Post Session: Quick Review

Indian equity benchmarks traded on a weak note throughout the day and ended with a cut of around a percentage point. After Budget 2018, all eyes are now on Reserve Bank of India’s (RBI) monetary policy scheduled to be released on February 7. The street expects the status quo on policy rates but the commentary would be key to watch out for. The equity benchmarks made gap-down opening and traded with a cut of around a percent in early deals as traders remained concerned that Union Budget could push up inflation and prompt the central bank to raise interest rates soon. The sentiments were downbeat after global ratings agency, Fitch Ratings said that high debt burden of the government is an obstacle to India’s sovereign rating upgrade. For the next fiscal year 2018-19, the government projected fiscal deficit at 3.3% of GDP. Besides, the US-based agency had kept India’s sovereign rating unchanged at ‘BBB-’, the lowest investment grade with stable outlook, citing weak fiscal position. The street took note of DEA Secretary Subhash Chandra Garg’s statement that achieving a double-digit economic growth for India in current global scenario is difficult but the country is on path to clock 8% plus expansion by 2020-21. Garg added that achieving double digit growth is difficult as the growth in the global economy is not that high.

Separately, industry body ASSOCHAM said that the RBI should not over-react to high yield pressures in the bond market and should refrain from hiking interest rates in its next monetary policy review outcome on February 7. ASSOCHAM enlightened in a post-Budget paper that some of the macro indicators, including pegging of higher fiscal deficit of 3.3% for 2018-2019 and 3.5% of the GDP for the current fiscal, look difficult, but reaction of the bond market would ease out soon. Mixed reactions were witnessed in telecom stocks as the Telecom Regulatory Authority of India (TRAI) is likely to unveil guidelines on transparent pricing this week, even as it considers challenging Telecom Dispute Settlement and Appellate Tribunal’s directions to it on the subject. Last Thursday, TDSAT directed TRAI to act against Reliance Jio for not adhering to the seven-day limit of reporting the Welcome Offer, besides asking the regulator to frame guidelines around transparent and non-predatory pricing.

The street shrugged off the report that the Nikkei India services Purchasing Managers’ Index, or PMI, rose to 51.7 in January from December’s 50.9. The report enlightened that the recovery across India’s service sector continued during January, with growth in output picking up to the joint-strongest since June 2017 as underlying demand conditions improved. Meanwhile, Commerce Minister Suresh Prabhu said that the government will come out with a strategy document on increasing the share of exports to 20% of the GDP. For this he requested industry to come up with proper business plan to increase exports. According to Federation of Indian Export Organisation (FIEO), the current share of exports in GDP is 18-19%. Separately, global rating agency Moody’s enlightened that Budget for 2018-19 strikes a balance between fiscal prudence and growth, and a slight slippage in fiscal deficit has no material impact on overall economic strength.

On the global front, Asian markets closed mostly in red. China’s services sector got off to a flying start in 2018, expanding at its fastest pace in almost six years as new orders surged and companies rushed to hire more staff. The Caixin/Markit services purchasing managers’ index (PMI) rose to 54.7 in January from December's 53.9, marking the highest reading since May 2012. The European markets were trading in red, as weakness seen in markets overseas weighs on sentiment. Britain’s economy slowed sharply in January, according to a survey which cast doubt on growing expectations among investors that the Bank of England might be gearing up to raise interest rates again in the coming months.

