Benchmarks make cautious start on geopolitical concern

Indian equity benchmarks have made a cautious start and are trading slightly in red in early deals on Tuesday, as traders opted to book some of their profit after three days of continuous rally. Also, sentiments remained downbeat on geopolitical tension after North Korea's deputy U.N. ambassador warned a nuclear war may break out any moment. However, losses remained capped with statement of NITI Aayog Vice-Chairman Rajiv Kumar, who has pitched for fiscal stimulus to boost growth with a rider that additional expenditure should be used only for increasing productivity and capital expenditure. He said that faced with slowing economic growth, the industry has been clamouring for a stimulus package from the government. Some solace also came with the International Monetary Fund suggesting India to consider setting up an independent fiscal council, saying this institution has contributed to better outcomes in the countries where it has been introduced.

On the global front, Asian markets exhibiting mixed trend at this point of time with some indices trading marginally in red in early deals, as concerns about North Korea re-emerged, while the Japanese market was up on speculation that the next head of the Federal Reserve will be more hawkish. The US markets extended their gains in last session and with the continued upward move.

Back home, pharma stocks edged higher despite proposed amendment to the four-year-old Drug Price Control Order (DPCO), which aims to bring non-scheduled drugs under price control by changing the price setting method. Meanwhile, the market breadth indicating the overall health of the market was strong, with 1,052 shares gaining and 868 shares declining, while a total of 69 shares were unchanged.

The BSE Sensex is currently trading at 32607.72, down by 25.92 points or 0.08% after trading in a range of 32565.32 and 32659.32. There were 12 stocks advancing against 17 stocks declining on the index, 2 stocks remained unchanged.

The broader indices were trading in green; the BSE Mid cap index gained 0.38%, while Small cap index was up by 0.27%.

The top gaining sectoral indices on the BSE were Telecom up by 0.72%, Oil & Gas up by 0.56%, Energy up by 0.37%, Capital Goods up by 0.26% and PSU up by 0.23%, while Realty down by 0.14%, Metal down by 0.13%, Power down by 0.12%, FMCG down by 0.11% and Auto down by 0.04% were the top losing indices on BSE.

The top gainers on the Sensex were Asian Paints up by 1.26%, Bharti Airtel up by 1.19%, Sun Pharma up by 0.78%, Axis Bank up by 0.77% and Bajaj Auto up by 0.69%. On the flip side, NTPC down by 1.00%, ONGC down by 0.90%, Tata Motors down by 0.87%, Tata Motors - DVR down by 0.82% and Infosys down by 0.72% were the top losers.

Meanwhile, to strengthen the fiscal responsibility frameworks, the International Monetary Fund (IMF) has suggested India to consider setting up an independent fiscal council, as introduction of this institution contributed to better outcomes in the countries where it has been introduced. Director of IMF's Fiscal Affairs Department, Vitor Gaspar said that India is engaging in very gradual fiscal consolidation which they regard as a welcome move. He added that India has accepted a public debt anchor at 60% of Gross Domestic Product (GDP), it is appropriate and that will help India to establish its public debt as a safe asset.

With hope further progress can be made, Gaspar said India could further strengthen its fiscal institutions both at the level of the union and at the level of states. He added that this is because the IMF has seen from the experience in other nations that this helps both in terms of transparency and accountability towards the general public, and also in terms of the quality of the policy debate in the country itself.

Noting that there have been some issues that have affected negatively the economic growth in the short run, he said that from a medium to long term perspective the prospects for the Indian economy are very good. Observing that growth and development are long run processes, he said that it is definitely worthwhile to promote structural reforms that will make growth stronger, more inclusive, more robust and resilient. He added that initiatives like GST, demonetisation, digitisation of public administration, proper targeting of income support and work support programs, are very positive for inclusion and growth.

Terming introduction of Goods and Services Tax (GST) as of macroeconomic significance, Gaspar said this is a major change. He also said that GST promises to create a single market in India, to integrate India much further and therefore, from a medium to long term perspective, it is something which is growth friendly. He noted that since the GST has been introduced on July 1 there will be a steep learning curve concerning how it is functioning and it's from that learning experience that the solutions will emerge.

The CNX Nifty is currently trading at 10227.95, down by 2.90 points or 0.03% after trading in a range of 10212.60 and 10239.25. There were 24 stocks advancing against 26 stocks declining on the index.

The top gainers on Nifty were BPCL up by 1.65%, Indiabulls Housing up by 1.39%, Asian Paints up by 1.27%, GAIL India up by 1.27% and Yes Bank up by 1.26%. On the flip side, ONGC down by 1.10%, Tata Motors down by 1.09%, Bosch down by 0.97%, Dr. Reddys Lab down by 0.86% and Eicher Motors down by 0.85% were the top losers.

Asian markets were trading mixed; Shanghai Composite rose 1.91 points or 0.06% to 3,380.38, KOSPI Index gained 3.06 points or 0.12% to 2,483.11, Hang Seng increased 51.21 points or 0.18% to 28,744.01 and Nikkei 225 was up by 62.22 points or 0.29% to 21,317.78.

On the flip side, Taiwan Weighted decreased 36.41 points or 0.34% to 10,737.80, Jakarta Composite slipped 17.91 points or 0.3% to 5,931.79 and FTSE Bursa Malaysia KLCI was down by 1.02 points or 0.06% to 1,753.35.