Benchmarks trade lower ahead of Union Budget

Indian equity benchmarks made a weak start and are trading slightly in red in early deals on Wednesday, as traders opted to stay away from buying risky assets ahead of upcoming budget to be released on February 1, 2018. However, losses remained capped with traders taking some solace with report that India has been ranked sixth in the list of wealthiest countries with total wealth of $8,230 billion, while the United States topped the chart. Traders also get some comfort with ratings agency Moody’s statement that recently introduced goods and services tax (GST) mechanism is still a work in progress that will ultimately result in formalisation of economy. It added that it was a necessary step to help banks and such reforms should continue.

On the global front, Asian markets, after making a subdued start, entered into green terrain as traders opted to buy beaten-down but fundamentally strong stocks. The US markets ended mostly in red on Tuesday due to profit taking, with traders cashing in on the recent strength of the markets. Traders were also looking ahead to the Federal Reserve’s monetary policy announcement on Wednesday.

Back home, stocks related to infrastructure, power and petroleum remained buzzing after a high powered committee headed by telecom secretary and consisting of secretary road transport and highways, power, petroleum and member (engineering) rail board has been formed to look into modalities of government to government sharing of infrastructure for setting up utilities such water pipes, telecom and power cables and national highways. In scrip specific developments, M&M gained on inking SSA to acquire 26% stake in MITRA, while Welspun Enterprises moved up on acquiring 49% stake in Chikhali-Tarsod project.

The BSE Sensex is currently trading at 35957.19, down by 76.54 points or 0.21% after trading in a range of 35909.45 and 36047.67. There were 14 stocks advancing against 17 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index declined 0.29%, while Small cap index was up by 0.20%.

The top gaining sectoral indices on the BSE were Realty up by 1.07%, Telecom up by 0.78%, Basic Materials up by 0.33%, Metal up by 0.22% and Oil & Gas was up by 0.16%, while IT down by 0.55%, Capital Goods down by 0.51%, FMCG down by 0.51%, Consumer Durables down by 0.37% and TECK was down by 0.36% were the top losing indices on BSE.

The top gainers on the Sensex were Hero MotoCorp up by 1.10%, SBI up by 0.75%, Tata Motors up by 0.69%, Kotak Mahindra Bank up by 0.64% and Bharti Airtel up by 0.56%. On the flip side, Coal India down by 2.09%, Hindustan Unilever down by 1.75%, Dr. Reddys Lab down by 1.60%, TCS down by 1.15% and Power Grid Corporation down by 1.10% were the top losers.

Meanwhile, a joint study carried out by the industry body Associated Chambers of Commerce & Industry of India (ASSOCHAM) and rating agency CRISIL has stated that with a meagre 35% and 17% debt market penetration in Government securities (G-secs) and corporate bonds, India’s debt market significantly trailing those of the developed economies like the United States of America (USA) where it is 83% and 123% respectively. It added that Indian debt market also suffers from a skew towards sovereign paper, with G-secs (including treasury bills and state-development loans) accounting for three-fourths of the pie, while bank loans form predominant medium of corporate funding. It noted that corporate bond market has grown over the years, it is heavily tilted towards top-rated papers and the banking, financial services and insurance domains, both in primary and secondary segments.

According to the report, there is lack of participation, of both individual and institutional investors. While individual investors limit themselves to the most accessible bank fixed deposits (FDs), institutional investors, such as insurance and pension funds are restricted by regulatory constraints, especially in terms of preference to G-secs over bonds. As per the study, response of foreign portfolio investors (FPIs) has remained mixed, individual investors are warming up to debt investments evidently as their investments in debt mutual funds increased from Rs 74,386 crore as of March 2009 to Rs 3.63 lakh crore as of September 2017. Moreover, a slew of macroeconomic and regulatory developments have aided growth of debt market.

On the economic front, the study said that stable inflation, fiscal improvement, a stable currency and addressing of structural interest rate issues by linking transmission of interest rates to small savings instruments have helped. While it added that on the regulatory front the positives include - implementation of Insolvency and Bankruptcy Code (IBC), uniform bond valuation, standardisation of issuance/reissuance and electronic biddings, framework for large borrowers, additional norms for credit rating agencies and corporate bond repos.

Adding that bringing a higher share of people under organised sector employment, promotion of financial intermediation and measures to increase foreign investors into the debt market would spur its growth, it said that more needs to be done, in terms of investor awareness, development of new products and simplification of taxation structure. Highlighting the important role of debt market in the global economy, the study said it benefits all the three parties associated that is issuers, investors and regulator/environment.

The CNX Nifty is currently trading at 11030.25, down by 19.40 points or 0.18% after trading in a range of 11010.70 and 11058.50. There were 24 stocks advancing against 26 stocks declining on the index.

The top gainers on Nifty were Hindalco up by 2.15%, Indian Oil Corporation up by 1.14%, Hero MotoCorp up by 1.07%, Kotak Mahindra Bank up by 0.77% and GAIL India up by 0.72%. On the flip side, Coal India down by 2.21%, Hindustan Unilever down by 1.79%, Dr. Reddys Lab down by 1.64%, ONGC down by 1.44% and Power Grid Corporation down by 1.26% were the top losers.

Asian markets were trading mostly in green; Shanghai Composite rose 5.98 points or 0.17% to 3,493.99, Taiwan Weighted gained 15.96 points or 0.14% to 11,092.74, KOSPI Index increased 23.86 points or 0.93% to 2,591.60, Nikkei 225 jumped 43.91 points or 0.19% to 23,335.88, Jakarta Composite added 45.28 points or 0.69% to 6,620.77 and Hang Seng was up by 137.9 points or 0.42% to 32,745.19.