Benchmarks extend losses in morning session

Indian equity benchmarks extended their losses in morning session on account of selling in front line blue chip counters. The rupee depreciated against the US dollar in early trade at the interbank forex market amid sharp losses in equity markets. The increased demand for the US currency from importers and banks and persistent losses in domestic equity markets weighed on the rupee. The sentiments were downbeat after global ratings agency, Fitch Ratings has 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 Reserve Bank of India 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 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, select PSU stocks were under pressure as the investments budgeted for nine public sector undertakings (PSUs) under the Ministry of Steel have been lowered by 10.45% to Rs 11,316.84 crore for the 2018-19 fiscal. These PSUs are Steel Authority of India (SAIL), Rashtriya Ispat Nigam (RINL), Hindustan Steelworks Constructions, NMDC, KIOCL, Manganese Ore India, MECON, MSTC and Ferro Scrap Nigam. The government had budgeted Rs 12,637.71 crore for these PSUs for the current fiscal. 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. Separately, 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%.

Traders were seen piling up position in Telecom, Oil & Gas and Energy stocks, while selling was witnessed in Capital Goods, Basic Materials and Metal sector stocks. In scrip specific development, Indian Oil Corporation (IOC) was trading in green on planning to invest Rs 3,400 crore in Assam over the next five years to expand its operations by setting up new units as well as upgrading the existing ones. The company’s board has already approved the funding and it may increase in future depending upon the progress of the work.

On the global front, the Asian markets were trading 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. Back home, the BSE Sensex and NSE Nifty were trading below the psychological 34,700 and 10,650 levels respectively. The market breadth on BSE was negative in the ratio of 491:1983, while 112 scrips remained unchanged.

The BSE Sensex is currently trading at 34698.53, down by 368.22 points or 1.05% after trading in a range of 34520.80 and 34843.76. There were 7 stocks advancing against 24 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.57%, while Small cap index was down by 1.93%.

The only gaining sectoral indices on the BSE were Telecom up by 0.74%, Oil & Gas up by 0.15% and Energy up by 0.11%, while Capital Goods down by 2.27%, Basic Materials down by 2.23%, Metal down by 1.70%, Industrials down by 1.61% and Bankex down by 1.51% were the top losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 3.84%, Tata Motors - DVR up by 1.50%, Tata Motors up by 1.34%, Power Grid up by 0.91% and ITC up by 0.25%.

On the flip side, HDFC down by 3.43%, Yes Bank down by 3.11%, Larsen & Toubro down by 2.43%, Hindustan Unilever down by 2.24% and Adani Ports & Special Economic Zone down by 2.04% 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 is currently trading at 10645.15, down by 115.45 points or 1.07% after trading in a range of 10586.80 and 10689.60. There were 9 stocks advancing against 41 stocks declining on the index.

The top gainers on Nifty were Bharti Airtel up by 3.81%, HPCL up by 2.18%, Tata Motors up by 1.41%, BPCL up by 1.29% and Power Grid up by 0.70%.

On the flip side, HDFC down by 3.46%, Vedanta down by 3.38%, Yes Bank down by 2.88%, UPL down by 2.60% and Larsen & Toubro down by 2.56% were the top losers.

The Asian markets were trading mostly in red; Nikkei 225 decreased 531.4 points or 2.28% to 22,743.13, Hang Seng decreased 455.08 points or 1.4% to 32,146.70, Taiwan Weighted decreased 166.24 points or 1.49% to 10,959.99, Jakarta Composite decreased 34.89 points or 0.53% to 6,593.93, KOSPI Index decreased 26.82 points or 1.06% to 2,498.57 and FTSE Bursa Malaysia KLCI decreased 17.1 points or 0.91% to 1,853.38.

On the other hand, Shanghai Composite increased 2.29 points or 0.07% to 3,464.37.