Post Session: Quick Review

Indian equity benchmarks showcased a drastic performance through the day and ended the session with cut of around one and half percent. Sensex and Nifty posted one day biggest fall in 10 months. The stock market carnage dragged the Nifty below 10,000 mark, while Sensex breached the 32,000 mark. The advance decline ratio was in favour of declines with one stock advancing against every eight declining ones. Geopolitical concerns over the Korean Peninsula have remained under the spotlight as the Trump administration attempted to put more pressure on North Korea. In turn, North Korean leader Kim Jong Un said that Trump would pay dearly for his speech at the United Nations earlier this week. Rupee hit 65 level mark against the US dollar for the first time in more than five months amid geopolitical concerns and fears that the US Federal Reserve left the door open for an interest rate hike by December end. Also, there are expectations that the government’s plan for a stimulus to halt an economic slowdown may have a negative impact on the fiscal deficit.
The equity benchmarks made a gap-down opening as traders remained cautious after the Organisation for Economic Co-operation and Development (OECD) trimmed India’s growth forecast for the current financial year, citing the temporary impact of the rollout of the Goods and Services Tax (GST) and demonetization, expecting the economy to expand at a slower pace than China. OECD said India’s economy will likely grow 6.7% in FY18, lower than its estimate 7.3% in June. The Paris-based group of 35 advanced and emerging countries cut its forecast for India’s growth to 7.2% in FY19 from 7.7% estimated earlier.

Investors took note of a report that a slowdown in growth is likely to create pressure on the government to announce an economic stimulus package. But it could have an adverse impact on near-term macroeconomic stability. Besides, there could be long-term implications on growth, the way it happened with the 2008-09 fiscal stimulus package. The report added that a whopping Rs 65,000 crore stimulus could be on cards, which could mean Asia’s third largest economy may have to again take leave from its fiscal targets. Public sector bank extended the losses after credit rating agency, ICRA in its report enlightened that private sector banks have far outstripped their public sector peers when it comes to growing their loan book. Private Banks have cornered the entire share of incremental loan growth and may increase their share from 38 to 40% by FY’20. Separately, addressing bankers at an event organized by the Indian Banks’ Association, Finance Minister Arun Jaitley said stressed assets are the biggest area of concern for the banking sector.

On the global front, Asian markets closed mostly in red. S&P Global Ratings cut Hong Kong’s credit rating a day after it downgraded China for the first time since 1999, a move that reflects the strong institutional and political linkages between the special administrative region and the mainland. Japanese big manufacturers’ confidence is expected to inch higher in September to hit its highest level in decade thanks to the upbeat global economy. The European markets were trading in green ahead of this weekend’s general election in Germany, where conservative Chancellor Angela Merkel is expected to win a fourth term.

The BSE Sensex ended at 31907.24, down by 462.80 points or 1.43% after trading in a range of 31886.09 and 32342.81. There were 3 stocks advancing against 28 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index was down by 2.69%, while Small cap index lost 3.00%. (Provisional)

The top losing sectoral indices on the BSE were Realty down by 4.60%, Metal down by 3.74%, Basic Materials down by 3.47%, Capital Goods down by 3.25% and Industrials down by 2.55%, while there were no gainers on BSE. (Provisional)

The top gainers on the Sensex were Wipro up by 0.98%, Coal India up by 0.16% and Tata Motors up by 0.11%. (Provisional)

On the flip side, Tata Steel down by 4.70%, Larsen & Toubro down by 3.48%, Reliance Industries down by 3.07%, Hero MotoCorp down by 2.75% and ICICI Bank down by 2.70% were the top losers. (Provisional)

Meanwhile, credit rating agency, ICRA in its latest report has said that with ability to successfully leverage technology for deposit mobilisation, the private banks can take more space in the banking sector advances in the future. According to the report Private Banks’ advances market share may increase to 38 to 40 per cent by 2019-20 from 19.9 per cent as on March 31, 2014 and 27.5 per cent during the preceding financial year (FY17). 

The growth is considered based on the capital constraints of public sector banks and assuming an incremental market share of 80 percent for private sector banks and a credit growth of 7-9 percent for the entire banking sector during the current financial year and in 2019-20.

The report found improvement in the private sector banks’ deposits share which has increased to 23.5 percent as on June 30, 2017 from 19 percent as on June 30, 2014. ICRA further said that despite challenges like increasing competitive intensity and difficulty in growth balance due to the buoyant debt capital markets, the private sector banks have performed well and capitalised on the opportunities by delivering a credit growth at 3-year CAGR of 17.8 percent as against 2.5 percent for public sector banks and with relatively better asset quality.

The report noted that in order to grow advances with an estimate of 38-40 percent by 2019-2020, the banks need to mobilise the requisite quantum of deposits and for this, ICRA said that leveraging technology will be a key driver of growth.

The CNX Nifty ended at 9962.65, down by 159.25 points or 1.57% after trading in a range of 9952.80 and 10095.05. There were 4 stocks advancing against 47 stocks declining on the index. (Provisional)

The top gainers on Nifty were HCL Technologies up by 1.45%, Wipro up by 0.70%, Bharti Infratel up by 0.66% and Tata Motors up by 0.33%. (Provisional)

On the flip side, Hindalco down by 4.85%, Tata Steel down by 4.82%, Yes Bank down by 4.14%, Ultratech Cement down by 3.99% and Vedanta down by 3.89% were the top losers. (Provisional)

The European markets were trading in green; UK’s FTSE 100 increased 1.79 points or 0.02% to 7,265.69, Germany’s DAX increased 20.36 points or 0.16% to 12,620.39 and France’s CAC increased 17.41 points or 0.33% to 5,284.70.

Asian equity markets ended mostly lower on Friday after North Korea threatened it could consider testing a nuclear weapon in the Pacific. Investors also digested the prospect of an additional rate hike from the Fed this year. Japan’s Nikkei share average slipped from a two-year high after North Korea threatened to test a hydrogen bomb in the Pacific Ocean, ratcheting up tensions with the United States and its allies. Meanwhile, Chinese stocks ended off their day's lows amid expectations that Beijing will maintain stability in markets ahead of next month's meeting of the Chinese Communist Party's National Congress. Hong Kong stocks posted their worst decline in a month, erasing much of the week’s gains, as investors trimmed positions following S&P’s downgrade of China’s sovereign credit rating and North Korea’s nuclear threats. The US Federal Reserve’s plan to shrink its balance sheet and later raise interest rates also dented sentiment. The markets in Malaysia remained closed for the Islamic New Year.