Benchmarks erase gains to trade in red

Indian equity benchmarks erased gains and started trading in red in morning session on account of selling in front line blue chip counters. The rupee opened higher against dollar on account of selling of American currency by banks and exporters. Oil prices were stable with Brent crude lingering near 2015 highs on the back of an outlook for healthy demand amid ongoing production cuts led by OPEC and Russia. A report showed that North Korea is preparing to launch a satellite, as outside observers warn that the nuclear-armed regime’s space programme is a fig leaf for weapons tests. Pyongyang is under multiple UN sanctions over its nuclear and missile tests and is prohibited from carrying out any launch using ballistic missile technology including satellites.

The sentiments were dampened as the overseas investors have pulled out a massive Rs 7,300 crore from the country’s stock markets this month so far, primarily due to rising crude prices and widening fiscal deficit. Separately, as the government gets down to the business of drawing up the budget, there is a growing view among some influential sections that there should not be any spending cut on key programmes to meet the fiscal deficit target. Investors took note that firming crude oil prices in the global market is likely to cast its shadow on retail inflation, which has began to move northwards after hitting a low of 1.46 per cent in June, and may prompt the RBI to hold interest rates at least for some time in 2018. Besides global oil prices, the impact of implementation of 7th Pay Commission, including the hike in house rent allowance, is likely put pressure on prices.

The downside was, however, capped with industry body ASSOCHAM’s Year-Ahead Outlook report, which enlightened that India’s economic growth may touch 7% next year as the government’s policies tilt towards the country’s stress-ridden rural landscape in the penultimate year before the 2019 general elections. It said that against GDP growth of 6.3% in the second quarter of 2017-18, the economic expansion may reach the crucial 7% mark by the end of September 2018 quarter, while inflation may range between 4 to 5.5% towards the second half of the next calendar year with the monsoon being a key imponderable. Separately, a private report stated that Indian economy is expected to witness sharp recovery in the January-March quarter and its GDP growth likely to be around 7.5% for 2018.

Traders were seen piling up position in Realty, Metal and Basic Materials stocks, while selling was witnessed in IT, Bankex and TECK sector stocks. In scrip specific development, Videocon Industries was trading in red as the lenders are gearing up to refer Videocon to the bankruptcy court as they are unsure of the company’s proposed debt recast programme clearing the central bank’s conditions to deal with defaulters. NBCC (India) was trading in red after the CBI booked chairman-cum-managing director (CMD) Anoop Kumar Mittal for alleged corruption in the Rs 2,150-crore re-development project of ITPO Complex at Pragati Maidan in New Delhi.

On the global front, Asian markets were trading mostly in red. Japan’s households spent more than expected in November while consumer inflation ticked up and the jobless rate hit a fresh 24-year low, offering the central bank some hope an economic recovery will drive up inflation to its 2 percent target. But the increase in prices was due mostly to a boost from rising fuel costs that is seen fading in 2018, keeping the Bank of Japan under pressure to maintain its huge monetary support even as other central banks seek an end to crisis-mode policies. Back home, the BSE Sensex and NSE Nifty were trading below the psychological 34,000 and 10,500 levels respectively. The market breadth on BSE was positive in the ratio of 1463:868, while 140 scrips remained unchanged.

The BSE Sensex is currently trading at 33919.67, down by 20.63 points or 0.06% after trading in a range of 33917.32 and 34005.37. There were 16 stocks advancing against 15 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.33%, while Small cap index was up by 0.46%.

The top gaining sectoral indices on the BSE were Realty up by 1.21%, Metal up by 0.68%, Basic Materials up by 0.67%, Oil & Gas up by 0.50% and Healthcare up by 0.39%, while IT down by 0.25%, Bankex down by 0.24%, TECK down by 0.18% and Telecom down by 0.04% were the only losing indices on BSE.

The top gainers on the Sensex were ONGC up by 1.29%, Asian Paints up by 0.84%, Sun Pharma up by 0.72%, Yes Bank up by 0.50% and Tata Steel up by 0.49%.

On the flip side, Infosys down by 0.99%, Mahindra & Mahindra down by 0.94%, SBI down by 0.80%, Coal India down by 0.75% and ICICI Bank down by 0.68% were the top losers.

Meanwhile, the government and the Reserve Bank of India (RBI) have firmly dismissed rumours of closure of some public sector (PSU) banks, saying there was no question of closure of any PSU Banks. There were apprehensions being raised and rumours being spread that the government may close down some banks after RBI decided to initiate a “prompt corrective action” (PCA) against large state-owned lenders.

The RBI in its release said that it has come across some “misinformed communication” circulating in some section of media, including social media, about closure of some public sector banks in the wake of their being placed under the PCA and clarified that “the PCA framework is not intended to constrain normal operations of the banks for the general public”. It emphasised that the PCA framework has been in operation since December 2002 and the guidelines issued on 13 April 2017 are only a revised version of the earlier framework. The central bank had issued a similar clarification in June also. It said “PCA framework is one of such supervisory tools, which involves monitoring of certain performance indicators of the banks as an early warning exercise and is initiated once such thresholds as relating to capital, asset quality, etc., are breached”.

The government on its part too, dismissed such rumours saying that on the contrary it is planning to strengthen the public sector banks. Financial services secretary Rajeev Kumar said “No question of closing down any bank. Government is strengthening PSBs by 2.11 lakh crore recapitalisation plan'.

Public sector banks placed under the PCA framework so far include Indian Overseas Bank, Dena Bank, Corporation Bank, Central Bank of India, IDBI Bank, UCO Bank, United Bank of India, Bank of Maharashtra, Oriental Bank of Commerce, and Bank of India. RBI has said that placing banks under the PCA framework will not affect their normal operations.

The CNX Nifty is currently trading at 10483.30, down by 9.70 points or 0.09% after trading in a range of 10483.00 and 10515.10. There were 25 stocks advancing against 25 stocks declining on the index.

The top gainers on Nifty were Bosch up by 2.16%, ONGC up by 1.24%, Vedanta up by 1.09%, GAIL India up by 0.85% and Cipla up by 0.81%.

On the flip side, Mahindra & Mahindra down by 0.94%, Hero MotoCorp down by 0.86%, SBI down by 0.86%, Infosys down by 0.84% and ICICI Bank down by 0.73% were the top losers.

The Asian markets were trading mostly in red; Taiwan Weighted decreased 109.59 points or 1.04% to 10,412.90, Nikkei 225 decreased 61.15 points or 0.27% to 22,878.03 and FTSE Bursa Malaysia KLCI decreased 4.07 points or 0.23% to 1,756.17.

On the other hand, KOSPI Index increased 1.46 points or 0.06% to 2,442.00 and Shanghai Composite increased 7.08 points or 0.22% to 3,287.54.

Hong Kong and Jakarta Stock Exchange were closed on account of National holiday.