Post Session: Quick Review

Indian equity markets traded in a narrow range for most part of the day and ended with cut of around half a percent. Selling in last hour of trade dragged the markets lower, with Nifty slipping below 10,500 mark. The market breadth was in favour of declines with two stocks advancing against every three declining ones. The equity benchmarks made a cautious start but managed to trade above water in early deals as traders were optimistic with rating agency ICRA’s expectations that gross value added (GVA) growth to rise by 50 basis points in 2018-19 to 7 per cent, on the back of normal monsoon, a commitment towards fiscal consolidation at the Central and State level, and the commencement of broader efficiency gains related to GST. Separately, the sentiments were upbeat on report that India looks set to leapfrog Britain and France next year to become the world’s fifth-largest economy in dollar terms. The report highlighted that despite temporary setbacks, India’s economy has still caught up with that of France and the UK and in 2018 will have overtaken them both to become the world’s fifth largest economy in dollar terms. Additionally, the State Bank of India’s (SBI’s) Composite Index, an indicator of manufacturing activity that helps estimate periods of contraction and expansion, has showed that Indian manufacturing activity in December improved marginally over the previous month taken over a yearly period, while the index fell more sharply on a month-wise comparison, amid the worries of GST rollout weighing down the manufacturing sector.

However, selling crept in as investors took note that Grant Thornton in its latest International Business Report (IBR) has said that business leaders in India remained largely positive, but their level of optimism has dropped to its lowest level in four years. According to the report, Asia Pacific business optimism has hit a 2-year high, mainly on account of improvements from its two biggest economies, China and Japan, and region-wide positivity on prospects for increased trade. Separately, India’s Goods and Services Tax (GST) collections fell to the lowest since the tax regime was put in place in what could further queer the pitch for the Centre to keep up with the budgeted fiscal math for FY18. The decline is partly because of sharp cuts in the tax on close to 200 items from November 15. Total collections under GST in November slipped for the second straight month to Rs 80,808 crore, down from over Rs 83,000 crore in the previous month.

On the global front, Asian markets closed mostly in green. Shanghai stocks suffered their biggest loss in two weeks amid signs of slowing economic growth and year-end liquidity tightness. According to a survey by the China Beige Book International (CBB), earnings at China’s industrial firms grew at their slowest pace in seven months in November. South Korea exports likely rose for a 14th straight month in December, wrapping up the year with an upbeat tone as global demand for memory chips and petroleum goods from Asia’s third biggest exporter continued. European markets were trading mostly in green amid light trade across markets worldwide due to the holiday period.

Back home, sugar stocks were under pressure in today’s trade on CRISIL report that Indian sugar industry is expected to witness a drop in margins due to an increase in cane cost coupled with higher production of sugar, expected to pull down the retail prices. While cane cost, which accounts for over 70% of the cost for sugar mills, are set to rise by 11%, sugar prices are expected to moderate marginally in sugar season 2017-18. Reliance Communications extended its rally for the second straight session after the company yesterday announced its exit from the Reserve Bank of India’s Strategic Debt Restructuring (SDR) framework, with zero equity conversion and zero loan write-offs for lenders and bond holders.

The BSE Sensex ended at 33871.27, down by 139.34 points or 0.41% after trading in a range of 33856.41 and 34137.97. There were 6 stocks advancing against 25 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index was down by 0.29%, while Small cap index was down by 0.40%. (Provisional)

The sole gaining sectoral index on the BSE was Healthcare up by 1.70%, while Realty down by 0.93%, Oil & Gas down by 0.84%, Bankex down by 0.81%, PSU down by 0.80% and Energy down by 0.79% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Sun Pharma up by 6.44%, Dr. Reddy’s Lab up by 1.68%, Mahindra & Mahindra up by 0.81%, Wipro up by 0.63% and Hindustan Unilever up by 0.62%. (Provisional)

On the flip side, Bharti Airtel down by 1.69%, ICICI Bank down by 1.67%, TCS down by 1.09%, SBI down by 1.06% and Tata Motors - DVR down by 0.93% were the top losers. (Provisional)

Meanwhile, economic expansion in terms of gross value added (GVA) is expected to grow only marginally in the third quarter of current fiscal (Q3 FY18), on the back of weak kharif harvest and higher commodity prices. As per credit rating agency, ICRA’s latest report, GVA at basic prices would improve slightly at around 6.5% in Q3 and the same growth rate is expected for the whole fiscal year. However, the rating agency expects the country’s GVA growth to be above 7.5% in Q4 FY18, while 7% growth is expected in next fiscal year, owing to normal monsoon and the government’s commitment towards fiscal consolidation and GST.

The report also expects healthy growth in manufacturing volumes in the third quarter but expressed worries that rising commodity prices would increase input cost and this will put pressure on manufacturing margins and GVA growth of this sector in Q3 FY18. Further, ICRA noted that volume growth of mining and electricity generation sectors are expected to continue October’s down trend for remaining months of third quarter but higher commodity prices may support earning and GVA growth of these sectors in Q3 and this would support overall GVA growth.

On policy rates front, ICRA report do not expect Reserve of Bank (RBI) to commence hiking rates as the CPI inflation is forecast to persist above 5% for at least two quarters, the rating agency maintained its baseline expectation of an extended pause by the RBI on policy rates in the first half of Calendar 2018.

The CNX Nifty ended at 10475.35, down by 56.15 points or 0.53% after trading in a range of 10469.25 and 10552.40. There were 13 stocks advancing against 37 stocks declining on the index. (Provisional)

The top gainers on Nifty were Sun Pharma up by 5.99%, Tech Mahindra up by 1.63%, Dr. Reddy’s Lab up by 1.47%, Wipro up by 1.22% and Aurobindo Pharma up by 1.07%. (Provisional)

On the flip side, Indian Oil down by 2.18%, Bharti Airtel down by 1.82%, ICICI Bank down by 1.78%, Ultratech Cement down by 1.57% and Bosch down by 1.38% were the top losers. (Provisional)

The European markets were trading mostly in green; UK’s FTSE 100 increased 12.18 points or 0.16% to 7,604.84, France’s CAC increased 3.99 points or 0.07% to 5,368.71 and Germany’s DAX decreased 2.44 points or 0.02% to 13,070.35.

Asian equity markets ended mostly in green on Wednesday, with investors indulging in some selective buying despite a lack of any big catalysts. Higher commodity prices triggered fairly strong buying in mining and energy stocks in the region. Overall, the volume of business was mostly thin across the region. Crude oil prices rose to two-year highs overnight and as iron ore, gold and copper prices also strengthened. Japanese shares ended higher, with a rally in crude prices supporting oil-related shares. Though, Chinese shares ended lower amid signs of slowing economic growth and year-end liquidity tightness. Earnings at China’s industrial firms grew at their slowest pace in seven months in November, official data showed. Separately, growth in wages and hiring slowed at industrial firms, according to a survey by the China Beige Book International (CBB). Meanwhile, benchmark rates in the banking systems kept climbing in signs of liquidity stress.