Markets trade lower in early deals; Nifty breaches 10,100 mark

Indian equity benchmarks made a dismal start and are trading in red in early deals with frontline gauges breaching their crucial 32,800 (Sensex) and 10,100 (Nifty) levels, as traders remained on sidelines ahead of the two-day policy review by RBI beginning today. The Reserve Bank is likely to keep the key rate unchanged on Wednesday and stay focused on inflation control as the rebound in September quarter GDP growth. Sentiments remained dampened after global rating agency Fitch Ratings has pared India’s growth forecast for this financial year to 6.7% from 6.9% estimated earlier citing lower than expected recovery in the second quarter. For 2018-19, the credit rating agency has cut the forecast to 7.3% from 7.4% earlier.

Weak global cues too dampened sentiments with most of the Asian peers trading in red terrain as investors’ rotation out of technology shares took the toll on some of the region’s tech heavyweights although hopes of a major tax cut in the United States underpinned risk sentiments. The US markets made a mixed closing in the last session and while the Dow reached a new record closing high, the Nasdaq and the S&P 500 ended the day in negative territory.

Back home, export oriented stocks remained buzzing as the key policymakers led by Commerce Minister Suresh Prabhu will unveil the mid-term review of the foreign trade policy today. Exporters have been voicing concerns about challenges on account of implementation of GST. In scrip specific development, TCS edged higher on entering into new partnership with Cornell Tech and Wonderla Holidays advanced on inaugurating ‘Mission Interstellar’ at Hyderabad.

The BSE Sensex is currently trading at 32725.49, down by 144.23 points or 0.44% after trading in a range of 32682.52 and 32830.91. There were 5 stocks advancing against 26 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index declined 0.50%, while Small cap index was down by 0.83%.

The few gaining sectoral indices on the BSE were IT up by 0.43%, TECK up by 0.19% and Realty was up by 0.06%, while Capital Goods down by 1.45%, Power down by 1.35%, Metal down by 1.20%, Utilities down by 1.16% and Industrials was down by 1.04% were the top losing indices on BSE.

The top gainers on the Sensex were Infosys up by 1.41%, Sun Pharma up by 0.84%, TCS up by 0.46%, Reliance Industries up by 0.34% and ICICI Bank up by 0.08%. On the flip side, Larsen & Toubro down by 1.99%, Power Grid Corporation down by 1.97%, Adani Ports down by 1.73%, Hero MotoCorp down by 1.64% and ONGC down by 1.55% were the top losers.

Meanwhile, highlighting the importance of  initial public offerings (IPOs) presenting a good picture for businesses and corporate, as it represents a better options to raise money, SBI research in its latest report has said that the significant rise in fund raising through the IPO is likely to spur credit growth in some of the sectors. The report said that though there is no direct relation between credit growth and equity raising through IPOs, the years witnessing higher IPOs in general have shown a modest pick-up in credit growth. In the fiscal year 2017-18, domestic companies have raised Rs 49,175 crore between April and October, which is more than the amount raised between FY12-FY16 put together.

The report noted that after the muted performance till FY15, domestic IPO market picked up pace with 70 and 106 companies listed in the last two fiscals. It gained further momentum in the current fiscal with 112 companies hitting the IPO market till October 2017. Particularly, the insurance sector has come to the market this fiscal with four companies alone raising Rs 31,320 crore. The report said if sector-wise IPOs in various years, and bank credit in those sectors are compared, the results are asymmetric e.g. a positive relation between credit off-take and IPO is visible for some sectors with credit off-take picking-up after IPOs in those sectors.

According to the report, the power sector, which raised huge amount from the equity market in FY10 and FY11, witnessed significant credit growth during this period. Similarly mining and quarrying, metals and minerals went to the IPO market in FY10, FY11 and those years witnessed higher credit disbursement in these sectors. However, advances to computer software declined in the FY17 when 8 medium and small software companies raised Rs 2,103 crore through IPO.

SBI research stated that this could be due to such sectors being more determined by global factors rather than domestic and hence a possible pick up in global growth could push domestic credit growth in these sectors with a concomitant lag. Even credit in the food processing industry has lower correlation with IPO. It added that one possibility could be that India has a young population, and consumption growth is mostly invariant with the expansionary or recessionary trends in business cycle. The current upsurge will last as long as the upswing in market continues. Additionally, the performance of the companies, which got listed in recent years, will also play a crucial factor in determining the success of future primary market issuances.

The CNX Nifty is currently trading at 10082.20, down by 45.55 points or 0.45% after trading in a range of 10069.10 and 10119.20. There were 8 stocks advancing against 41 stocks declining on the index, while 1 stock remained unchanged.

The top gainers on Nifty were Infosys up by 1.40%, Sun Pharma up by 0.73%, BPCL up by 0.59%, TCS up by 0.52% and HCL Tech up by 0.46%. On the flip side, Power Grid Corporation down by 2.10%, Adani Ports down by 1.78%, Larsen & Toubro down by 1.77%, NTPC down by 1.58% and ONGC down by 1.57% were the top losers.

Asian markets were trading mostly in red; Hang Seng decreased 86.65 points or 0.3% to 29,051.63, Nikkei 225 declined 69.86 points or 0.31% to 22,637.30, Taiwan Weighted dropped 69.12 points or 0.65% to 10,581.99, Jakarta Composite shed 6.47 points or 0.11% to 5,991.73 and FTSE Bursa Malaysia KLCI was down by 0.68 points or 0.04% to 1,712.45.

On the flip side, Shanghai Composite increased 1.98 points or 0.06% to 3,311.60 and KOSPI Index was up by 5.89 points or 0.24% to 2,507.56.