Benchmarks continue weak trade on global sell-off

Indian equity benchmarks continued their weak trade in morning session on account of selling in front line blue chip counters taking cues from global sell-off. Asian stocks plunged after a record-breaking loss on Wall Street, extending a global rout as panicked investors fret over rising US borrowing costs and cash in profits after months of market euphoria. Besides, Indian rupee plunged in the early trade against the dollar on combination of factors which includes dollar strength, Union Budget, higher crude prices etc. Traders also took note of foreign brokerage report which enlightened that the economy will growth 7.5 percent level in the first half on a lower base, but will slip down to 7 percent in the second half of the next fiscal. The report added that even with the jump, it will continue to trend 1 percentage point lower than the potential growth of the economy. Separately, another brokerage said that the budgeted fiscal deficit is in line with expectations but there are some risks of slippage in financial year 2018-19, unless economic activities formalize at a rapid pace. It estimates a 20 bps upside risk to the fiscal deficit in 2018-19, unless economic activities formalize at a rapid pace over the coming year to generate the necessary buoyancy in revenues. Moreover, higher oil prices could exert additional pressure on the fiscal deficit.

Investors remained on sidelines ahead to the Reserve Bank of India’s (RBI) policy review meeting which will start later in the day amid expectations that the central bank will tighten its monetary policy stance in the wake of growing concerns over fiscal slippage. Banking stock witnessed selling pressure as they are set to bleed more as their biggest money-spinner in recent times - bond profits - may vanish amid surging yields, removing the shield against mounting bad-loan provisions. This could prolong the agony for local banks with focus now shifting to likely losses in treasury incomes from protracted deterioration in asset quality.

Traders were seen selling in Realty, Consumer Durables and Basic Materials sector stocks. In scrip specific development, Punjab National Bank (PNB) was trading under pressure as the bank came across a suspected fraud involving one branch wherein certain irregularities have been observed on account of people risk. The matter involving Rs 280.70 crore based on preliminary investigation report stands reported to appropriate Regulatory & Investigating Authorities, and the detailed investigation is on.

On the global front, the Asian markets were trading in red following a severe rout in the US market. Japanese Economy Minister Toshimitsu Motegi said that he was monitoring the impact that financial market moves might have on Japan’s economy. Motegi said Japan’s economic fundamentals were solid given an improving labor market and rising wages. Back home, the BSE Sensex and NSE Nifty were trading below the psychological 33,800 and 10,400 levels respectively. The market breadth on BSE was negative in the ratio of 168:2246, while 91 scrips remained unchanged.

The BSE Sensex is currently trading at 33711.14, down by 1046.02 points or 3.01% after trading in a range of 33482.81 and 33941.34. There were 31 stocks declining on the index, while there were no gaining stocks on BSE.

The broader indices were trading in red; the BSE Mid cap index was down by 3.79%, while Small cap index was down by 4.15%.

The losing sectoral indices on the BSE were Realty down by 5.11%, Consumer Durables down by 4.27%, Basic Materials down by 4.24%, Metal down by 4.22%, Industrials down by 4.03%, while there were no gainers on sectoral front on BSE.

The top losers on the Sensex were Tata Motors down by 6.87%, Tata Motors - DVR down by 6.54%, Axis Bank down by 4.47%, Yes Bank down by 4.33% and Tata Steel down by 4.15%.

Meanwhile, global rating agency Moody’s Investors Service, in its latest report on India’s Union Budget 2018 has stated that slightly breaching fiscal deficit goals will have ‘no material impact’ on India’s economic strength and is in line with its expectations. It also said that the India’s Budget for 2018-19 strikes a balance between fiscal prudence and growth. The government has revised fiscal deficit projections for the current fiscal year to 3.5% of gross domestic product (GDP) as compared to 3.2% targeted earlier and it also altered 2018-19 fiscal deficit projection to 3.3% of GDP from earlier target of 3%.

In the report titled ‘Cross-Sector -- India: Fiscal 2019 budget strikes balance between fiscal prudence and growth’, the Moody’s said that the revised fiscal consolidation path is modestly shallower than the previous roadmap, but does not fundamentally alter India’s overall fiscal strength. It also said that the medium-term target to reduce the central government debt-to-GDP ratio to 40% is supportive of the sovereign credit profile. It added that the projected expenditure restraint and strong revenue growth are likely to be broadly achieved, although some measures such as the rule guiding increases in Minimum Support Prices (MSPs) and ambitious goods and services tax (GST) revenue targets could result in some further slippage.

The ratings agency also said that the budget benefits corporates as well as infrastructure and insurance sectors. It highlighted that the government will meet next year’s deficit target, based on achievable budget assumptions and demonstrated commitment to fiscal prudence. However, some ambitious revenue assumptions and uncertainty about some spending items could result in a shortfall to overall fiscal consolidation. It further stated that the budget's measures of higher rural spending, lower corporate taxes, and relaxing restrictions on the ability of financial intermediaries to invest in lower rated corporate bonds are credit positive for most of India’s corporates.

On the sectoral front, it noted that the infrastructure sector will benefit from a boost in spending and the government's continued focus on public investment will also help galvanise India's upturn in capital spending. Finally, the insurance market will benefit from the launch of a national health scheme and the merger, as well as listing, of three state-owned insurers. The insurance, and in particular non-life market, is set to benefit from the growth prospects provided by the widening of universal health insurance cover.

The CNX Nifty is currently trading at 10350.70, down by 315.85 points or 2.96% after trading in a range of 10276.30 and 10423.70. There were 50 stocks declining on the index.

The top losers on Nifty were Tata Motors down by 6.75%, Vedanta down by 4.91%, Axis Bank down by 4.64%, GAIL India down by 4.62% and Indiabulls Housing Finance down by 4.56%.

The Asian markets were trading in red; Hang Seng decreased 1593.32 points or 4.94% to 30,651.90, Nikkei 225 decreased 1491.36 points or 6.58% to 21,190.72, Taiwan Weighted decreased 540.28 points or 4.94% to 10,405.97, Jakarta Composite decreased 162.86 points or 2.47% to 6,426.82, Shanghai Composite decreased 103.01 points or 2.95% to 3,384.49, FTSE Bursa Malaysia KLCI decreased 50.04 points or 2.7% to 1,803.03 and KOSPI Index decreased 47.22 points or 1.9% to 2,444.53.