Post Session: Quick Review

Indian equity benchmarks traded in green for most part of the day but pared all their gains in last hour of trade to end the session in red, with a cut of more than four tenth of a percent ahead of key economic data of August IIP and September CPI, which are scheduled to be released tomorrow. The fall in the second half of the trade pulled the Nifty below 10,000 mark. The market breath was in favour of declines with 2 stocks advancing, while 5 stocks were declining on the bourses. The benchmarks made an optimistic start and traded with traction in early deals as sentiments remained upbeat with OPEC’s statement that India is experiencing some of the greatest structural changes as bold new reforms like note ban and GST have put the country firmly on a sustainable growth path. Separately, former RBI Governor C Rangarajan said that he expects that the economy would grow at 6.5% for the year 2017-18. He also said the job opportunities and economic growth of the country are inter-related. Some support also came on report that Private Equity/Venture Capital (PE/VC) investments touched a record high of $8.7 billion in the September quarter, a sharp increase over the last year, largely driven by big-ticket transactions. The surge was driven by large transactions, with nine $200-million-plus deals in the said quarter.

Investors took note of the International Monetary Fund (IMF) report that the downgrade in India’s growth for the current fiscal by 0.5% to 6.7% is a blip in a much positive long-term picture of its economy. IMF appeared to be confident about the future of Indian economy. It enlightened that in general, the state of India’s economy is quite good. The government has energetically perused structural reforms, including the GST which will have a payoff longer term. It added that the country has benefited from the improved terms of trade. It has also benefited from return of normal monsoonal rain season given the large share of agriculture.

However, selling crept in on report that US President Donald Trump discussed a ‘range of options’ with his top military advisors to respond to North Korea’s aggression and prevent it from threatening the US and its allies. North Korea has fired 22 missiles during 15 tests since February, drawing a sharp reaction from the US and its allies. Separately, India Ratings & Research reported that the much awaited recovery in corporate capital expenditure in India has been delayed further and is now expected to happen only in the fiscal year ended 2021 two years later than earlier thought as highly leveraged stressed companies will drag down investment recovery.

On the global front, Asian markets closed mixed. Japan’s core machinery orders rose for a second straight month in August, handily beating market expectations, signaling a pickup in capital expenditure that should encourage Prime Minister Shinzo Abe ahead of a general election this month. The European markets were trading mostly in red. The German government will raise its 2017 growth forecast for Europe’s biggest economy to 2.0 percent, a sharp increase from its earlier estimate of 1.5 percent and the strongest rate since 2011.

Back home, Dolphin Offshore Enterprises (India), Alphageo (India) and Duke Offshore closed in green after the government said that import of oil drilling rigs has been exempted from the Goods and Services Tax (GST) levy to give a boost to domestic exploration and production. Nearly all deep-sea drilling rigs are imported while a bulk of ones used in shallow waters to drill wells to probe and produce oil and gas are also of foreign origin.

The BSE Sensex ended at 31783.19, down by 141.22 points or 0.44% after trading in a range of 31769.40 and 32098.46. There were 9 stocks advancing against 22 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index was down by 0.92%, while Small cap index was down by 1.16%. (Provisional)

The top gaining sectoral indices on the BSE were Telecom up by 3.34%, TECK up by 0.82%, Oil & Gas up by 0.82%, IT up by 0.40% and Energy up by 0.04%, while Realty down by 2.40%, Metal down by 1.46%, Industrials down by 1.16%, Bankex down by 1.06% and Basic Materials down by 1.06% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Bharti Airtel up by 5.46%, TCS up by 1.85%, Wipro up by 1.57%, Mahindra & Mahindra up by 0.94% and Hindustan Unilever up by 0.73%. (Provisional)

On the flip side, SBI down by 2.16%, Tata Motors down by 1.98%, Tata Motors - DVR down by 1.47%, Dr. Reddy’s Lab down by 1.46% and Lupin down by 1.38% were the top losers. (Provisional)

Meanwhile, amid weak consumption demand, global overcapacity and working capital disruptions due to the goods and services tax (GST), credit rating agency, India Ratings and Research’s (Ind-Ra) sees muted private capex conditions to continue for two more financial years. In its latest report it raised concerns over the capital expenditure growth and said that the corporate capex growth would stay muted over FY18-FY20. It expects capex to grow at a compounded annual growth rate of just 5-8 per cent or by Rs 1 trillion over FY18-FY20, which also will mainly be in the form of maintanence capex.

The Fitch group company further said that any meaningful capex recovery will happen only after FY20 and will be led by the private sector. As per its report, corporates are likely to show an unwillingness to invest in long-term projects due to muted demand and significant leverage, despite a low interest rate environment. Further, it noted that out of the top 200 asset heavy corporates, only 125 non-stressed corporates will spend on maintenance, while the remaining 75 stressed corporates may not even be in a position to incur maintenance capex which may impact on the investment recovery. Besides, it said that sectors like oil and gas, auto and telecom will be the main drivers for marginal growth over FY18-FY20.

The rating agency further pointed that though the Insolvency and Bankruptcy Code is likely to streamline debt resolution through debt reduction options for stressed corporates, the low capacity utilization of 40%-50% of stressed corporates could delay the overall recovery in investment, as these stressed corporates may pull-back investments of the non-stressed corporates.

The CNX Nifty ended at 9972.30, down by 44.65 points or 0.45% after trading in a range of 9955.80 and 10067.25. There were 15 stocks advancing against 35 stocks declining on the index. (Provisional)

The top gainers on Nifty were Bharti Airtel up by 5.56%, HPCL up by 3.92%, Bharti Infratel up by 2.78%, Indian Oil Corporation up by 1.90% and TCS up by 1.68%. (Provisional)

On the flip side, Yes Bank down by 2.74%, Vedanta down by 2.35%, SBI down by 2.12%, Tata Motors down by 1.98% and Indiabulls Housing down by 1.79% were the top losers. (Provisional)

The European markets were trading mostly in red; UK’s FTSE 100 decreased 7.95 points or 0.11% to 7,530.32, France’s CAC decreased 9.44 points or 0.18% to 5,354.21, while Germany’s DAX increased 3.55 points or 0.03% to 12,952.80.

Asian equity markets made a mixed closing on Wednesday as upward momentum from a record Wall Street close faded and investors grew cautious ahead of the release of the latest Fed meeting minutes and a key Chinese communist party meeting next week. Meanwhile, higher commodity prices and better-than-expected data from Japan and Australia boosted investor optimism about global growth. Traders also heaved a sigh of relief after Catalan leader Carles Puigdemont refrained from making a formal declaration of the region's independence on Tuesday. Japanese shares closed at their highest level in 21 years, with exporters and defensive stocks leading the surge after data showed Japan's core machinery orders rose for a second straight month in August. Further, Chinese shares ended higher, helped by a jump in defensive consumer staples such as big liquor producers, while resources shares curbed gains. China is on track to meeting its growth target of around 6.5 percent this year, and could well exceed it, the head of the Statistics Bureau said on Tuesday.