Benchmarks end lower ahead of IIP, CPI data

Tuesday turned out to be a dismal day of trade for Indian equity benchmarks with frontline gauges breaching their crucial 10,250 (Nifty) and 33,300 (Sensex) levels, as traders opted to book profit after three day of continuous rally. After a feeble opening, markets never looked confidant and extended their southward journey to at day’s lows, as traders remained on sidelines ahead of Index of Industrial Production (IIP) data for October and inflation data based on consumer price index (CPI) for November to be released later in the day. A private poll showed that India’s retail inflation likely breached the central bank’s 4% medium-term target in November after unseasonably heavy rains sent food prices soaring. The poll enlightened that the higher inflation rate is unlikely to push the Reserve Bank of India (RBI) to change its key rate any time soon. Traders failed to get any sense of relief with the UN DESA's World Economic Situation and Prospects 2018 report, which said that despite a slowdown observed in early 2017, the outlook for India remains positive, underpinned by strong private consumption, robust public investments and structural reforms.

Selling got accelerated in second half of trade, as traders failed to hold their nerves. Sentiments remained pessimistic with report that foreign investors offloaded shares worth of over Rs 4,000 crore from domestic equity markets this month so far on account of rising crude prices and widening fiscal deficit. Investors took note of ASSOCHAM report enlightening that the government needs to accord top priority to agriculture in the budget as a major shortfall in kharif production resulted in sluggish growth of farm sector in the second quarter this fiscal. While the year-to-year agriculture Gross Value Addition (GVA) growth for the July-September quarter of 2017-18 dropped to 1.7% from 4.1%, measured on basic prices, the fall looks quite sharp at current prices from 10% to 3.7%. Meanwhile, with the farm loan waiver pitch getting shriller by the day, former RBI governor Y V Reddy has said that the practice is not good for economic or credit culture and insisted that ultimately it is a political decision and cannot be justified in the longer run.

On the global front, European markets were trading mostly in green in early deals with private report stating that almost nine out of ten of countries saw positive annual price growth in the third quarter, while Europe recorded a rise of 5.6% to September. Asian markets ended mostly in red as investors booked some profits after several days of advances.

Back home, oil marketing companies viz. Bharat Petroleum Corporation (BPCL), Hindustan Petroleum Corporation (HPCL) and Indian Oil Corporation (IOC) and aviation companies like Jet Airways, SpiceJet and Interglobe Aviation closed in red following sharp rise in crude oil prices in international market. Brent crude oil prices were near 2015 highs after the unplanned closure of a major North Sea pipeline for repairs, knocking out significant supplies from a market that was already tightening due to OPEC-led production cuts. Paper stocks exhibited mixed performance on expectation of robust growth demand. As per the reports, experts estimate 12% and four to five per cent growth in demand for packaging and writing & printing paper, respectively, next year. Writing & printing paper continues to face margin pressure in cheaper shipments from Southeast Asia.

Finally, the BSE Sensex declined 227.80 points or 0.68% to 33,227.99, while the CNX Nifty was down by 82.10 points or 0.80% to 10,240.15.

The BSE Sensex touched a high and a low of 33,458.41 and 33,179.75, respectively and there were 8 stocks on gaining side as against 23 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index declined 1.01%, while Small cap index was down by 0.68%.

The top losing sectoral indices on the BSE were Telecom down by 2.12%, Realty down by 1.62%, Power down by 1.24%, FMCG down by 1.03% and Bankex was down by 1.02%, while there were no gainers on the BSE sectoral front.

The top gainers on the Sensex were Dr. Reddy’s Lab up by 2.83%, Adani Ports & SEZ up by 2.72%, ONGC up by 2.26%, Lupin up by 0.87% and Infosys up by 0.76%. On the flip side, Coal India down by 2.45%, Cipla down by 2.27%, Hero MotoCorp down by 2.13%, TCS down by 1.80% and Tata Motors - DVR down by 1.61% were the top losers.

Meanwhile, textile industry body the Confederation of Indian Textile Industry (CITI) has stressed that there is an urgent need to impose safeguard measures such as Rules of Origin, Yarn Forward and Fabric Forward Rules in order to prevent routing of cheaper fabrics produced in countries like China through Bangladesh and Sri Lanka, that have free trade pacts (FTAs) with India. It also observed that the country’s garment industry will face stiff competition from imported garments, especially from Bangladesh where production cost is much lower.

CITI pointed out that according to the latest data released by Bangladesh Export Promotion Bureau, India's import of garments from Bangladesh has touched $87.4 million during July to November 2017, registering a sharp increase of 56 percent from $55.92 million during the same period last year. Besides, it indicated that during July to November 2017, India's imports of knitted apparel from Bangladesh grew by 69 percent, while the imports of woven apparel jumped by 51 percent in the corresponding period of the previous financial year.

The textile industry body further said that the basic custom duty on import of garments from Bangladesh is exempted. It also noted that garment manufacturers in India have to pay duty on imported fabrics, while Bangladesh can import fabric from China duty free and convert them into garments and sell to India duty free. It added that this is putting Indian garment industry at a major disadvantage and it is feared that this figure will go up further in the coming days as more Indian Brands shift sourcing from India to low cost duty free countries like Bangladesh and Sri Lanka.

The CNX Nifty traded in a range of 10,326.10 and 10,230.20. There were 12 stocks in green as against 38 stocks in red on the index.

The top gainers on Nifty were Dr. Reddy’s Lab up by 2.83%, ONGC up by 2.77%, Adani Ports & SEZ up by 2.37%, GAIL India up by 2.24% and Lupin up by 1.00%. On the flip side, HPCL down by 4.20%, Bharti Infratel down by 3.29%, BPCL down by 3.02%, Coal India down by 2.39% and UPL down by 2.22% were the top losers.

The European markets were trading in green; Germany’s DAX rose 2.08 points or 0.02% to 13,125.73, France’s CAC increased 9.08 points or 0.17% to 5,395.91 and UK’s FTSE 100 was up by 21.73 points or 0.29% to 7,475.21.

Asian equity markets ended mostly in red on Tuesday as investors booked some profits after several days of advances. Markets await cues from key central bank meetings due this week as well as a major annual economic planning conference in Beijing that will set policy priorities for the next 12 months. Japanese shares ended lower as caution set in ahead of a two-day policy meeting of the US Federal Reserve beginning later today. Further, Chinese shares ended lower on growing expectations that China's central bank may raise open-market interest rates if the Fed decides to increase borrowing costs.