Benchmarks snap four days gaining streak; end with marginal losses

Snapping four days gaining streak, Indian equity benchmarks ended the choppy day of trade slightly in red, as traders opted to book profit near all time high levels. After making cautious start, markets gained some traction and entered into green terrain to trade above neutral lines for most part of the day with traders getting some support from Commerce & Industry Minister Suresh Prabhu’s statement that the government is working on a strategy to boost share of services in total exports from the country. He said ‘In my opinion services should be one of the most critical drivers of the growing economy and must be brought to the forefront’. Prime Minister Narendra Modi’s electoral victories in key states continued to lend support to the markets, but focus has now shifted to Budget and macros.

However, sharp selling in last leg of trade played spoil sports for the local bourses and dragged them back into red terrain. Sentiments turned down-beat after Federation of Indian Chambers of Commerce and Industry (FICCI) in its latest quarterly survey has said that manufacturing sector outlook is slightly less optimistic in third quarter of the current fiscal year (Q3). It reported that overall the capacity utilization in manufacturing remains low. The average capacity utilization for the manufacturing sector is about 75% for Q-2 2017-18 as reported in the survey which is similar to that of Q-1 2017-18. Meanwhile, some caution set in ahead of the release of the minutes from the Reserve Bank of India’s policy meeting earlier this month in which the policy rate was kept unchanged.

Weak opening in European counters too dampened sentiments, with traders’ volumes remained thin ahead of the Christmas holiday. German exports and imports will hit record highs in 2018, the BGA trade association said, adding that companies in Europe’s largest economy will continue to reap benefits of a recovery in the United States, the European Union and China. Asian markets exhibited mixed trend on Wednesday amid cautious trades following the negative lead overnight from Wall Street and as investors awaited the final votes on the US tax reform bill.

Back home, PSU banking stocks edged lower despite global rating agency Moody’s latest report highlighting that capital raising by a number of public sector banks (PSBs), including PNB and UBI, is credit positive because it will help improve their loss-absorbing buffers. Moody's said that it signals improved access to the equity capital markets and will reduce PSBs' dependence on fund infusion from the government. Stocks of select cement companies edged lower after India Ratings and Research (Ind-Ra) in its latest report has said that the operating profits of cement companies in India, which use a high proportion of pet coke, may fall by around one percent, following the government’s decision to hike the import duty on petcoke from the current 2.5 percent to 10 percent. However, oil companies stocks remained buzzing, as the Finance minister Arun Jaitley said that the Centre favours including petroleum products in the ambit of the Goods and Services Tax (GST) but it would want a consensus with the States before taking such a step.

Finally, the BSE Sensex shed 59.36 points or 0.18% to 33,777.38, while the CNX Nifty was down by 19.00 points or 0.18% to 10,444.20.

The BSE Sensex touched a high and a low of 33,956.31 and 33,754.94, respectively and there were 13 stocks on gaining side as against 18 stocks on losing side on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.36%, while Small cap index was up by 0.79%.

The top gaining sectoral indices on the BSE were Realty up by 3.01%, Metal up by 0.75%, Industrials up by 0.68%, Capital Goods up by 0.64% and Basic Materials was up by 0.64%, while Bankex down by 0.34%, Auto down by 0.30%, Energy down by 0.20%, PSU down by 0.18% and Telecom was down by 0.15% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors - DVR up by 2.80%, Wipro up by 1.54%, ONGC up by 1.46%, Hero MotoCorp up by 1.20% and Larsen & Toubro up by 1.06%. On the flip side, Dr. Reddy’s Lab down by 1.80%, Bharti Airtel down by 1.45%, Tata Steel down by 1.09%, HDFC down by 0.98% and HDFC Bank down by 0.91% were the top losers.

Meanwhile, global rating agency, Moody's Investors Service in its Credit Outlook article, has stated that capital raising by a number of public sector banks (PSBs), including Punjab National Bank (PNB) and Union Bank of India (UBI), is credit positive, as it will improve their loss absorbing capabilities. Apart from this, it noted that the capital raising by PSBs’ signals improved access to the equity capital markets and reduces their dependence on capital infusion from the government.

According to the report, the inability of most of these banks to access the equity capital markets has also been a key constraint on their capital levels. It also observed that the share prices of most PSBs that they rate improved substantially after the Union government unveiled Rs 2.11 lakh crore recapitalisation plan over two years for the country’s 21 PSBs. It also mentioned that recently, Punjab National Bank and Union Bank of India raised Rs 5,000 crore and Rs 2,000 crore through qualified institutional placement to fund expansion plan. Besides, Syndicate Bank raised Rs 1,150 crore.

On a pro forma basis, the rating agency has said that the capital raise will add about 100 basis points to PNBs Common Equity Tier 1 (CET1) ratio, which was 8.1 per cent as of September 2017. It added that UBI and Syndicate each will add 60-70 basis points to their CET1 ratios, which were 7 percent and 7.2 percent, respectively, as of September 2017.

The CNX Nifty traded in a range of 10,494.45 and 10,437.15. There were 26 stocks in green as against 24 stocks in red on the index.

The top gainers on Nifty were Hindalco up by 1.53%, ONGC up by 1.46%, HUL up by 1.29%, Hero MotoCorp up by 1.25% and Infosys up by 1.24%. On the flip side, Eicher Motors down by 2.03%, Dr. Reddy’s Lab down by 1.65%, Bharti Airtel down by 1.49%, M&M down by 1.42% and Tata Steel down by 1.13% were the top losers.

The European markets were trading in red; France’s CAC shed 13.88 points or 0.26% to 5,369.03, Germany’s DAX decreased 13.74 points or 0.1% to 13,202.05 and UK’s FTSE 100 was down by 9.23 points or 0.12% to 7,534.86.

Asian equity markets made a mixed closing on Wednesday as the final vote on the US tax bill entered a crucial phase. Senate Republicans voted late Tuesday night to approve their final tax overhaul, which would cut taxes for businesses and individuals while widening American budget deficit and income inequality. However, a technical vote in the House is still needed before it can be sent to President Donald Trump's desk. China stocks ended lower in thin trade and as liquidity in the banking system tightened. Meanwhile, Hong Kong stocks ended slightly in red as weakness in financial and IT stocks offset strength in property and utility plays. Though, Japanese shares ended a choppy session marginally higher as a weaker yen on US tax cut hopes and gains in the financial sector helped outweigh renewed sell-off in construction shares in the wake of bid-rigging allegations.