Weak global cues drag benchmarks lower in early deals

Indian equity benchmarks have made a cautious start and are trading lower in early deals on Friday with frontline gauges breaching their crucial 33,200 (Sensex) and 10,300 (Nifty) levels amid weak global cues. Traders also remained on sidelines ahead of the key macro data of industrial production and the GST Council meeting outcome later in the day. Though, it is expected that the GST Council would rationalize tax rates for 100-150 items in the 28 percent tax slab along with taking a call on recommendations of the ministerial panel's suggestions to make the composition scheme attractive, but traders will look for the final outcome. Bihar Deputy Chief Minister Sushil Kumar Modi, who heads the panel on the Goods and Services Tax Network (GSTN), has indicated that the rates on over 200 daily-use items are expected to come down from 28 per cent to 18 per cent.

Global cues remained somber with most of the regional peers were trading in red at this point of time tailing the US markets and led by the Japanese broader index, which is down by over a percent after the yen strengthened against the dollar. Investors in the region appeared to be growing pessimistic about the prospects for meaningful US fiscal reform. The US markets despite coming off the worst levels of the day ended lower in the last session.

Back home, weakness in rupee too dampened sentiments, as it depreciated against the US dollar in the opening trade, headed for the biggest weekly drop in seven weeks. The rupee opened at 65.07 a dollar. The home currency was trading at 65.08 against the dollar, down 0.23% from its Thursday’s close of 64.94. Stocks related to realty sector remained buzzing, as the government in its bid to give a fillip to the housing sector and push construction activities has announced that central government employees can get loans up to Rs 25 lakh from the government under the house building advance (HBA) scheme, which is more than three times of the earlier norm.

The BSE Sensex is currently trading at 33162.19, down by 88.74 points or 0.27% after trading in a range of 33135.94 and 33254.00. There were 10 stocks advancing against 20 stocks declining on the index, while one stock remained unchanged.

The broader indices were trading in red; the BSE Mid cap index slipped 0.04%, while Small cap index was down by 0.03%.

The top gaining sectoral indices on the BSE were Capital Goods up by 1.03%, Consumer Durables up by 0.91%, Telecom up by 0.17%, FMCG up by 0.10% and Realty was up by 0.09%, while Energy down by 1.12%, Metal down by 0.89%, Auto down by 0.78%, Oil & Gas down by 0.56% and IT was down by 0.44% were the top losing indices on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 2.03%, Lupin up by 1.30%, Cipla up by 0.97%, ICICI Bank up by 0.85% and SBI up by 0.69%. On the flip side, Tata Motors down by 2.48%, Tata Motors - DVR down by 1.79%, Asian Paints down by 1.78%, Reliance Industries down by 1.54% and Adani Ports down by 1.15% were the top losers.

Meanwhile, Moody’s Investors Service in its latest Global Macroeconomic Update (2018-19) has stated that India is the only G20 emerging market country where growth has slowed sharply for six consecutive quarters. But it expects economic growth in 2017 to average 6.2% before accelerating to around 7.5% in 2018 and 2019. It said that the slowdown in economy was due to the temporary negative impact of last year's demonetization, temporary disruption related to the rollout of the Goods and Service Tax (GST) and weak bank lending for investment-related activity due to a high proportion of delinquent loans on bank balance sheets. It added that the effects of demonetization and GST implementation will fade.

Terming government’s capital infusion plan for state-controlled banks positive for economic growth, the rating agency said that it will help to break the negative loop of weak lending, weak investment, weak growth and weak balance sheets. It also said that despite progress on economic reforms and monetary policy easing, the flow of bank credit for investment activities has been hampered by both the inability of the banking sector to lend and weak demand for credit.

Moody's further noted that the reforms, including liberalization of foreign direct investment in key sectors and the GST, will increase efficiency, boosting trend growth. Resolving stressed corporate and bank balance sheets through bankruptcy, resolution and recapitalization would be an important step toward restarting the investment cycle and unlocking the benefits of the reforms. This amount of capital injection would allow banks to meet international standards of capital adequacy and, over time, grow lending.

The CNX Nifty is currently trading at 10284.65, down by 24.30 points or 0.24% after trading in a range of 10270.00 and 10304.55. There were 16 stocks advancing against 34 stocks declining on the index.

The top gainers on Nifty were Larsen & Toubro up by 2.12%, Lupin up by 1.53%, Ultratech Cement up by 1.02%, ICICI Bank up by 0.96% and Cipla up by 0.95%. On the flip side, Tata Motors down by 2.50%, BPCL down by 1.84%, Asian Paints down by 1.81%, HPCL down by 1.70% and Aurobindo Pharma down by 1.57% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 declined 231.9 points or 1.01% to 22,636.81, Taiwan Weighted decreased 23.78 points or 0.22% to 10,719.49, Jakarta Composite shed 12.63 points or 0.21% to 6,029.83, KOSPI Index dropped 8.33 points or 0.33% to 2,542.24, Shanghai Composite slipped 1.57 points or 0.05% to 3,426.22 and FTSE Bursa Malaysia KLCI was down by 0.5 points or 0.03% to 1,746.31.

On the flip side, Hang Seng was up by 2.38 points or 0.01% to 29,138.95.