Bloodbath continues on Dalal Street on Monday; Sensex slips below 34,800 mark

Bears took full control over Dalal Street on Monday, with frontline gauges settling below their crucial 34,800 (Sensex) and 10,700 (Nifty) levels, as traders opted to stay away from risky assets ahead of Reserve Bank of India’s (RBI’s) monetary policy meeting to be start from tomorrow. Markets, after a gap-down start, traded with pessimism throughout the session, as traders remained concerned that Union Budget could push up inflation and prompt the central bank to raise interest rates soon. sentiments also remained dampened with Fitch Ratings’ statement that high debt burden of the government constrains India’s rating upgrade, after Finance Minister Arun Jaitley projecting a fiscal deficit of 3.5 per cent of GDP against the earlier target of 3.2 per cent. 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. Traders failed to get any sense of relief with report that the Indian service sector remained in expansion mode in January, registering the fastest rise in activity in three months driven by a renewed increase in new business orders. The seasonally adjusted Nikkei Services Business Activity Index improved to 51.7 in January, up from 50.9 in December.

Traders took note of industry body ASSOCHAM’s report stating 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. Meanwhile, DEA Secretary Subhash Chandra Garg said 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.

Weak opening in European counters too dampened sentiments, 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. Asian markets ended mostly in red, as investors remained worried that rising inflation could prompt central banks to tighten monetary policy faster than expected.

Back home, telecom stocks exhibited mixed trend, 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. Stocks related to chemical sector remained in focus on report that the government planning to impose antidumping duty on import of a chemical, used in industries like plastics, from four countries, including China, for three years to guard domestic players from cheap shipments.

Finally, the BSE Sensex tumbled 309.59 points or 0.88% to 34,757.16, while the CNX Nifty was down by 94.05 points or 0.87% to 10,666.55.

The BSE Sensex touched a high and a low of 34,874.17 and 34,520.80, 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 slipped 0.09%, while Small cap index was down by 0.37%.

The top gaining sectoral indices on the BSE were Telecom up by 1.68%, Auto up by 0.73%, Power up by 0.68%, Utilities up by 0.65% and PSU was up by 0.38%, while Capital Goods down by 2.65%, Bankex down by 1.11%, Basic Materials down by 1.01%, Industrials down by 0.59% and Metal was down by 0.56% were the top losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 4.20%, Tata Motors up by 3.12%, Tata Motors - DVR up by 2.27%, Power Grid Corporation up by 2.08% and ITC up by 1.43%. On the flip side, HDFC down by 4.06%, Larsen & Toubro down by 3.65%, Kotak Mahindra Bank down by 2.66%, Indusind Bank down by 2.36% and Bajaj Auto down by 2.12% were the top losers.

Meanwhile, department of Economic Affairs Secretary Subhash Chandra Garg has said that the Finance Ministry is hopeful of meeting fiscal deficit target of 3.3 percent of the gross domestic product (GDP) for the year 2018-19, citing lesser number of uncertainties ahead, even as it missed its target for the current financial year. Calling this year’s upward revision of fiscal deficit target to 3.5 percent from 3.2 percent a ‘one-off aberration’, he said that the Indian economy is well on its path of fiscal consolidation despite a small pause of a year.

To further improve the credibility of it, the Secretary has stated that they have now proposed an amendment in the Fiscal Responsibility and Budget Management Act to statutorily bind the government to pin down fiscal deficit to three percent by 2021. He also pointed out that various factors, including the implementation of the Goods and Services Tax (GST) regime and shortfall in the non-tax revenue, led to a wider fiscal deficit in the current year. Besides, he said that while the government received better proceeds in some areas like direct tax collections and disinvestment, overall it fell short by around Rs 50,000 crore. He added that that’s the reason they have a fiscal deficit of 3.5 percent.

Garg further said that the country's economy was virtually in the last leg of fiscal consolidation and that concerns about fiscal deficit were certainly overblown. He also said that although not every quarter has that concern, most people believe that it’s very strong fiscal consolidation, unparalleled of the government’s undertaking this kind of fiscal consolidation in the world. However, he said that there are some sections which still have some reservations.

The CNX Nifty traded in a range of 10,702.75 and 10,586.80. There were 24 stocks in green as against 26 stocks in red on the index.

The top gainers on Nifty were Bharti Airtel up by 4.98%, Tata Motors up by 3.71%, Bosch up by 2.70%, HPCL up by 2.44% and Coal India up by 1.91%. On the flip side, HDFC down by 4.14%, Larsen & Toubro down by 3.40%, Indusind Bank down by 2.63%, Adani Ports & SEZ down by 2.39% and Indiabulls Housing Finance down by 2.17% were the top losers.

European markets were trading in red; UK’s FTSE 100 declined 80.93 points or 1.09% to 7,362.50, Germany’s DAX decreased 75.83 points or 0.59% to 12,709.33 and France’s CAC was down by 46.33 points or 0.86% to 5,318.65.

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.