traders took some solace with Moody’s latest report that India is likely see increased foreign direct investment (FDI) inflows on the back of reforms such as introduction of the goods and services tax and the bankruptcy code. Some support also came with Union Minister for Road Transport, Highways and Shipping Nitin Gadkari’s statement that the government has managed to save bank loans worth Rs 300,000 crore to the road sector from turning into non-performing assets (NPAs).

On the global front, European markets were trading mixed and Asian shares also wavered, hobbled by uncertainty as traders waited on a Fed meeting for clues on US monetary policy. The Fed is expected to hold interest rates steady, but investors will be looking for clues on the expected pace of further tightening later this year and next. The market is pricing in an approximately even chance of a hike in December.

Back home, 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.

On the sectoral front, Oil sector stocks remained buzzing as the Oil Minister Dharmendra Pradhan said that he has requested the Ministry of Finance to bring petroleum products under the ambit of Goods and Services Tax (GST) in the interest of consumers. Shares of oil marketing companies (OMCs) i.e. Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) remained on buyers’ radar after credit rating agency Moody’s in its report enlightened that higher sales, improved margins and lower dividend payments will improve credit metrics of OMCs, which weakened in the previous year.

Finally, the BSE Sensex slipped 21.39 points or 0.07% to 32,402.37, while the CNX Nifty was down by 5.55 points or 0.05% to 10147.55.

The BSE Sensex touched a high and a low of 32,524.11 and 32,358.63, respectively and there were 15 stocks on gaining side as against 16 stocks on losing side on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.13%, while Small cap index was up by 0.36%.

The top gaining sectoral indices on the BSE were Utilities up by 1.19%, Oil & Gas up by 1.15%, Realty up by 0.79%, Telecom up by 0.65% and Auto was up by 0.61%, while Metal down by 0.58%, Capital Goods down by 0.39%, Healthcare down by 0.34%, Consumer Durables down by 0.32% and Energy was down by 0.06% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 4.58%, Tata Motors - DVR up by 3.22%, Kotak Mahindra Bank up by 1.63%, Cipla up by 0.61% and ICICI Bank up by 0.60%. On the flip side, Coal India down by 2.49%, HDFC down by 1.02%, Larsen & Toubro down by 0.92%, SBI down by 0.87% and Sun Pharma down by 0.84% were the top losers.

Meanwhile, in order to promote the telecom equipment manufacturing industry in India, Telecom Regulatory Authority of India (TRAI) has started second phase of consultation process. The regulator has said that the consultation paper will discuss the controversial issue of standard essential patents and grant of their licence for use on the basis of fair, reasonable and on-discriminatory (FRAND) terms. It also said that the issue has been a bone of contention between domestic mobile phone companies and European multi-nationals. It had floated a consultation paper titled ‘Encouraging Telecom Manufacturing in India’ on December 28, 2010 and issued recommendations on the same in April 2011.

TRAI has said that the present consultation paper has been aimed to realistically assess India’s true potential in equipment manufacturing with the aim to arrive at recommendations that would enable Indian telecom industry to transition from an import-dependent industry to a global hub for manufacturing. It pointed out that while the Mobile handset manufacturing industry has shown good progress in the past five years, the telecom equipment manufacturing industry has not been able to match the performance of mobile handset manufacturing industry. Previously, it had come out with its recommendations in 2011 on telecom equipment manufacturing policy.

The regulator has said that today, the services sector commands nearly 60 percent of India's gross domestic product (GDP) whereas the share of manufacturing, a major contributor to the infrastructure domain, has been stagnating at around 16 percent on average since 1990. Further, it cited a report which showed that over 90 percent of the demand of telecom equipment in India was met through imports in 2013-14, and was the same even now.

The CNX Nifty traded in a range of 10,178.95 and 10,129.95. There were 23 stocks in green as against 28 stocks in red on the index.

The top gainers on Nifty were GAIL India up by 5.43%, Tata Motors up by 4.77%, Tata Motors - DVR up by 3.36%, Bharti Infratel up by 2.06% and Kotak Mahindra Bank up by 1.91%. On the flip side, Coal India down by 2.38%, Aurobindo Pharma down by 2.04%, Sun Pharma down by 1.26%, Hindalco down by 1.20% and SBI down by 1.02% were the top losers.

European markets were trading mixed; France’s CAC gained 5.33 points or 0.1% to 5,234.65 and UK’s FTSE 100 increased 17.06 points or 0.24% to 7,270.34, while Germany’s DAX was down by 6.91 points or 0.06% to 12,552.48.

Asian equity markets ended mostly lower on Tuesday, even as Japanese shares surged as traders returned to their desks after a long holiday weekend. Underlying sentiments remained cautious as investors awaited clues from the Fed and BoJ meetings. At a two-day policy meeting beginning later today, the Federal Reserve is expected to announce details on its trillions balance sheet unwinding. The Bank of Japan holds its regular policy meeting on Thursday with many expecting no change in its monetary policy stance. Chinese stocks fell slightly as liquidity worries resurfaced before the National Day holiday. Japanese shares hit its highest close in more than two years as investors drew confidence from a weakening yen and gains on Wall Street, while hopes of a snap election underpinned the market.