Markets end lower as RBI maintains status quo

Indian equity benchmarks ended the Wednesday’s trade in red terrain as Reserve Bank of India (RBI) decided to keep the policy repo rate unchanged. Sentiments remained downbeat since morning as markets after a negative start never looked confidant and extended their southward journey to end below their crucial 32,600 (Sensex) and 10,050 (Nifty) levels. Traders remained concerned with report that public debt of the central government rose by 2.53% to Rs 65.65 lakh crore in the July-September quarter compared to the previous quarter. Internal debt constituted 93% of public debt at end-September 2017, while marketable securities accounted for 82.6% of public debt. Meanwhile, the newly-constituted 15th Finance Commission held its first meeting and decided to involve think-tanks in drawing up its report that will primarily deal with devolution of revenue between the Centre and states.

Markets extended southward journey after RBI’s Monetary Policy Committee (MPC) decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.0% but has raised the inflation forecast for remainder of the current financial year to 4.3-4.7%. The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%, while supporting growth. Sentiments also remained dampened on reports that India's economy though showed signs of recovery in Q2FY18 but overall business sentiment in the country during the same period got hit by the new Goods and Services Tax (GST) regime. As per the National Council of Applied Economic Research’s (NCAER) latest survey, its Business Confidence Index (BCI) fell 12.9% from the earlier quarter and 11.1% on year-on-year basis, due to GST.

Weak global cues too dampened sentiments with European counters trading in red in early deals, as investors monitored corporate earnings and fresh economic data. Asian markets ended mostly in red, led by the Japanese market which is down by around a percent as commodities companies led declines following a rout in copper prices and as investors assessed the impact of proposed tax cuts.

Back home, metal stocks lost shine following correction in commodities prices in international market as investors raised doubts over China demand for metals. Mixed reaction was witnessed in aviation stocks on International Air Transport Association (IATA) report that with rising air passenger numbers, as much as 1% of the global GDP - translating into $861 billion - is projected to be spent on air transport in 2018. However, select stocks from leather, textiles, agriculture products and carpets industry remained in focus, as government yesterday announced incentives worth a total Rs 8,450 crore to boost exports and employment in labour-intensive sectors in the mid-term review of the five-year foreign trade policy (FTP) that was rolled out in 2015. Incentives under the Merchandise Export from India Scheme (MEIS) have been raised to 4% from 2% for leather, textiles, agriculture products and carpets.

Finally, the BSE Sensex declined 205.26 points or 0.63% to 32,597.18, while the CNX Nifty was down by 74.15 points or 0.73% to 10,044.10.

The BSE Sensex touched a high and a low of 32,804.75 and 32,565.16, 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 0.89%, while Small cap index was down by 0.66%.

The few gaining sectoral indices on the BSE were Energy up by 0.46%, IT up by 0.32% and TECK was up by 0.03%, while Metal down by 2.03%, Telecom down by 1.38%, Basic Materials down by 1.37%, PSU down by 1.32% and Bankex was down by 1.23% were the top losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 1.76%, Maruti Suzuki up by 1.23%, Hindustan Unilever up by 1.05%, Infosys up by 0.61% and Coal India up by 0.26%. On the flip side, Sun Pharma down by 2.31%, SBI down by 2.21%, ICICI Bank down by 1.96%, HDFC down by 1.78% and Tata Motors - DVR down by 1.66% were the top losers.

Meanwhile, with increasing airline's passengers traffic, the International Air Transport Association (IATA) has said that as much as 1 percent of the world Gross domestic product (GDP), totaling $861 billion, is expected to be spent on air transport in the year 2018. It also expects that new destinations are likely to increase next year, with frequencies up too; both boosting consumer benefits.

The IATA, which represents around 275 airlines comprising 83 percent of global air traffic, pointed out that economic development worldwide is getting a significant boost from air transport. It noted that this wider economic benefit is being generated by increasing connections between cities - enabling the flow of goods, people, capital, technology and ideas - and falling air transport costs. Noting that governments have gained substantially from the good performance of the airline industry, it said that airlines and customers are forecast to generate $136 billion in tax revenues next year. It also mentioned that that is the equivalent of 45 percent of the industry's GVA (Gross Value Added, which is the firm-level equivalent of GDP), paid to governments in payroll, social security, corporate and product taxes.

The global airlines grouping expects that the value of international trade shipped by air next year to be $6.2 trillion, while tourists travelling by air in 2018 are projected to spend $776 billion. It also noted that the number of scheduled aircraft departures is forecast to exceed more than 38 million next year. That's an average of 73 aircraft departing each minute of 2018. It further stated that the industry continues to create high value added jobs.

The CNX Nifty traded in a range of 10,104.20 and 10,033.35. There were 11 stocks in green as against 39 stocks in red on the index.

The top gainers on Nifty were Reliance Industries up by 1.67%, Tech Mahindra up by 1.48%, Maruti Suzuki up by 1.37%, Hindustan Unilever up by 1.10% and Ambuja Cement was up by 0.98%. On the flip side, Bosch down by 3.84%, Hindalco down by 3.15%, Bharti Infratel down by 3.01%, Eicher Motors down by 2.73% and Vedanta down by 2.39% were the top losers.

The European markets were trading in red; Germany’s DAX declined 142.82 points or 1.09% to 12,905.72, France’s CAC decreased 35.45 points or 0.66% to 5,340.08 and UK’s FTSE 100 was down by 5.02 points or 0.07% to 7,322.48.

Asian equity markets ended mostly in red on Wednesday as bond yields tumbled, metals prices plunged sharply, oil eased on supply worries and the Japanese yen gained ground on Middle East concerns as well as worries over a possible US government shutdown. Chinese stocks fell after a senior researcher at the People's Bank of China urged central banks to tighten monetary policies. Further, Japanese shares ended sharply lower as geopolitical worries and concerns over a potential government shutdown in the US helped fuel demand for safe-haven assets.