Benchmarks end dismal session with a percent cut

Tuesday turned out to be a dismal day of trade for Indian equity benchmarks, where key gauges went home with a cut of around a percent, breaching their crucial 33,400 (Sensex) and 10,400 (Nifty) levels. After making an optimistic start, markets failed to hold momentum and entered into red terrain with traders shifting focus on corporate earnings and developments related to PSUs. Sentiments remained dampened with oil prices hitting their highest since July 2015 on Monday as Saudi Arabia’s crown prince cemented his power over the weekend through an anti-corruption crackdown. Traders also remained concerned with a foreign brokerage which reported that a year after the Indian government scrapped high denomination currency notes, a wide range of indicators suggest the economy is still coming to terms with the move. The report highlighted that while the initial scenes of long queues of people exchanging notes disappeared within a month or so, the shock measure left a rather lasting impact on informal economic activities, bank deposits and digital transactions. It added that in an economy where 90 percent of employment and over 50 percent of Gross Domestic Product (GDP) is derived from informal activities, this is bound to be a highly disruptive process.

Markets extended its southward journey in second half of the trade to end near intraday lows. Traders failed to get any sense of relief with Finance Minister Arun Jaitley’s statement that excessive cash in the economy has 'its own cost' and India is gradually moving towards digital transactions. Investors paid no heed to the BMI Research’s latest report that the ongoing economic reforms and improvements to the business environment will continue to support India's economic growth over the coming years, and they expect the country to be one of the best performing emerging market economies, with real GDP growth set to average 6.5 percent over the next five fiscal years.

Weakness in European counters too dampened sentiments, while sluggishness in the euro boosted the export-oriented DAX to a new record high. A survey showed that British retail spending fell last month at the fastest pace for any October since 2008 as consumers curbed purchases of non-food goods in the face of rising inflation. Asian markets ended mostly in green, boosted by rallying oil prices and corporate deal-making news.

Back home, IT stocks remained on buyers’ radar in today’s trade, on account of weak rupee. Engineering sector stocks remained buzzing on report that Indian engineering exports are benefiting from an impressive turnaround in demand in most of the developed economies, including the US and Europe. Cement stocks remained on buyers’ radar, as some of the Cement major increased prices. However, the oil marketing companies (OMCs) edged lower despite the international crude oil prices edging down on Tuesday after posting the biggest gains in six weeks a day earlier. Shares of aviation companies like Jet Airways, SpiceJet, and InterGlobe Aviation edged lower on back of surge in crude oil prices on a global scale.

Finally, the BSE Sensex declined 360.43 points or 1.07% to 33,370.76, while the CNX Nifty was down by 101.65 points or 0.97% to 10,350.15.

The BSE Sensex touched a high and a low of 33,865.95 and 33,341.82, respectively and there were 6 stocks on gaining side as against 25 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index declined 1.47%, while Small cap index was down by 1.35%.

The only gaining sectoral indices on the BSE were IT up by 2.06% and TECK was up by 1.21%, while Healthcare down by 3.51%, Realty down by 2.24%, Energy down by 2.04%, Consumer Durables down by 2.03% and PSU was down by 1.92% were the top losing indices on BSE.

The top gainers on the Sensex were Infosys up by 2.92%, TCS up by 1.55%, Wipro up by 0.87%, Kotak Mahindra Bank up by 0.36% and ITC up by 0.32%. On the flip side, Lupin down by 16.84%, Cipla down by 7.18%, SBI down by 3.57%, Tata Motors - DVR down by 3.47% and Bharti Airtel down by 3.45% were the top losers.

Meanwhile, terming the medium-term outlook for logistics firms in India as positive, domestic rating agency, ICRA in its latest report has said that the country’s logistics industry is likely to grow at a rate of 9-10 percent annually. It also said that while there have been fluctuations in the economy and freight demand due to Goods and Services Tax (GST) implementation, the impact of the same would be transitory and would be corrected over the near term. Besides, it believes that the industry would continue to benefit from recovery in the Indian economy and revival in industrial output, while supply side factors like improvement in logistics infrastructure and emergence of logistics startups would offer further impetus to growth.

As per the report, analysis of the Q1 FY18 performance of key listed logistics companies indicated that their revenue growth at 6.2 percent (on Y-o-Y basis) outpaced the real GDP growth, much of it was supported by increase in freight rates since the latter half of FY 2017, while volume growth remained flat for most of the companies. In addition, it noted that companies have benefited from the underlying sectors such as automobile, consumer durables etc. which have bucked the trend of economic slowdown. From a profitability perspective, it stated that while the aggregate operating profit margins improved marginally on a sequential basis to 9.7 percent during Q1 FY18, there was pressure on the margins on a Y-o-Y basis.

The rating agency pointed out that although the manufacturing activity has declined further in July 2017 post GST implementation, there has been a gradual improvement in most of economic indicators over the past couple of months, which suggest the outlook for logistics companies is likely to turn favourable going forward. As per the report, the road freight rates also followed a similar trend, with the decline in industrial activity and lack of freight demand resulting in a sharp decline of freight rates in July 2017, and subsequent recovery in August 2017 as the industrial activity and freight demand improved.

The CNX Nifty traded in a range of 10,485.75 and 10,340.80. There were 13 stocks in green as against 37 stocks in red on the index.

The top gainers on Nifty were HCL Tech up by 3.78%, HPCL up by 2.98%, Infosys up by 2.87%, Tech Mahindra up by 2.51% and TCS up by 1.67%. On the flip side, Lupin down by 16.86%, Cipla down by 7.11%, SBI down by 3.57%, Bharti Airtel down by 3.37% and UPL down by 3.31% were the top losers.

European markets were trading mostly in red; UK’s FTSE 100 decreased 11.35 points or 0.15% to 7,550.93 and France’s CAC was down by 4.27 points or 0.08% to 5,502.98, while Germany’s DAX was up by 19.28 points or 0.14% to 13,488.07.

Asian equity markets ended mostly higher on Tuesday after the major US averages hit fresh record closing highs overnight, boosted by rallying oil prices and corporate dealmaking news. Higher commodity prices, including the overnight surge in crude oil prices after a purge of royal family's political rivals in Saudi Arabia helped investors shrug off US President Donald Trump's fiery rhetoric on North Korea and uncertainties related to proposed US tax reform. Chinese shares ended higher, with banking and energy firms leading the surge on optimism over global growth. Further, Japanese shares ended higher, with a weaker yen and optimism over corporate earnings buoying investor sentiment.