Markets start 2018 on pessimistic note; Nifty breaches 10,450 mark

First day of 2018 turned out to be a dismal day of trade for Indian equity benchmarks with frontline gauges settling with a cut of around a percent, breaching their crucial 10,450 (Nifty) and 33,900 (Sensex) levels. Key bourses made cautious start and traded lacklustre throughout the session, as traders remained concerned with fiscal deficit at the end of November breaching the target and touching 112 percent of the budget estimate for 2017-18, mainly due to lower GST collections and higher expenditure. Fiscal deficit was Rs 6.12 lakh crore during April-November 2017-18. Traders also remained concerned with government's statement that Indian economy slowed down in 2016-17, with the gross domestic product declining drastically from 8 percent in 2015-16 to 7.1 percent the next year. Sentiments also remained dampened with Finance Minister Arun Jaitley's statement that the slower economic growth reflected lower growth in the industry and the services sectors, due to a number of factors including structural, external, fiscal and monetary factors.

But selling in last leg of trade mainly played spoil sports for domestic bourses and dragged them to their intraday lows in dying hour of trade with traders turning pessimistic on report that overseas investors pulled out close to Rs 5,900 crore from domestic equities in Decemebr, with widening fiscal deficit and higher crude prices making market participants cautious on macro-economic front. In spite of December performance, foreign portfolio investors (FPIs) ended the year with a net inflow of over Rs 51,000 crore. Sentiments also weighed down on report that India’s external debt position surged by around 2.1 percent to $495.7 billion during July-September quarter (Q2 FY18), as compared to $485.8 billion reported for the end-June period. Traders shrugged off report that the government has extended by 10 days the last date for filing of final sales return GSTR-1 till January 10 under the Goods and Services Tax. Businesses with turnover of up to Rs 1.5 crore will have to file GSTR-1 for July-September by January 10, 2018, as against December 31, 2017 earlier.

On the global front, the markets in Asia and Europe remained closed on account of National holiday. Back home, select PSU banking stocks edged higher on report that the government has provided over Rs 7,500 crore of fresh equity to six stressed state-run banks in order to help them meet the prescribed regulatory capital requirement and its commitment to keep banks well-funded. Shares of select auto companies remained in focus as auto companies started declaring monthly sales numbers for December 2017. Many auto makers had offered huge year-end discounts during the month, the impact of which is to be seen on sales data later in the day. Meanwhile, shares of Anil Ambani led Reliance Group (ADAG) companies continued their upward journey in an otherwise subdued market. In past one month, Anil Ambani announced it has signed definitive binding agreements with Reliance Jio Infocomm (RJio) for sale of wireless spectrum, tower, fibre and Media Convergence Node (MCN) assets.

Finally, the BSE Sensex declined 244.08 points or 0.72% to 33,812.75, while the CNX Nifty was down by 95.15 points or 0.90% to 10,435.55.

The BSE Sensex touched a high and a low of 34,101.13 and 33,766.15, respectively and there were 6 stocks on gaining side as against 25 stocks on losing side on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.08%, while Small cap index was up by 0.26%.

The top gaining sectoral indices on the BSE were Utilities up by 0.80%, Power up by 0.79%, Capital Goods up by 0.40%, Realty up by 0.36% and Consumer Durables was up by 0.18%, while Auto down by 0.78%, Bankex down by 0.75%, Energy down by 0.68%, TECK down by 0.65% and Basic Materials was down by 0.61% were the top losing indices on BSE.

The top gainers on the Sensex were Coal India up by 1.44%, Wipro up by 1.39%, Sun Pharma up by 0.49%, Axis Bank up by 0.44% and Larsen & Toubro up by 0.39%. On the flip side, TCS down by 1.69%, Indusind Bank down by 1.45%, Hindustan Unilever down by 1.40%, HDFC down by 1.35% and Tata Motors down by 1.35% were the top losers.

Meanwhile, Union Finance Minister Arun Jaitley has said that creditors, banks and unsecured creditors would need to take a haircut on their bad loans to resolve the issue of non-performing assets (NPAs), even as defaulting promoters could make their businesses operational again by paying the outstanding interest on the loan. He also said that an ineligibility criteria was required to keep promoters responsible for NPAs from coming back to take over the company.

The minister has said that the government featured later in the waterfall list of creditors involved in the resolution of the NPA, or bad loans, in the Indian banking system that have crossed the staggering level of Rs 8.5 lakh crore. He noted that a haircut signifies accepting a lower than market value for the asset for a resolution of the NPA. Besides, he clarified that management is not barred from making a unit operational if it pays the outstanding interest on the stressed loan. He said 'No one is being barred for life and neither are we asking that you pay the whole amount. Just pay the interest and make the account operational.'

Meanwhile, the Lok Sabha has passed a Bill that seeks to amend the Insolvency and Bankruptcy Code (IBC) to plug potential loopholes and prohibit certain persons, such as wilful defaulters, from submitting resolution plans to let them take charge of the company. It will replace an ordinance promulgated earlier. The IBC, being implemented by the Corporate Affairs Ministry, became operational in December 2016 and provides for a time-bound insolvency resolution process. The changes proposed are expected to help streamline the process of selecting buyers for stressed assets.

The CNX Nifty traded in a range of 10,537.85 and 10,423.10. There were 10 stocks in green as against 40 stocks in red on the index.

The top gainers on Nifty were Indiabulls Housing Finance up by 1.75%, Coal India up by 1.50%, Cipla up by 1.28%, Sun Pharma up by 0.59% and IOC up by 0.50%. On the flip side, Bharti Infratel down by 2.32%, TCS down by 1.90%, Indusind Bank down by 1.73%, BPCL down by 1.73% and Bosch down by 1.71% were the top losers.

The markets in Asia and Europe are closed on account of National holiday.