Markets enter into red terrain; Sensex below 34,200 mark

Erasing all their initial gains, Key Indian benchmarks entered into red terrain in late morning session, amid concerns of outcome of Reserve Bank of India’s (RBI) monetary policy, which is due later in the day. The sentiments got hit, as the Fitch group company, BMI Research in its latest report has revised India’s fiscal deficit forecast to 3.5 percent of gross domestic product (GDP) for the fiscal year 2018-2019 (FY19) as against its earlier estimate of 3.3 percent. It also said that there is room for fiscal slippage as the government seeks to achieve its 7.5 percent growth target. Besides, selling pressure in Telecom, Banking and TECK stocks, also weighed on the markets. However, downside remained capped with traders taking some comfort from Finance Secretary Hasmukh Adhia’s statement that the import duty hike in 45 items announced in the Budget will earn about Rs 7,000 crore revenue to the government and is mainly intended to give a push to the MSMEs for domestic manufacturing. Some relief also came with the report that as many as 67 foreign direct investment proposals worth Rs 11,703 crore were approved during the first nine months of the ongoing fiscal.

On the global front, Asian markets were trading mostly in green, recovering some of the sharp losses made in the previous sessions, after US stocks closed sharply higher overnight after a volatile session. Concerns about rising bond yields and potentially higher interest rates resulted in a brutal selloff in global markets earlier this week. Back home, in scrip specific development, Tata Motors traded higher after the company’s subsidiary -- Jaguar Land Rover (JLR) reported a rise of 3% in global sales to 49,066 units in January 2018.

The BSE Sensex is currently trading at 34144.59, down by 51.35 points or 0.15% after trading in a range of 34128.91 and 34666.33. There were 19 stocks advancing against 12 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.72%, while Small cap index was up by 1.72%.

The top gaining sectoral indices on the BSE were Realty up by 1.61%, Consumer Durables up by 1.31%, Oil & Gas up by 1.30%, Industrials up by 1.06% and Energy up by 1.01%, while Telecom down by 0.38%, Bankex down by 0.36%, TECK down by 0.17%, Power down by 0.15% and Utilities down by 0.12% were the top losing indices on BSE.

The top gainers on the Sensex were Coal India up by 2.15%, ONGC up by 2.10%, Tata Motors up by 1.75%, Tata Motors - DVR up by 1.58% and Dr. Reddy’s Lab up by 1.24%. On the flip side, NTPC down by 2.69%, HDFC Bank down by 1.55%, Wipro down by 1.49%, Bharti Airtel down by 1.37% and Yes Bank down by 1.17% were the top losers.

Meanwhile, Fitch Ratings in its latest report stated that the Indian government’s budget has pushed back fiscal consolidation, leaving much of the task of strengthening weak public finances to the next administration after the 2019 general elections. However, it said that the budget target revisions are modest, and are balanced by positive reform momentum and a strong economic outlook. Besides, it noted that postponement of consolidation in part reflects policies to support the economy, which was held back last year by weak investment and disruptions caused by demonetisation and the introduction of the Goods and Services Tax (GST).

The US-based agency has stated that in the Union Budget for 2017-18, the government announced new spending initiatives including measures to boost rural incomes, an ambitious National Health Protection Scheme intended to provide health insurance cover to 50 crore Indians, and funding for the construction and upgrading of medical colleges and hospitals. It noted that this spending will benefit a large section of the public ahead of general elections due by May 2019. Adding further, it said that the government has revised the fiscal deficit target at 3.5% of GDP for 2017-18 and projected 2018-19 deficit at 3.3% of GDP, compared with original targets of 3.2% and 3%, respectively. It indicated that the fiscal slippage of 0.3% of GDP in both 2017 -18 and 2018-19 is relative to last year’s budget targets of 3.2% and 3% of GDP, respectively.

According to the report, the target for FY18 was missed largely because of higher expenditure. It also said that this government’s initial fiscal plan, set out in 2014, aimed to reduce the deficit to 3% of GDP by FY18 - the level consistent with the Fiscal Responsibility and Budget Management (FRBM) Act of 2003. It pointed out that despite this slippage, the government stated in the budget that it plans to adopt a ceiling of 40% of GDP for central government debt, as recommended by the FRBM Committee in January 2017, compared to an estimated 50% of GDP in 2017-18. It added that this would be a positive step towards a more prudent fiscal framework, if eventually adhered to, even if debt is unlikely to fall below the ceiling by 2022-23, as recommended by the committee.

The CNX Nifty is currently trading at 10489.65, down by 8.60 points or 0.08% after trading in a range of 10489.40 and 10614.00. There were 32 stocks advancing against 18 stocks declining on the index.

The top gainers on Nifty were HPCL up by 4.42%, Aurobindo Pharma up by 2.61%, Coal India up by 2.29%, ONGC up by 2.21% and Indiabulls Housing Finance up by 1.55%. On the flip side, NTPC down by 2.81%, HCL Tech down by 2.53%, Bharti Airtel down by 1.70%, HDFC Bank down by 1.47% and Wipro down by 1.43% were the top losers.

Asian markets were trading mostly in green; FTSE Bursa Malaysia KLCI increased 26.76 points or 1.48% to 1,839.21, Jakarta Composite increased 74.18 points or 1.14% to 6,552.72, Taiwan Weighted increased 147.54 points or 1.42% to 10,551.54, Nikkei 225 increased 179.08 points or 0.83% to 21,789.32 and Hang Seng increased 224.22 points or 0.73% to 30,819.64.

On the flip side, Shanghai Composite decreased 34.51 points or 1.02% to 3,336.14 and KOSPI Index decreased 30.37 points or 1.24% to 2,422.94.