Benchmarks clobber out of shape on penultimate day of F&O expiry

Wednesday turned out to be a daunting day of trade for Indian equity benchmarks where frontline gauges clobbered out of shape, tumbling below their crucial 31,200 (Sensex) and 9,750 (Nifty) levels, as traders opted to remain on sidelines on penultimate day of September F&O expiry. Markets failed to take any advantage of positive start and soon entered into negative terrain. Afterwards, market never looked confident of recovering and gradually extended its losses till end to close near intraday lows, as sentiments remained dampened on report that collections under goods and services tax declined to Rs 90,669 crore for August from a revised figure of Rs 94,063 crore for July. Of the tax collected, Rs 14,402 crore have come in as Central GST, Rs 21,067 crore as State GST and Rs 47,377 crore as Integrated GST, which is levied on inter-state movement of goods and imports and Rs 7,823 crore as compensation cess. Some cautiousness also crept with report that the Asian Development Bank (ADB) expecting the RBI to go for another round of rate cut in the latter part of 2017-18 in view of sluggish economic activities but does not see possibility of any major fiscal stimulus.

Markets extended losses in last leg of trade on report that India slipped one place to rank 40th in Global Competitiveness Index out of 137 countries surveyed, while Switzerland, the US and Singapore were ranked as the top three countries. Meanwhile, the Indian Army has conducted another surgical strike at Naga Insurgent Camp, Myanmar border. There was no casualty to Indian forces during surgical strike but there are heavy casualties at Naga Insurgent camp in Myanmar border. Traders overlooked Niti Aayog Vice Chairman Rajiv Kumar’s statement that the extra fiscal stimulus will help the economy do well and there is no harm in relaxing the fiscal deficit target to allow for more capital expenditure in order to lift the slowing Indian economy.

On the global front, European markets were trading in green on growing expectations of another rate hike in the United States before the year-end. British retail sales growth unexpectedly surged to a two-year high during the first part of this month, industry data showed, potentially giving the Bank of England confidence to raise interest rates as soon as November. Asian markets ended mixed, as the dollar retained modest gains after Federal Reserve Chair Janet Yellen boosted expectations for an interest-rate rise in December.

Back home, ICICI Lombard General Insurance Company, which made a tepid start, managed to went home with the gain of over 3% on the bourses. On the sectoral front, telecom stocks ended in red after the telecom regulator rejected a request by operators for an additional six months to implement a new penalty regime for call drops, which is set to kick in from October 1. In new rules issued on August 18, TRAI set penalties of up to Rs 10 lakh per circle in a quarter on operators failing to meet voice quality benchmarks. Pharma stocks edged lower after India Ratings and Research, a rating firm of Fitch Group highlighted that Indian pharma exporters’ road to recovery might still take time as weak economic and political conditions in Africa and currency volatility in Latin America (LATAM) are likely to weigh on the consumption of pharmaceutical formulations. This fluctuation is expected to put pressure on the medium term growth prospects for India’s exporters.

Finally, the BSE Sensex declined 439.95 points or 1.39% to 31,159.81, while the CNX Nifty was down by 135.75 points or 1.38% to 9,735.75.

The BSE Sensex touched a high and a low of 31,797.46 and 31,100.80, respectively and there were 2 stocks on gaining side as against 29 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index lost 1.99%, while Small cap index was down by 2.10%.

The top losing sectoral indices on the BSE were Realty down by 2.66%, Healthcare down by 2.55%, Industrials down by 2.19%, Capital Goods down by 2.16% and Power was down by 2.15%, while there were no gainers on the BSE sectoral front.

The few top gainers on the Sensex were TCS up by 0.62%, Coal India up by 0.25% and Bajaj Auto up by 0.13%. On the flip side, Adani Ports & SEZ down by 4.85%, SBI down by 2.89%, Reliance Industries down by 2.51%, Dr. Reddy’s Lab down by 2.50% and Sun Pharma down by 2.46% were the top losers.

Meanwhile, the domestic rating agency, ICRA in its latest report has said that petrol and diesel prices have jumped 8 percent since dynamic daily pricing for these fuels was introduced in mid-June. It also noted that the sharp increase in the price of petrol and diesel can be attributed to a 14 percent increase in international fuel prices. Apart from this, it also noted that the increase was also due to a 40 percent rise in dealer's commission to Rs 3.57 per litre from Rs 2.55 earlier and a moderate increase in marketing margins.

The report showed that the retail selling price of petrol in Delhi increased by 7.9 percent from Rs 65.23 per litre as on June 17 to Rs 70.41. However, it pointed out that sustained rise in fuel prices in absence of moderation in taxes (excise duty and VAT), could impact the growth in demand, besides leading to inflationary pressures in the economy. It further said that due to the earlier practice of fortnightly revisions, the price changes were at times sharp which would now be gradual, leading to lesser resistance from the public and lower risk of political intervention.

The rating agency further said that as dealers and some consumers were able to predict price movements, they had been resorting to bulk purchase or draw down from the inventory towards the end of the fortnight, depending on the direction of prices, resulting in some lumpiness in sales and opportunity loss on the marketing margins for oil companies. It also said that with greater autonomy and lower political intervention, oil firms could over time expand marketing margins, albeit increasing competition from private retailers would eventually moderate that. Moreover, it noted that any intervention by the government, which limits the freedom of oil marketing companies (OMCs) in price revisions, in light of rising fuel prices could be a credit negative.

The CNX Nifty traded in a range of 9,921.05 and 9,714.40. There were 5 stocks in green as against 46 stocks in red on the index.

The top gainers on Nifty were Bharti Infratel up by 1.90%, TCS up by 0.83%, Tech Mahindra up by 0.59%, Ambuja Cement up by 0.17% and GAIL India up by 0.05%. On the flip side, Adani Ports & SEZ down by 4.75%, SBI down by 3.10%, Bank of Baroda down by 3.05%, Sun Pharma down by 2.96% and Ultratech Cement down by 2.83% were the top losers.

European markets were trading in green; UK’s FTSE 100 increased 7.19 points or 0.1% to 7,292.93, France’s CAC gained 8.52 points or 0.16% to 5,277.28 and Germany’s DAX was up by 57.21 points or 0.45% to 12,662.41.

The Asian markets made a mixed closing on Wednesday; some indices in the region remained under pressure since morning after US Federal Reserve Chair Janet Yellen boosted expectations for an interest-rate rise in December and as President Donald Trump prepares to lay out his tax-cut plan. Japanese shares hit 1-1/2 week lows as many heavyweight stocks went ex-dividend, offsetting investor optimism over a declining yen. Though, China's Shanghai Composite index closed marginally higher after official data showed China's industrial profit growth accelerated sharply in August. Industrial profits grew at a faster pace of 24.0 percent year-over-year in August, following a 16.5 percent spike in July. Hong Kong's Hang Seng index too ended up by nearly half a percent for the day.