The BSE Sensex ended at 34782.07, down by 284.68 points or 0.81% after trading in a range of 34520.80 and 34874.17. There were 13 stocks advancing against 18 stocks declining on the index. (Provisional)

The broader indices ended mixed; the BSE Mid cap index was up by 0.08%, while Small cap index was down by 0.14%. (Provisional)

The top gaining sectoral indices on the BSE were Telecom up by 1.63%, Auto up by 0.88%, Power up by 0.85%, Utilities up by 0.76% and PSU up by 0.56%, while Capital Goods down by 2.32%, Bankex down by 1.15%, Basic Materials down by 0.72%, Industrials down by 0.30%, IT down by 0.28% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were Bharti Airtel up by 3.95%, Tata Motors up by 3.48%, Tata Motors - DVR up by 2.22%, Power Grid up by 2.08% and ITC up by 1.62%.  (Provisional)

On the flip side, HDFC down by 3.75%, Larsen & Toubro down by 3.40%, IndusInd Bank down by 2.32%, Kotak Mahindra Bank down by 2.08% and Adani Ports & Special Economic Zone down by 1.96% were the top losers. (Provisional)

Meanwhile, maintaining expansion mode for the second straight month, activity in India’s services sector grew at the fastest pace in three months in January, with recovery in new business orders. Signaling a further increase in activity at the start of 2018, the seasonally adjusted Nikkei Services Business Activity Index remained above the neutral mark of 50.0 in January, posting reading at 51.7, up from 50.9 in December. Besides, as manufacturing production growth eased from December’s 60-month high, the Nikkei Composite Output Index, which measures both manufacturing and services, fell to 52.5 in January from 53.0 in December.

The report stated that new orders rose for the third consecutive month at manufacturing companies. It also said that growth rates for activity and employment accelerated since December, but remained weaker than their respective long-run survey averages. The latest survey data signalled that capacity constraints remained evident across both the manufacturing and service sectors, as the volume of outstanding business rose for the twentieth successive month.

It added that higher backlogs partly reflected delayed customer payments for orders. Reflecting improved demand conditions, manufacturers raised their payroll numbers for the sixth consecutive during January. Job creation accelerated to the second strongest in over six-and-a-half years, but, as firms struggled in receiving timely payments, the Goods and Services Tax (GST) continued to be a key constraint to businesses and the service sector remained a laggard relative to its manufacturing counterpart.

As per the report, Indian manufacturers registered a further marked increase in their average cost burdens during January. Subsequently, manufacturing companies reportedly raised their output charges to pass on higher input costs to consumers. On inflation front the survey revealed that service sector input price inflation stabilized at a moderate pace in January, remaining below the long-run survey average. That said, costs rose sufficiently to generate another increase in prices charged by service providers, with those in the Information & Communication sector registering the strongest inflation of charges.

The CNX Nifty ended at 10692.55, down by 68.05 points or 0.63% after trading in a range of 10586.80 and 10702.75. There were 23 stocks advancing against 27 stocks declining on the index. (Provisional)

The top gainers on Nifty were Bharti Airtel up by 4.89%, Tata Motors up by 3.71%, Bosch up by 2.70%, HPCL up by 2.51% and Coal India up by 1.91%. (Provisional)

On the flip side, HDFC down by 4.14%, Larsen & Toubro down by 3.37%, IndusInd Bank down by 2.63%, Adani Ports & Special Economic Zone down by 2.39% and Indiabulls Housing down by 2.17% were the top losers. (Provisional)

The European markets were trading in red; UK’s FTSE 100 decreased 73.51 points or 0.99% to 7,369.92, Germany’s DAX decreased 52.99 points or 0.41% to 12,732.17 and France’s CAC decreased 38.4 points or 0.72% to 5,326.58.

Asian stocks ended mostly in red on Monday, following steep losses on Wall Street on Friday, after a strong jobs report for January helped to fuel expectations that the Federal Reserve will lift borrowing costs more than the three times initially expected this year. The report showed that non-farm payroll employment surged up by 200,000 jobs in January after climbing by an upwardly revised 160,000 jobs in December. Japanese shares followed regional peers lower, with selling seen across the board. Though, Chinese shares bucked the weak regional trend to end notably higher after data showed that China's private sector activity expanded at the fastest pace in seven years in January, driven by accelerated rates of activity growth across both manufacturing and services. The Caixin composite PMI rose to 53.7 from 53.0 in December.