Benchmarks end marginally in red ahead of RBI policy outcome

Indian equity benchmarks ended the Tuesday’s trade with marginal losses as traders remained on the sidelines ahead of the outcome of two-day policy review by the Reserve Bank of India (RBI) beginning today. The RBI is likely to keep the key rate unchanged on Wednesday and stay focused on inflation control as the rebound in September quarter GDP growth. Markets started the session on pessimistic note, as sentiments remained dampened after global rating agency Fitch Ratings 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.

Sentiments also weighed down with India’s services sector growth losing momentum in the month of November, as sustained pain from the country’s Goods and Services Tax (GST) regime triggered significant decline in demand and lower customer turnout. The seasonally adjusted Nikkei Services Business Activity Index fell to 48.5 in the month of November from 51.7 in the month of October. The Nikkei India Composite PMI Output Index, which measures both manufacturing and services, was also down to 50.3 in November from 51.3 in October. However, recovery in final hour of trade helped markets to pare most of their early losses and end only with marginal cut, as traders drew some solace on report that Finance Secretary Hasmukh Adhia has called a meeting of tax officials from the Centre and States on December 9, to assess the trend in revenue collections from the GST and review measures to further boost compliance.

On the global front, European markets were trading mostly in red in early deals, amid latest news surrounding Brexit talks and fresh economic data. Activity in the UK service sector dropped more than expected in November, dampening optimism over the British economy as the sector makes up approximately 80% of gross domestic product. Asian markets ended mostly in red despite growth in China’s services sector activity picked up to a three-month high in November, buoyed by a solid rise in new business, though the rate of expansion remained moderate and weaker than the long-run trend.

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. Aviation stocks flied higher on report that India’s domestic passenger traffic grew by 20.4% in October. The report enlightened that India’s domestic demand was highest amongst major aviation markets like Australia, Brazil, China, Japan, Russia and the US. PSU banking stocks remained in focus in today’s trade on report that the finance ministry is working with state-run lenders to frame a common set of rules for valuation of stressed assets for faster resolution of loans extended by consortia of banks.

Finally, the BSE Sensex declined 67.28 points or 0.20% to 32,802.44, while the CNX Nifty was down by 9.50 points or 0.09% to 10,118.25.

The BSE Sensex touched a high and a low of 32,893.05 and 32,682.52, respectively and there were 7 stocks on gaining side as against 23 stocks on losing side on the index.

The broader indices ended mixed; the BSE Mid cap index gained 0.41%, while Small cap index was down by 0.03%.

The top gaining sectoral indices on the BSE were Telecom up by 0.83%, Energy up by 0.58%, Bankex up by 0.38%, Oil & Gas up by 0.16% and Healthcare was up by 0.09%, while Power down by 1.06%, Metal down by 0.85%, Utilities down by 0.80%, Basic Materials down by 0.72% and Capital Goods was down by 0.62% were the top losing indices on BSE.

The top gainers on the Sensex were SBI up by 1.92%, Bharti Airtel up by 1.18%, Reliance Industries up by 1.11%, Sun Pharma up by 0.52% and ICICI Bank up by 0.38%. On the flip side, Hero MotoCorp down by 2.31%, Wipro down by 2.29%, Tata Steel down by 1.71%, NTPC down by 1.70% and ONGC down by 1.52% were the top losers.

Meanwhile, asserting that the rebound in India's gross domestic product (GDP) growth rate in September quarter was weaker than expected, global ratings agency, Fitch Ratings in its latest report has trimmed its growth forecast for 2017-18 to 6.7% from 6.9% predicted in its September Global Economic Outlook (GEO). It also slashed the FY19 forecast to 7.3% from its earlier projection of 7.4%. The country's economic growth accelerated to 6.3% in the July-September quarter of fiscal year 2017-18 (Q2FY18), from a three-year low of 5.7% in the April-June quarter, as manufacturing revved up and businesses adjusted to the new GST tax regime.

According to the rating firm, growth has repeatedly disappointed in recent quarters, partly because of one-off factors including the demonetisation programme of November 2016 and disruptions related to the implementation of the Goods and Services Tax (GST) in July 2017. However, it expects that the country’s economic growth will pick up in the next two years on back of gradual implementation of the structural reform agenda and higher real disposable income. It also expects that recent moves by the government should help support the growth outlook and enhance business confidence.

The US-based ratings agency further said that the two-year bank recapitalisation plan of Rs 2.1 lakh crore, or 1.4% of GDP, is likely to help address the capital shortages that have hindered the banks' lending capacity. It also stated that the Rs 6.9 lakh crore, or 4.5% of GDP, road construction plan may encourage the investment growth outlook. As per the report, inflation still running at low levels on muted food prices and rupee appreciating quite sharply against the US dollar since the beginning of this year give headroom for the RBI to keep interest rates quite low in order to help lift the economy. It added that pick-up in global growth has been better than expected and went on to project 3.2% expansion this year and 3.3% next year.

The CNX Nifty traded in a range of 10,147.95 and 10,069.10. There were 17 stocks in green as against 33 stocks in red on the index.

The top gainers on Nifty were SBI up by 2.17%, Bajaj Finance up by 2.03%, Yes Bank up by 2.00%, Reliance Industries up by 1.41% and Indusind Bank up by 1.33%. On the flip side, Wipro down by 2.40%, Hero MotoCorp down by 2.20%, ONGC down by 1.95%, Tech Mahindra down by 1.81% and Tata Steel down by 1.79% were the top losers.

The European markets were trading mostly in red; Germany’s DAX decreased 7.43 points or 0.06% to 13,051.12, France’s CAC decreased 8.04 points or 0.15% to 5,381.25, while UK’s FTSE 100 increased 20.64 points or 0.28% to 7,359.61.

Asian equity markets ended mostly in red on Tuesday after oil prices fell over 1 percent overnight and Brexit talks did not yield a breakthrough on the withdrawal issues. Encouraging services sector data from China helped to limit regional losses to some extent. Chinese shares ended lower even as survey results from IHS Markit revealed the country's private sector growth momentum improved marginally in November. The Caixin composite output index rose to 51.6 from October's 16-month low of 51.0, suggesting the economy has maintained stability and there was no imminent risk of a significant decline in its growth rate. The pace of manufacturing growth picked up from October's four-month low, while services activity grew the most in three months. China's official nonmanufacturing PMI also rose to 54.8 in November from 54.3 in October. Further, Japanese shares ended lower as tech stocks succumbed to heavy selling pressure hit by a tech sell-off on Wall Street overnight.