Benchmarks snap three days winning streak; Sensex gives up 34,800 mark

Snapping three days gaining streak, Indian equity benchmarks ended the volatile day of trade with marginal losses on Tuesday, as traders opted to book profit at higher levels. Markets altered between green and red throughout the session to end marginally in red, as traders remained a bit cautious with the merchandise export growth slowing sequentially to 12.4% in December, while imports jumping 21.1% during the month, aided by a spike in crude oil prices and a favourable base. The trade deficit widened to its highest level in over three years in December to $14.9 billion, a three-year peak. However, excluding the almost 35% rise in oil purchases from overseas, overall imports rose 17.2% in December. Traders also remained on sidelines ahead of GST Council meeting scheduled to be held on January 18, which will also be the last meeting before Budget 2018. The council is likely to revise rates for electric vehicles, farm equipment, ease compliance & modify the reverse charge mechanism. The recommendations of the law review committee are also likely to be taken up for consideration by the GST Council, comprising Centre and states.

However, losses remained capped, as International Monetary Fund (IMF) highlighted that India is reclaiming its place as a growth leader after a short period of slowdown in the economy. Some relief also came with Prime Minister Narendra Modi promising more economic reforms to further improve the ease of doing business in India as he invited Israeli companies to invest in India. PM further noted that India is the fastest growing economy with FDI inflows at all time high. Traders also took some solace with private report stating that two Asian economies - India and Indonesia - will see a pick-up in GDP growth in 2018, reaping benefits of the economic reforms. It further noted that in the Indian context, adapting to the new GST regime, economic reforms aiding growth and recapitalisation plan for public sector banks will lead to increased investment growth and economic activity over the coming quarters.

On the global front, European markets were trading in green in early deals, as investors monitored the release of corporate earnings while keeping an eye on the euro, which hovered near a three-year peak. Asian markets rallied on Tuesday, following a holiday for US markets as investors looked ahead to American corporate earnings.

Back home, shares of Information Technology (IT) stocks remained on buyers’ radar, as investors reacted to a weaker rupee at the interbank foreign exchange after concerns over trade deficit ballooning to a three-year high. The export oriented stocks remained in focus, as the various export bodies have expressed concern over delay in refunds under GST and have written to the Union Commerce Ministry seeking faster refunds. Mixed reactions were displayed in jewellery stocks on report that the Commerce Ministry has pitched for reduction in import duty on gold in the forthcoming Budget with an aim to promote gold jewellery exports. The Gems and Jewellery Export Promotion Council (GJEPC) has demanded cut in import duty on gold to 4% from the current 10%.

Finally, the BSE Sensex declined 72.46 points or 0.21% to 34,771.05, while the CNX Nifty was down by 41.10 points or 0.38% to 10,700.45.

The BSE Sensex touched a high and a low of 34,936.03 and 34,735.55, respectively and there were 12 stocks on gaining side as against 19 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index declined 1.74%, while Small cap index was down by 2.21%.

The only gaining sectoral indices on the BSE were IT up by 3.32% and TECK was up by 2.45%, while Realty down by 3.51%, Metal down by 2.83%, Energy down by 2.31%, PSU down by 2.26% and Oil & Gas was down by 1.84% were the top losing indices on BSE.

The top gainers on the Sensex were Wipro up by 4.88%, Infosys up by 3.93%, TCS up by 3.77%, ICICI Bank up by 1.43% and Dr. Reddy’s Lab up by 1.38%. On the flip side, Coal India down by 4.57%, Reliance Industries down by 2.54%, Tata Motors down by 2.30%, Tata Steel down by 2.16% and ITC down by 2.06% were the top losers.

Meanwhile, credit ratings agency, Crisil Ratings in its latest report has said that the government’s recent move to permit 100% foreign direct investment (FDI) in single-brand retail under the automatic route is expected to increase the market share of organised retail in India from 7% to 10% by financial year 2020. Before the change in rules, it had expected the market share of organised retailers to grow to 9% by fiscal 2020, based on healthy revenue growth of about 18% of organised brick and mortar (B&M) retailers.

As per the report, better operating environment for single-brand retail would also mean the pace of store additions will be faster than the annual 10-12%. It also pointed out that the effects of the government’s move will be more pronounced in apparel, luxury goods, home decor, footwear, and electronics, which make up about 45% of the organised retail revenues. It noted that global single-brand retailers facing growth headwinds in their key geographies will now be more than keen to peg a tent here and those already present can step up investments. It added that the previous sourcing norms were a bottleneck to scaling up of operations.

The ratings agency further said that while FDI approvals under the automatic route will lower the time to commence business, the relaxation of 30% local sourcing norms for the first five years by allowing inclusion of incremental sourcing for global operations will also provide sufficient time for new entrants to set up and stabilise their sourcing base. It stated that this could mean increase in competition for domestic organised brick and mortar retailers. However, more foreign retailers vending their ware will also lead to sharper focus on, and improvements in, supply chain efficiencies which will benefit the sector over the medium-term. It believes that healthy growth prospects for the sector and benefits of scale and focus on profitability, will help offset the impact of higher capital spending over the medium-term.

The CNX Nifty traded in a range of 10,687.85 and 10,762.35. There were 17 stocks in green as against 33 stocks in red on the index.

The top gainers on Nifty were Wipro up by 5.90%, HCL Tech up by 4.40%, TCS up by 4.15%, Infosys up by 4.06% and Tech Mahindra up by 2.43%. On the flip side, Coal India down by 4.87%, HPCL down by 3.53%, Reliance Industries down by 2.67%, Bajaj Finance down by 2.66% and Tata Motors down by 2.42% were the top losers.

European markets were trading in green; UK’s FTSE 100 rose 12.83 points or 0.17% to 7,781.97, France’s CAC increased 15.74 points or 0.29% to 5,525.43 and Germany’s DAX was up by 98.28 points or 0.74% to 13,298.79.

Asian equity markets ended in green on Tuesday despite a lack of fresh catalysts as investors looked ahead to more earnings news from the US. Chinese shares rallied, with the blue-chip index closing at a 30-month high, led by a surge in real estate firms, even as a poll backed expectations that growth in the Asian economic powerhouse will slow in 2018. Further, Japanese shares rose to its highest level since late 1991 as the yen's appreciation against the dollar stopped and expectations for strong corporate earnings bolstered investors' sentiments.