Benchmarks end in red ahead of GDP data

Indian equity benchmarks ended the Tuesday’s trade in red terrain as traders opted to remain on sidelines ahead of Gross Domestic Product (GDP) numbers for December quarter to be released on Wednesday. Despite making an optimistic start markets turned negative and traded choppy throughout the session, as traders remained concerned on report that investments in the domestic capital market through participatory notes (P-notes) plunged to a nearly eight-and-a-half-year low of Rs 1.19 lakh crore in January-end amid stringent norms put in place by regulator SEBI to check misuse. Traders also remained worried on private report stating that inflation is expected to trend higher and though RBI may keep policy rates on hold in 2018-19, there are also increasing chances of a rate hike. Sentiments remained downbeat, as the government categorised around 9,500 non-banking financial companies -- about 80 per cent of the NBFCs in the country -- as high risk prone as they have not complied with a stipulated provision of the anti-money laundering law.

However, losses remained capped as traders get some relief with report that India’s economic recovery is expected to have gathered momentum as economists expect India’s GDP to grow 6.9 percent in the December quarter, the fastest pace in a year and up from 6.3 percent in July-September quarter, on the back of increased spending by consumers, businesses and the government. Investors also got some solace with economic think-tank NCAER’s report that the Indian economy is projected to grow at 6.7 per cent in the current financial year and 7.5 per cent in 2018-19. The figures are in line with the growth projections in this year’s Economic Survey, which said India is likely to clock 7-7.5 per cent growth in 2018-19, up from 6.75 per cent in the current fiscal. Some support also came with report that the government plans to cut red tape and ease rules for foreign portfolio investors (FPI), as it seeks to attract more investments into Asia’s third-largest economy.

On the global front, European markets were trading mostly in green despite European Commission said that euro zone sentiments fell as expected for the second month in a row in February from a multi-year high as confidence sapped from every sector except services. Asian markets exhibited mixed trend, as investors awaited Congressional testimony later in the day by the new Federal Reserve Chairman Jerome Powell for further insights into the central bank's view on inflation and interest rates.

Back home, banking stocks remained under pressure as there seems no end to Punjab National Bank (PNB) woes. PNB told exchanges late on Monday that the quantum of unauthorized transactions using SWIFT could rise by $204.25 million, or Rs 1,322 crore. The bank had on February 14 disclosed that unauthorized transactions worth $1.8 billion, or Rs 11,300 crore, had been carried out from its Brady House branch. With this, the total amount lost to fraud now stands at about Rs 12,622 crore. Select stocks related to cement sector remained buzzing on ICRA’s report that cement demand in India is likely to grow about 4.5% in 2018-19 on the back of pick-up in housing segment, and higher infrastructure spend. Domestic cement production during April-December 2017-18 stood at 216.5 million metric tonne (MMT), higher by 2.7% compared to 210.8 MMT during the same period of previous financial year.

Finally, the BSE Sensex shed 99.36 points or 0.29% to 34,346.39, while the CNX Nifty was down by 28.30 points or 0.27% to 10,554.30.

The BSE Sensex touched a high and a low of 34,610.79 and 34,314.87, respectively and there were 15 stocks on gaining side as against 16 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index declined 0.50%, while Small cap index was down by 0.35%.

The top gaining sectoral indices on the BSE were Telecom up by 0.97%, Energy up by 0.52%, TECK up by 0.31%, IT up by 0.26% and Utilities was up by 0.26%, while Realty down by 2.03%, Bankex down by 1.43%, PSU down by 1.25%, Metal down by 0.79% and Basic Materials was down by 0.59% were the top losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 2.07%, Dr. Reddy’s Lab up by 1.82%, Hero MotoCorp up by 1.64%, NTPC up by 1.53% and Reliance Industries up by 1.21%. On the flip side, Axis Bank down by 2.68%, SBI down by 2.53%, Sun Pharma down by 2.02%, ICICI Bank down by 1.56% and Tata Steel down by 1.23% were the top losers.

Meanwhile, the share of foreign portfolio investments (FPI) in domestic capital markets through participatory notes (P-notes) have slumped to nearly eight and a half year low of Rs 1.19 lakh crore at the end of January, amid tough rules put in place by Securities and Exchange Board of India (SEBI) to check their misuse. This was the lowest level since August 2009, when the cumulative value of such investments stood at Rs 1,10,355 crore. According to the SEBI data, total value of P-note investments in Indian markets including equity, debt and derivatives, at January-end, has dropped to Rs 119,556 crore, from Rs 124,810 crore at the end of December.  

Of the total investments in January, P-note holdings in equities were at Rs 84,278 crore, while in debts and derivatives were at Rs 32,194 crore and Rs 3,084 crore respectively. The quantum of FPI investments via P-Notes decreased to 3.5 percent in January, from 3.8 percent in the preceding month. Investments through P-Notes were showing declining trend since June last year and hit an over eight-year low in September, however, it slightly rose in October but fell in November and the trend continued till January this year.

In July 2017, markets regulator SEBI had notified stricter norms stipulating a fee of $1,000 that would be levied on each instrument to check any misuse for channelising black money. Also, the regulator prohibited FPIs from issuing such notes where the underlying asset is a derivative, except those which are used for hedging purposes. The move was a follow-through of SEBI's board approval of a relevant proposal in June. These measures were an outcome of a slew of other steps taken by the regulator in the recent past. Further, it had barred resident Indians, NRIs and entities owned by them from making the investment through P- notes.

The CNX Nifty traded in a range of 10,631.65 and 10,537.25. There were 23 stocks in green as against 27 stocks in red on the index.

The top gainers on Nifty were Bharti Airtel up by 2.08%, Dr. Reddy’s Lab up by 1.92%, Reliance Industries up by 1.36%, Hero MotoCorp up by 1.33% and NTPC up by 1.32%. On the flip side, Ambuja Cement down by 4.16%, SBI down by 2.46%, Axis Bank down by 2.32%, Sun Pharma down by 2.31% and Coal India down by 2.12% were the top losers.

European markets were trading mostly in green; France’s CAC rose 3.43 points or 0.06% to 5,347.69 and UK’s FTSE 100 gained 8.2 points or 0.11% to 7,297.78, while Germany’s DAX was down by 17.39 points or 0.14% to 12,509.65.

Asian equity markets made a mixed closing on Tuesday as investors awaited Congressional testimony later in the day by the new Federal Reserve Chairman Jerome Powell for further insights into the central bank's view on inflation and interest rates. Japanese shares rallied after US stocks hit their highest level in over three weeks overnight amid declining Treasury yields on easing worries over rate hikes. However, Chinese shares snapped a six-session winning streak, led lower by real estate and resource firms, as investors booked profits after a recent strong rally.