Benchmarks erase gains in morning session

Indian equity benchmarks erased their early gains and were trading flat with negative bias in morning session on account of selling in front line blue chip counters. The sentiments were dampened after the RBI cut its growth estimate for the current fiscal on Wednesday and warned that any economic stimulus and farm debt waivers could push up fiscal deficit by 1 percentage point, potentially stoking inflation. Separately, as per foreign brokerage report the sentiment of foreign portfolio investors towards India is likely to remain weak until corporate earnings recovery sets in.  This, coupled with high equity supply, would mean that the market performance will remain subdued until the end of the year. FPIs have pulled out over Rs 24,000 crore from Indian equities since August due to disappointment over economic growth, delay in earnings recovery, expensive valuation and geopolitical tensions. Select IT stocks were under pressure as Indian IT companies are likely to report another quarter of muted results as clients in retail and banking and financial services continue to curtail their IT spends. However, IT margins will be helped by favourable currency movements. Investors took note that India’s winter crops may be at risk this year as insufficient showers in some key regions reduced dam levels. The June-September monsoon season is critical to India’s agriculture sector as it directly waters more than half of all farm land and helps fill dams that irrigate crops during winter. This year’s monsoon was below normal, with 17% of the country receiving insufficient showers.

The downside was, however, capped after the Nikkei India Services Purchasing Managers’ Index rose to 50.7 in September from August’s 47.5. India’s service sector PMI marked below the 50.0 neutral level in the previous two months due to the goods and services tax (GST) introduced in July. According to the PMI survey, greater workloads supported job creation in September, with the rate of employment growth the strongest since June 2011. Some support also came with NITI Aayog CEO Amitabh Kant’s statement that while there has been a ‘little bit of dip’ in the Indian economy, it is now bouncing back. Prime Minister Narendra Modi too has asserted that the economy is much better than critics make it out to be and that his government is totally committed to reverse the slowdown in GDP growth in recent quarters.

Traders were seen piling up position in Healthcare, Realty and Basic Materials stocks, while selling was witnessed in Telecom, Oil & Gas and PSU sector stocks. In scrip specific development, Prataap Snacks made a strong market debut as the scrip got listed at around 33% premium to its issue price of Rs 938. The Rs 482-crore initial public offer (IPO), which was sold during September 22-26, had received good response, with investors bidding for 47.39 times the issue size. The quota limit for qualified institutional buyers (QIBs) was subscribed 76.89 times, non-institutional investors (NIIs) 101.15 times and retail investors 8.48 times.

On the global front, Asian markets were trading mostly in red. Japanese stocks are forecast to scale a 21-year peak by year-end, boosted by weaker yen and market expectations Prime Minister Shinzo Abe will prevail in a snap election he called for October 22 in a boost for his broad political and economic agenda. Back home, the BSE Sensex and NSE Nifty were trading below the psychological 31,700 and 9,950 levels respectively. The market breadth on BSE was positive in the ratio of 1369:786, while 67 scrips remained unchanged.

The BSE Sensex is currently trading at 31665.45, down by 6.26 points or 0.02% after trading in a range of 31646.48 and 31772.41. There were 17 stocks advancing against 14 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.46%, while Small cap index was up by 0.58%.

The top gaining sectoral indices on the BSE were Healthcare up by 0.94%, Realty up by 0.66%, Basic Materials up by 0.39%, Auto up by 0.33% and Consumer Disc up by 0.32%, while Telecom down by 1.06%, Oil & Gas down by 0.65%, PSU down by 0.45%, Consumer Durables down by 0.45% and Energy down by 0.24% were the top losing indices on BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 1.78%, Cipla up by 0.89%, Dr. Reddy’s Lab up by 0.86%, NTPC up by 0.80% and Kotak Mahindra Bank up by 0.78%.

On the flip side, SBI down by 1.20%, Power Grid down by 0.96%, ICICI Bank down by 0.89%, Hero MotoCorp down by 0.82% and Bharti Airtel down by 0.66% were the top losers.

Meanwhile, the Reserve Bank of India (RBI) will review the foreign portfolio investment norms and come out with a new set of regulations, to be effective next April. RBI in a statement said that the new norms will facilitate the process of investment and hedging by Foreign Portfolio Investors (FPIs), keeping in view the macro-prudential parameters.

The central bank in its statement on developmental and regulatory policies, noted that the regulatory regime for FPI debt investments in India is a part of the larger framework for capital account management and said this framework has evolved over the years, influenced by capital flows and evolving macroeconomic conditions.

As per the RBI’s indication the limit on foreign ownership of bonds may be increased next fiscal, pointing to a likely decline in yields should the enhanced allocation find sufficient buyers, as investment caps in sovereign, state and corporate bonds are nearly exhausted because of the high real interest rate.

RBI said that regulatory changes to be finalised in consultation with the Government of India and the Securities Exchange Board of India (SEBI) will be effective from April 2018 and also decided to broaden non-resident centralised treasuries of multinational companies to hedge the rupee (INR) risk on current account transactions of their Indian subsidiaries, which is expected to facilitate internationalisation of the rupee by encouraging rupee invoicing of trade transactions while also encouraging non-residents to hedge INR risks onshore.

The CNX Nifty is currently trading at 9914.25, down by 0.65 points or 0.01% after trading in a range of 9904.65 and 9945.95. There were 24 stocks advancing against 26 stocks declining on the index.

The top gainers on Nifty were Aurobindo Pharma up by 3.10%, Yes Bank up by 2.47%, Mahindra & Mahindra up by 1.77%, HCL Technologies up by 1.38% and Cipla up by 0.93%.

On the flip side, Bharti Infratel down by 2.71%, BPCL down by 1.57%, Indian Oil Corporation down by 1.52%, HPCL down by 1.46% and SBI down by 1.07% were the top losers.

The Asian markets were trading mostly in red; Jakarta Composite decreased 35.21 points or 0.59% to 5,916.26, FTSE Bursa Malaysia KLCI decreased 3.35 points or 0.19% to 1,758.49 and Nikkei 225 decreased 1.2 points or 0.01% to 20,625.46.

On the other hand, Taiwan Weighted increased 48.54 points or 0.46% to 10,517.89.

The markets in South Korea, China and Hong Kong are closed on account of National Holiday.