Late hour selloff drag benchmarks near neutral lines

Erasing most of their early gains, Indian equity benchmarks ended flat on Friday, as traders opted to book profit at higher levels in last leg of trade ahead of long weekend. Traders also remained on sidelines ahead of some economic data slated to be released in next week. Though, markets started off on optimistic note as sentiments remained up-beat with statement of Niti Aayog member Bibek Debroy, who is also Chairman of the Prime Minister’s Economic Advisory Council that while there may be some minor problems with the economy, it was nothing to be worried about. Domestic bourses extended their gains to reclaim their crucial 31,500 (Sensex) and 9,850 (Nifty) levels, as traders took some encouragement with report that the government will stick to its borrowing and fiscal deficit targets for this fiscal, indicating that it has no plans to relax spending goals to prop up growth as of now. The finance ministry on Thursday released borrowing calendar for the second half of FY18, indicating a gross borrowing of Rs 2.08 lakh crore, which is in line with the target laid out in the Budget. Reports that the Goods and Services Tax (GST) collections in the first two months have met the target and going forward the revenue will see further surge, too aided sentiments.

However, benchmarks took U-turn from high point of the day as market participants booked almost all of their early gains to end flat. Sentiments turned pessimistic on report that Securities and Exchange Board of India (SEBI) continued to hit participatory notes (P-notes) investments in month of August too. The share of foreign portfolio investments (FPI) in domestic capital markets through P-notes dropped to seven and a half year low of Rs 1.25 lakh crore at August- end from Rs 1.35 lakh crore at the end of July. Some cautiousness also crept with credit rating agency Icra’s report that Reserve Bank of India is likely to leave policy rates unchanged in the forthcoming policy review next month as it expects a spike in retail inflation going ahead. Meanwhile, the Centre plans to borrow Rs 2.08 lakh crore from the market in the second half of 2017-18, reiterating the government’s commitment to meet the fiscal deficit target of 3.2 per cent of the gross domestic product (GDP).

On the global front, European counters trading mostly in green as investors focus on data releases and monitor US plans to overhaul the tax system. Consumer price inflation (CPI) in the euro zone remained stable in September, missing forecasts for a slight increase, while the core reading eased unexpectedly. Asian markets ended mostly higher on Friday, though gains remained capped amid expectations of a rate hike by the US Federal Reserve in December.

Back home, auto stocks remained in top gear ahead of their September month sales data slated to be released on start of next week. Select cement stocks remained under pressure on ICRA report that cement demand growth is expected to be around 3.5%-4% during the current financial year, a downward revision against the earlier estimate of 5% as there has been a delay in the revival of cement demand during the first half of FY2018. The export oriented stocks remained buzzing as the Industry bodies and exporters raised their concerns related to the Goods and Services Tax (GST), including timely refund of duties, with Finance Minister Arun Jaitley at a meeting.

Finally, the BSE Sensex rose 1.24 points to 31,283.72, while the CNX Nifty was up by 19.65 points or 0.20% to 9,788.60.

The BSE Sensex touched a high and a low of 31,523.87 and 31,243.71, respectively and there were 21 stocks on gaining side as against 10 stocks on losing side on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.83%, while Small cap index was up by 1.09%.

The top gaining sectoral indices on the BSE were Realty up by 2.42%, Utilities up by 1.50%, Metal up by 1.37%, Telecom up by 1.25% and Consumer Durables was up by 1.24%, while FMCG down by 0.66%, IT down by 0.28% and TECK was down by 0.01% were the few losing indices on BSE.

The top gainers on the Sensex were Bajaj Auto up by 2.34%, Bharti Airtel up by 1.63%, Adani Ports & SEZ up by 1.51%, Mahindra & Mahindra up by 1.49% and Coal India up by 1.35%. On the flip side, Hindustan Unilever down by 2.37%, Wipro down by 1.71%, TCS down by 1.67%, Dr. Reddy’s Lab down by 1.62% and ITC down by 1.11% were the top losers.

Meanwhile, the rating agency, CRISIL in its latest report has said that revival prospects of stressed coal-based power plants with a total capacity of about 21 GW are bleak for at least next few years. It also pointed out that their assets sale as well as consolidation will be slow despite various schemes being undertaken by the government.

The rating agency, in addition, has stated that a large number of plants adding up to 35 GW capacity are smarting due to issues such as lack of fuel supply agreement or coal linkage, unviable tariffs due to increase in cost of imported coal, project cost overrun due to delay in commissioning, and high receivables due to weak financial condition of procurers (state power distribution companies or discoms). It also pointed out that while the government’s SHAKTI and UDAY schemes are expected to alleviate stress related to fuel supply and delayed payments, finding offtake will be a huge challenge.

The report further said that electricity demand is likely to remain tepid at around 6 percent over next five years due to reducing electricity intensity in GDP, rising efficiency and falling technical losses. Besides, it noted that getting discoms to sign new long-term power purchase agreements (PPAs) that ensure stable offtake is going to be challenging. Adequate quantum of power tied-up under already signed PPAs, expected tepid power demand growth, likely migration of high tariff paying industrial and commercial consumers to open access and availability of low-priced power in short-term market would imply few new PPAs in the near term.

The CNX Nifty traded in a range of 9,775.35 and 9,854.00. There were 31 stocks in green as against 18 stocks in red, while one stock remained unchanged on the index.

The top gainers on Nifty were GAIL India up by 5.70%, Eicher Motors up by 3.42%, HPCL up by 2.34%, Aurobindo Pharma up by 2.72% and BPCL up by 2.63%. On the flip side, Hindustan Unilever down by 2.76%, Wipro down by 1.99%, Dr. Reddy’s Lab down by 1.89%, TCS down by 1.57% and ITC down by 1.40% were the top losers.

European markets were trading in green; France’s CAC increased 11.72 points or 0.22% to 5,305.49, Germany’s DAX jumped 49.24 points or 0.39% to 12,753.89 and UK’s FTSE 100 was up by 50.54 points or 0.69% to 7,373.36.

Asian equity markets ended mostly higher on Friday, although overall gains remained muted amid expectations of a rate hike by the US Federal Reserve in December. Caution ahead of upcoming holidays in China and South Korea next week also served to keep a lid on potential gains. The dollar rally paused and gold held near six-week lows on improved risk appetite following the tax reform speech from US President Donald Trump, while oil prices rose after declining around 1 percent overnight. Chinese shares ended higher on hopes that next month's twice-a-decade Communist Party Congress will likely make state-owned enterprise reform a priority. Meanwhile, Japanese shares ended on a flat note even as a slew of data offered a mostly positive picture of the economy. Industrial output bounced back in August after falling in July, core inflation accelerated amid continued tightness in the labor market and household spending rose while growth in the retail sector slowed in the month.