Benchmarks end lower on F&O expiry

Snapping six day winning streak, Indian equity benchmarks ended the January F&O expiry session on pessimistic note with marginal cut on Thursday, as traders opted to remain on sidelines ahead of Union Budget 2018-19, to be announced on February 1, 2018. Markets made cautious start to the day as traders shrugged off private report which enlightened that waning effects from the Goods and Services Tax (GST) impact will help push the Indian GDP growth to 7% in FY19. The report added that the growth has slid from previous year’s 7.1% to 6.5% in FY18 due to the implementation of the GST. But as some of the short-run disruptions caused by GST got ironed out, the firm expects growth to rise in the next couple of years. Traders also paid no heed to report that the Department of Industrial Policy and Promotion (DIPP) notified easing of Foreign Direct Investment (FDI) rules for several sectors, including single brand retail, non-banking financial companies and construction. On January 10, in big bang reforms ahead of the BJP government’s last full Budget, the Union Cabinet had allowed 100% FDI in single brand retail and construction development under the automatic route.

Investors took note that a day after PM spoke about Climate Change at Davos, a biennial report by Yale and Columbia Universities has ranked India among the bottom five countries on the Environmental Performance Index 2018, plummeting 36 points from 141 in 2016. The street took note that petrol and diesel prices have touched new highs in Delhi NCR and other metros on Wednesday. Petrol was sold at Rs 72.43 per litre in Delhi, the highest in three years. In Kolkata, Mumbai and Chennai, petrol was sold at Rs 75.13, Rs 80.30 and Rs 75.12 per litre respectively, also at over three-year high levels. Oil prices have hit their highest since December, 2014, pushed up after US crude inventories posted a 10th straight week of declines and as the dollar continued to weaken.

On the global front, European markets were trading in green in early deals amid investors waiting to see how the European Central Bank would react to a fast-rising euro. Asian markets ended mostly in red, on renewed worries over Donald Trump's America First policies and other protectionist measures like tax cuts.

Back home, public sector banking stocks edged lower after Fitch Ratings highlighted that the government’s Rs 88,139-crore capital infusion in struggling public sector banks (PSBs) should help in part to mitigate risks, but resolution of bad assets and continued high credit costs hinder the sector’s near-term performance. Select domestic pharma companies remained under pressure on ICRA’s report that domestic pharma companies are expected to face pricing pressure by 10-12% on US generic business which may sustain for the next 12 months. This could negatively impact profitability and cash flows before tapering off gradually.

Finally, the BSE Sensex declined 111.20 points or 0.31% to 36,050.44, while the CNX Nifty was down by 16.35 points or 0.15% to 11,069.65.

The BSE Sensex touched a high and a low of 36,247.02 and 35,823.35, respectively and there were 9 stocks on gaining side as against 21 stocks on losing side, while 1 stock remained unchanged on the index.

The broader indices ended in red; the BSE Mid cap index shed 0.75%, while Small cap index was down by 0.68%.

The only gaining sectoral indices on the BSE were Metal up by 0.84% and Capital Goods was up by 0.38%, while PSU down by 1.79%, Realty down by 1.52%, Auto down by 1.18%, TECK down by 1.13% and IT was down by 1.13% were the top losing indices on BSE.

The top gainers on the Sensex were ICICI Bank up by 1.60%, Coal India up by 1.56%, Kotak Mahindra Bank up by 0.99%, Axis Bank up by 0.96% and Larsen & Toubro up by 0.90%. On the flip side, SBI down by 4.96%, Adani Ports & SEZ down by 2.37%, Dr. Reddy’s Lab down by 2.26%, Hero MotoCorp down by 1.95% and TCS down by 1.79% were the top losers.

Meanwhile, the Finance Ministry has said that the additional expenditure of Rs 80,000 crore towards recapitalisation of public sector banks (PSBs) through bonds, as part of Rs 2.11 trillion capital support over two years, will not have an impact on fiscal deficit as they will be cash neutral. Besides, Economic Affairs Secretary S C Garg has noted that these bonds will have 10-15 year tenure and will not have statutory liquidity ratio (SLR) status.

Garg has stated that there is no fiscal impact of bond issuance to banks. He also said that these will be swap deals and cash neutral, and there is not going to be a public issue. He also pointed out that the additional expenditure of Rs 80,000 crore towards bank recapitalisation through issue of government securities will be matched by additional receipts on issues of securities to the banks and will not entail any cash outgo. Talking about the pricing, he said that it would be three months average price of government securities plus the spread.

Earlier, in October, Finance Minister Arun Jaitley had announced an unprecedented Rs 2.11 lakh crore, 2-year road map to strengthen PSBs, reeling under high non-performing assets (NPAs) or bad loans. Their NPAs have increased from Rs 2.75 lakh crore in March 2015 to Rs 7.33 lakh crore as on June 2017. The plan included floating re-capitalisation bonds of Rs 1.35 lakh crore and raising Rs 58,000 crore from the market by diluting government's stake. He had also announced that there would be front loading of re-capitalisation bonds.

The CNX Nifty traded in a range of 11,095.60 and 11,009.20. There were 24 stocks in green as against 26 stocks in red on the index.

The top gainers on Nifty were Indiabulls Housing Finance up by 2.74%, ICICI Bank up by 2.06%, GAIL India up by 1.80%, Ultratech Cement up by 1.59% and Vedanta up by 1.34%. On the flip side, UPL down by 6.76%, SBI down by 5.46%, Adani Ports & SEZ down by 2.84%, Aurobindo Pharma down by 2.82% and Dr Reddy’s down by 2.28% were the top losers.

European markets were trading in green; Germany’s DAX increased 1.16 points or 0.01% to 13,415.90, UK’s FTSE 100 gained 4.57 points or 0.06% to 7,648.00 and France’s CAC was up by 27.5 points or 0.5% to 5,522.66.

Asian equity markets ended mostly in red on Thursday on renewed worries over Donald Trump's America First policies and other protectionist measures like tax cuts. Comments by US Treasury Secretary Steven Mnuchin that he welcomed a weaker currency also added to investors’ worries over the Trump administration's protectionist stance. Chinese shares fell from two-year highs as investors booked some profits after recent strong gains. Further, Japanese shares ended to their lowest level in nearly two weeks as the yen hit a four-month high after the US treasury secretary hailed a ‘weak dollar’ at the World Economic Forum in Davos. Though, Oil and mining stocks outperformed after oil prices hit their highest since December 2014, pushed up after US crude inventories posted a 10th straight week of declines and as the dollar continued to weaken.