Benchmarks continue weak trade; Sensex below 34,000 mark

Indian equity benchmarks continued their weak trade in morning session on account of selling in frontline blue chip counters taking cues from global sell-off. The rupee opened with a loss against the dollar on fears that the regime of lower borrowing costs is nearing its end with a quicker removal of easy monetary policy by central banks worldwide. Traders took note that foreign portfolio investors (FPIs) have turned wary on Indian shares again owing to the recent global market sell-off triggered by rising bond yields in developed markets including in the US and the euro zone. FPIs have sold shares worth Rs 3,665.6 crore in the domestic stock market (including provisional data of Wednesday and Thursday) in February after pumping close to Rs 13,000 crore into Indian equities in January. Separately, Former Reserve Bank of India (RBI) governor Duvvuri Subbarao said that Finance Minister Arun Jaitley’s decision to relax on fiscal consolidation to give himself more room to spend is a questionable, and by far the most disappointing decision of the budget. He added that the finance minister inherited a fiscal deficit of 4.2% of GDP and he brought it down to 3.5%. But this was at a time when oil price was low and food prices were soft because of good monsoons.

Investors took note that banks have started raising interest rates even though the RBI is leaving its rates unchanged, as risks such as surging bond yields and more provisioning requirements erode their profit. The raising of rates by major banks are likely to follow suit, raising concerns of de facto rate increases in an economy that is growing at its slowest pace in three years and needs private investment. The street shrugged off the Finance Minister Arun Jaitley’s statement that India was adversely affected post the global economic slowdown of 2010. Despite that, he said it was an achievement that India’s GDP growth was the highest in the world in the last three years, as he defended the 2018 Budget in the Lok Sabha. Jaitley said it was a mark of India’s progress that organizations like IMF and World Bank have recognized India as one of the fastest growing economy among its peers.

Meanwhile, sugar stocks were buzzing in today’s trade. The central government has put a ceiling on the amount of sugar mills can sell by imposing significant minimum stocks for the next two months to check falling prices. Millers have welcomed the decision, saying it will help further improve sugar prices, which have already jumped 3.5% since the government doubled import duty on sugar to 100%. Banking stocks were under pressure after India Ratings and Research (Ind-Ra), a subsidiary of Fitch Ratings, in its latest report has stated that public sector banks (PSBs) may need more capital for higher growth. It has estimated that state-run banks may need capital of Rs 2.06 trillion for a credit growth of 8-9% in the financial year 2018-19. It added that the recapitalization amount from the government will go towards sustaining the banks.

Traders were seen piling position in Metal stocks, while selling was witnessed in Bankex, IT and TECK sector stocks. In scrip specific development, Fortis Healthcare was trading firm after Malvinder Mohan Singh and Shivinder Mohan Singh, the founding promoters of the company, have resigned as directors from the company’s board, following the Delhi High Court order upholding the Rs 3,500 crore arbitral award in favour of Daiichi Sankyo. The decision to distance from the board of the company was aimed at insulating the company from the promoters’ ongoing legal fight that was hurting performance. Steel Authority of India (SAIL) was trading in green as company turned profitable in the quarter ended December 2017.

On the global front, the Asian markets were trading in red, with Chinese shares slipping to multi-month lows after Wall Street shares dropped again in the face of rapidly-rising bond yields. In addition to pressure from the drop in global shares, Chinese equities were weighed by factors such as investors attempting to stay liquid ahead of the Lunar New Year holidays and pressure to meet rising margin calls. Back home, the BSE Sensex and NSE Nifty were trading below the psychological 34,000 and 10,450 levels respectively. The market breadth on BSE was negative in the ratio of 842:1498 while 93 scrips remained unchanged.

The BSE Sensex is currently trading at 33936.61, down by 476.55 points or 1.38% after trading in a range of 33849.65 and 34017.73. There were 3 stocks advancing against 28 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.70%, while Small cap index was down by 0.49%.

The only gaining sectoral index on the BSE was Metal up by 0.45%, while Bankex down by 1.90%, IT down by 1.53%, TECK down by 1.40%, Oil & Gas down by 1.15% and Capital Goods down by 1.03% were the top losing indices on BSE.

The few gainers on the Sensex were Tata Steel up by 1.07%, Coal India up by 0.48% and Bharti Airtel up by 0.33%.

On the flip side, ICICI Bank down by 2.97%, Axis Bank down by 2.23%, Infosys down by 1.98%, Yes Bank down by 1.88% and HDFC down by 1.86% were the top losers.

Meanwhile, the Indian IT trade body, National Association of Software and Services Companies (NASSCOM) has said that prospect for the Indian information technology (IT) sector is ‘cautiously optimistic’ in the calendar year (CY) 2018 as challenges continue amidst prospects of greater IT spending with global and US economies improving. It also dismissed any speculation about 2018 being the revival year for the sector, explaining that major revivals take time.

Nasscom President R Chandrashekhar has agreed that no doubt the global outlook was looking up as the global economy, the US economy and all of that are all looking positive. Adding further, he pointed out that the short-term prognosis for the global economy is good; US economy is doing well, which usually does translate into greater IT spending, even though it may not be visible today. However, he warned that it does not immediately translate into bigger prospects for the domestic IT industry and also said that the industry needs to tread with caution as there is always a phase-lag and that many things can happen in-between.

Chandrashekhar further said that old challenges continue and none of them have disappeared, and some of them may have abated, while some others may have reduced either in immediacy or in their magnitude of impact. He also said that there are new ones like continued small administrative actions in the US which have been there that don't individually have a big impact, but collectively they add up to a number of negatives. So, he noted that all those things are now a part of business in a global industry which is dealing with de-globalisation and anti-globalisation.

The CNX Nifty is currently trading at 10431.35, down by 145.50 points or 1.38% after trading in a range of 10398.20 and 10453.90. There were 4 stocks advancing against 46 stocks declining on the index.

The top gainers on Nifty were Lupin up by 1.42%, Tata Steel up by 1.09%, Coal India up by 0.73% and Bharti Airtel up by 0.24%.

On the flip side, Indiabulls Housing down by 2.86%, ICICI Bank down by 2.74%, Axis Bank down by 2.37%, Bharti Infratel down by 2.22% and Tech Mahindra down by 2.18% were the top losers.

The Asian markets were trading in red; Hang Seng decreased 1041.16 points or 3.42% to 29,410.11, Nikkei 225 decreased 614.11 points or 2.81% to 21,276.75, Taiwan Weighted decreased 144.06 points or 1.37% to 10,384.46, Shanghai Composite decreased 136.79 points or 4.19% to 3,125.26, Jakarta Composite decreased 72.13 points or 1.1% to 6,472.51, KOSPI Index decreased 49.04 points or 2.04% to 2,358.58 and FTSE Bursa Malaysia KLCI decreased 15.86 points or 0.86% to 1,823.58.