Benchmarks end lower on Monday; Nifty slips below 10,400 mark

Indian equity benchmarks ended the Monday’s trade on disappointing note with frontline gauges settling below their crucial 33,800 (Sensex) and 10,400 (Nifty) levels. Markets started the session on pessimistic note, as traders remained concerned with report that an index mapping the country’s short-term financial conditions has plunged over 12 points for the fourth quarter of the current fiscal ending March 31, as compared to the previous quarter. A joint study by the Confederation of Indian Industry (CII) and the Indian Banks’ Association (IBA) has indicated that the India’s financial conditions index stood at 53.2 for Q4 (January-March) of 2017-18 as against 65.3 in the previous quarter, thereby registering a significant fall of 12.1 points. Sentiments also remained dampened on report that in lieu of the ongoing fraudulent transaction scam involving Punjab National Bank, the ASSOCHAM demanded that the government to reduce its stake in banks to less than 50. Meanwhile, the government’s chief economic advisor Arvind Subramanian underlined the need for more privatization in the banking sector.

Adding to the pessimism, foreign investors, so far this month, have pulled out a staggering $1 billion or Rs 6,850 crore from equities during February 1-16 from the Indian stock market in the wake of sell-offs globally. This is against the total inflow of over Rs 13,780 crore by Foreign Portfolio Investors (FPIs) in January. The selling got intensified and markets even went to test their psychological 33,600 (Sensex) and 10,300 (Nifty), but key gauges got strong support near those levels and managed to prune some of their losses to end off day’s low. Some solace came with Prime Minister Narendra Modi’s statement that the budget reforms have created a new work culture and they are transforming the socio-economic landscape of the country. He said the budget was not limited to outlay, its focus was on the outcome.

On the global front, European markets were trading mostly in red after a survey showed that British households’ gloom about their finances deepened this month, and most now expect borrowing costs to rise again within six months after the Bank of England raised interest rates in November. However, Asian markets ended mostly in green, as sentiments improved gradually from a recent shakeout that stemmed from fears of creeping inflation and higher borrowing costs.

Back home, banking stocks remained under pressure on report that the exposure of Indian banks in the alleged fraud involving jeweller Nirav Modi, his relatives and associated companies may touch Rs 20,000 crore, almost twice the initial estimate. The amount cited above would include bonafide credit to related firms that now risks being classified as bad debt given that the promoters have been accused of fraud. The amount involved was initially pegged at Rs 11,300 crore. Steel stocks lost sheen on report that India’s export of finished steel shrank by over 30% to 0.616 million tonnes (MT) during January 2018. However, aviation companies stocks InterGlobe Aviation, SpiceJet and Jet Airways closed in green as investors reacted to strong growth in air traffic for January. According to DGCA data, domestic air traffic grew 20% in January, with airlines ferrying more than 1.14 crore passengers.

Finally, the BSE Sensex declined 236.10 points or 0.69% to 33,774.66, while the CNX Nifty was down by 73.90 points or 0.71% to 10,378.40.

The BSE Sensex touched a high and a low of 34,122.96 and 33,554.37, respectively and there were 8 stocks on gaining side as against 23 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index declined 1.05%, while Small cap index was down by 0.99%.

The top losing sectoral indices on the BSE were Metal down by 1.60%, Capital Goods down by 1.56%, PSU down by 1.38%, Industrials down by 1.34% and Basic Materials was down by 1.17%, while there were no gainers on the BSE sectoral front.

The top gainers on the Sensex were Coal India up by 0.66%, Axis Bank up by 0.57%, Infosys up by 0.46%, Reliance Industries up by 0.45% and Kotak Mahindra Bank up by 0.31%. On the flip side, Tata Steel down by 5.82%, Asian Paints down by 2.77%, Dr. Reddy’s Lab down by 2.75%, Adani Ports & SEZ down by 2.72% and Larsen & Toubro down by 2.35% were the top losers.

Meanwhile, India Ratings and Research (Ind-Ra) in its latest report has retained a stable outlook on the solar sector and revised wind energy sector’s outlook from negative to stable for the financial year 2018-19. The development comes in the backdrop of favourable environment for wind and solar energy sectors, as bids are being driven by central government agencies and power purchase agreements (PPAs) are becoming favourable to developers in terms of addressing grid curtailment and termination issues. However, it has maintained a negative outlook for the thermal power sector for FY19, owing to lack of visibility for tying up long-term PPAs. 

The ratings agency has stated that development of guarantee funds by states/bidders, incentives to local solar panels manufacturers and exploring of wind-solar hybrid projects and offshore wind projects show a sustaining growth momentum in renewable power. It also said that another favourable development helping the renewable sector is from the bond market. However, it noted that few obstacles such as uncertainties in solar panel costs, unpredictable behaviour of distribution companies (discoms) and operational troubles from wind turbine manufacturers need to be addressed by renewable developers.

According to the report, existing excess power tie-up of discoms and PPAs already signed with central and state sector generating companies for buying power from 40GW under construction thermal plants, prevent the need for purchasing power from private thermal plants under long-term PPAs. Also, it noted that thermal plants remain vulnerable to coal and water availability, thus certainty in these two linkages is hard to come by. For power transmission projects, Ind-Ra has maintained a stable outlook on the back of high project availability and stable receivable period of interstate transmission assets.

The CNX Nifty traded in a range of 10,489.35 and 10,302.75. There were 13 stocks in green as against 37 stocks in red on the index.

The top gainers on Nifty were Bharti Infratel up by 1.31%, Yes Bank up by 0.82%, Reliance Industries up by 0.76%, Coal India up by 0.76% and Axis Bank up by 0.73%. On the flip side, Tata Steel down by 5.91%, Dr. Reddy’s Lab down by 2.65%, Bajaj Auto down by 2.50%, HCL Tech down by 2.47% and Larsen & Toubro was down by 2.47% were the top losers.

European markets were trading in red; Germany’s DAX slipped 10.53 points or 0.08% to 12,441.43, UK’s FTSE 100 dipped 6.24 points or 0.09% to 7,288.46 and France’s CAC was down by 2.76 points or 0.05% to 5,278.82.

Asian stocks closed in green on Monday following last week's gains on Wall Street. Meanwhile, trading volumes remained thin across the region as markets in China, Hong Kong, and Taiwan remained shut due to the Lunar New Year holiday. Japanese shares rallied, with a weaker yen, firmer lead from Wall Street and encouraging trade data helping support underlying sentiments. Japan posted a merchandise trade deficit of 943.417 billion yen in January, the Ministry of Finance said - an improvement of 13.6 percent from a year earlier. That exceeded forecasts for a shortfall of 1,003.6 billion yen following the 358.7 billion yen deficit in December.