Markets snap eight session winning streak on profit booking

Indian equity benchmarks ended the Tuesday’s trade with a cut of around one third of a percent, as traders opted to book profit after eight day winning streak ahead of November derivatives expiry and release of September-quarter GDP data later in the week. Markets started the session on pessimistic note on report that tax collection under the Goods and Services Tax (GST) was lower at Rs 83,346 crore in October, against a mop-up of over Rs 90,000 crore in September. The Finance Ministry said that total collection stood at Rs 83,346 crore till November 27 for the month of October and 50.1 lakh returns were filed for the month. Sentiments also remained dampened with rating agency CRISIL enlightening that India’s competitiveness in the labour intensive export sectors has been on a declining path in the last decade and needs significant structural reforms that need to be addressed. The agency analyzed the competitiveness of the labour intensive export sectors namely, gems & jewellery, leather & leather products and readymade garments which showed that these have become less competitive over the last decade.

However, markets witnessed recovery and gained green terrain with traders taking some solace with report that the government sticking to its promise to lower the tax burden on India Inc is exploring the possibility of reducing the corporate tax rates for larger firms as well. The exact quantum of the cut in corporate tax rate is expected to be finalised closer to the presentation of the Union Budget 2018-19, but revenue implications also have to be factored in. Some comfort also came with report that Asian Development Bank is expecting the Indian economy to pick up in the coming quarters and grow by 7 per cent this fiscal. Meanwhile, the Industry body, Federation of Indian Chambers of Commerce and Industry (FICCI) in its latest Economic Outlook Survey forecasted India's GDP growth to improve to 6.2 percent in Q2FY18 and rise further to 6.7 percent in Q3FY18. Though, the recovery proved short lived with selloff in last leg of trade once again pulled key gauges back into red trajectory to end near intraday lows.

On the global front, European markets were trading in green in early deals, as concerns over political tensions in German subsided and market sentiments improved. Asian markets exhibited mixed trend, as the Japanese government stuck to its moderately upbeat view on the economy in November, its monthly economic report showed, saying it remained on a recovery path helped by consumer spending and business investment.

Back home, stocks related to telecom sector edged lower despite reports that the Telecom Regulatory Authority of India (Trai) will issue recommendations on net neutrality. Banking stocks remained under pressure on ICRA’s report that banks credit provisions are likely to surge to Rs 2.4-2.6 trillion in fiscal 2018 compared to Rs 2 trillion last year due to provisioning for IBC accounts and ageing of NPAs. The report highlighted that the increase in provisioning will result in higher losses for state-run banks during the year. Realty stocks declined on report suggesting that there might be a tax on the unsold inventory held by developers. The real estate industry is in a doldrums situation with so many changes; regulatory and GST etc. It was weathering those blows and this is supposed to be the next one.

Finally, the BSE Sensex declined 105.85 points or 0.31% to 33,618.59, while the CNX Nifty was down by 29.30 points or 0.28% to 10,370.25.

The BSE Sensex touched a high and a low of 33,770.15 and 33,576.65, respectively and there were 12 stocks on gaining side as against 19 stocks on losing side on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.10%, while Small cap index was up by 0.27%.

The few gaining sectoral indices on the BSE were Consumer Discretionary Goods & Services  up by 0.20%, FMCG up by 0.10% and Auto was up by 0.04%, while Telecom down by 1.30%, Consumer Durables down by 0.92%, TECK down by 0.64%, PSU down by 0.61% and IT was down by 0.55% were the top losing indices on BSE.

The top gainers on the Sensex were Maruti Suzuki up by 1.56%, Asian Paints up by 1.05%, Coal India up by 1.03%, HDFC up by 0.88% and Bajaj Auto up by 0.73%. On the flip side, NTPC down by 1.88%, Bharti Airtel down by 1.56%, Infosys down by 1.30%, Tata Motors down by 1.23% and Sun Pharma down by 1.19% were the top losers.

Meanwhile, credit ratings agency, ICRA in its latest report has said that the overall credit provisioning for banks is expected to surge to Rs 2.4-2.6 lakh crore in the financial year 2018 as compared to Rs 2 lakh crore in the previous year, mainly due to provisioning for Insolvency and Bankruptcy Code (IBC) accounts and ageing of Non-performing assets (NPAs). Besides, it pointed out that increase in provisioning would lead to higher losses for public sector banks (PSBs) during the year.

The rating agency indicated that during July-September quarter (Q2FY18), bank’s provisions jumped to Rs 64,500 crore, up by 40 percent on a sequential basis and 30 percent on a year-on-year basis. It also said that with the recent amendments in IBC, the likelihood of the higher losses and a further increase in credit provisions appears to be a possibility. It expects that the asset quality pain is likely to continue in the near-term with nearly Rs 1.7 lakh crore of standard restructured advances. It also expects that the gross non-performing assets (GNPA) of Rs 8.8-9 lakh crore or 10-10.2 percent to peak out by end of FY18 as against GNPAs of Rs 7.65 lakh crore or 9.5 percent as on March 31, 2017.

As per the report, PSBs are positioned weakly on their capital ratios with seven PSBs (out of 21) and 12 PSBs below the regulatory minimum capital level required for March 2017 and March 2018 respectively. It stated that with the challenges of meeting capital levels, the PSBs continue to refrain from growing advances, which is reflected in a year-on-year growth of less than 1 percent in advances of PSBs even as the private sector banks continue to achieve a higher year-on-year growth of 17.2 percent as on September 30, 2017. It also expects the scope of a further cut in deposit rates to be limited, even as the cost of deposits will continue to decline upon re-pricing of fixed deposits, which, coupled with competitive pressure, may drive a marginal cut in lending rates.

The CNX Nifty traded in a range of 10,409.55 and 10,355.20. There were 19 stocks in green as against 31 stocks in red on the index.

The top gainers on Nifty were Zee Entertainment up by 1.64%, Indiabulls Housing Finance up by 1.59%, Maruti Suzuki up by 1.39%, Asian Paints up by 1.17% and Indusind Bank up by 1.05%. On the flip side, Bharti Infratel down by 2.53%, Aurobindo Pharma down by 1.99%, NTPC down by 1.85%, Sun Pharma down by 1.68% and Infosys down by 1.66% were the top losers.

The European markets were trading in green; Germany’s DAX increased 17.92 points or 0.14% to 13,018.12, France’s CAC gained 21.43 points or 0.4% to 5,381.52 and UK’s FTSE 100 was up by 32.23 points or 0.44% to 7,416.13.

Asian equity markets ended mixed on Tuesday as oil prices fell and Beijing stepped up its crackdown on shadow banking and other risky forms of financing. Investors also awaited developments on US tax reform bills ahead of a crucial Senate vote and the confirmation hearing for incoming Federal Reserve Governor Jerome Powell. Japanese shares ended marginally lower after a government source said that Japan has detected radio signals from North Korea that indicate Pyongyang could be preparing for another ballistic missile. The yen reversed gains, helping limit overall losses in the broader market. Meanwhile, Chinese shares ended higher as investors hunted for bargains at lower levels after recent declines.