Benchmarks extend southward journey for fifth straight session

Extending their southward journey for fifth straight session, Indian equity benchmarks ended the Tuesday’s trade with a cut of over a percentage point, breaching their crucial 33,400 (Sensex) and 10,250 (Nifty) levels. Markets started the session on an optimistic note and traded in green terrain for most part of the day, as traders took some encouragement with report that the economy will grow up to 7.5 per cent in FY19, supported by domestic consumption, policy push, and synchronised global growth. In the current fiscal, GDP growth is expected to be 6.5 per cent. The Economic Survey 2018 has pegged FY19 growth at 7-7.5 per cent. Traders also took some support with a private report estimating that the Goods and Services Tax collection for 2018-19 would grow at a rate of 14-16 per cent, bringing it closer to the decadal growth rate in indirect taxes of just under 14 per cent. Reports that the Centre will constitute a group to suggest necessary changes in the policy for special economic zones (SEZs) too aided sentiments. Designed to facilitate exports, units in SEZs get certain fiscal and non-fiscal incentives such as no licencing required for imports and full freedom of sub-contracting, as well as direct and indirect tax benefits.

Market participants also got support with report that the Reserve Bank of India (RBI) will inject Rs 1 lakh crore short term money into the banking system ahead of the financial year-end that normally sees cash crunch. However, sharp selling in last leg of trade mainly played spoil sport for the Indian markets, which dragged the key gauges lower. Traders remained concerned with a private report enlightening that India has signaled a larger fiscal deficit for the federal government for the year to March 2018 and while it has forecast a lower gap for next year, with a national election due in early 2019 many expect that target to be breached. Compounding those concerns are higher state government deficits, lower-than-expected revenues from the newly introduced goods and services tax, and farm loan waivers.

On the global front, European markets were trading in green terrain in early deals despite uncertainty following Italy’s parliamentary election on Sunday which produced a hung parliament. Asian markets ended mostly in green led by around two percent gain in Japanese markets after Japan’s cabinet approved a plan to improve the accuracy of the government’s initial estimate of gross domestic product by collecting more data from the private sector on capital expenditure.

Back home, banking stocks edged lower after Central Bureau of Investigation (CBI) told the court that violation of norms for issuance of Letters of Undertaking (LoUs) to benefit billionaire jeweller Nirav Modi and his uncle Mehul Choksi had been going on since 2010. Separately, there were reports that Serious Fraud Investigation Office has summoned ICICI Bank CMD Chanda Kochhar and Axis Bank MD Shikha Sharma in the PNB fraud case. Also, Gitanjali Gems cracked after the CBI detained Vipul Chitalia, Vice President (Banking Operations) of Gitanjali Group, in Mumbai in the Rs 12,700 crore Punjab National Bank fraud case. Stocks related to apparel sector remained buzzing on report that India's apparel industry may post a rare decline in exports for the current fiscal 2017-18, let alone meeting the $20 billion target.

Finally, the BSE Sensex tumbled 429.58 points or 1.27% to 33,317.20, while the CNX Nifty was down by 109.60 points or 1.06% to 10,249.25.

The BSE Sensex touched a high and a low of 34,060.13 and 33,209.76, respectively and there were 4 stocks on gaining side as against 27 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index declined 0.84%, while Small cap index was down by 1.32%.

The lone gaining sectoral index on the BSE was Consumer Durables up by 0.10%, while Realty down by 2.21%, Telecom down by 1.68%, Bankex down by 1.44%, Auto down by 1.36% and Industrials was down by 1.34% were the top losing indices on BSE.

The few gainers on the Sensex were Indusind Bank up by 1.21%, Tata Steel up by 0.79%, Hero MotoCorp up by 0.35% and Coal India up by 0.31%. On the flip side, Sun Pharma down by 2.95%, SBI down by 2.77%, ICICI Bank down by 2.64%, Mahindra & Mahindra down by 2.52% and Maruti Suzuki down by 2.05% were the top losers.

Meanwhile, the Commerce and Industry Minister Suresh Prabhu has said that the government is in the process of forming a group to study necessary changes in the Special Economic Zones (SEZs) Policy. SEZs, which emerged as major export hubs in India, contribute significantly to the country’s total outbound shipments.

Prabhu has pointed out that the developers and units of these zones enjoy certain fiscal and non-fiscal incentives such as no licence is required for import, full freedom for subcontracting and no routine examination of cargo for export/import by customs authorities. They also enjoy direct and indirect tax benefits.

In order to address issues pertaining to the rubber sector, the minister said that the government has decided to constitute a task force on the commodity for finding out short term solutions and formulating long term strategies to tackle the problems. He added that the members of the task force include representatives of state and central government. He further said that the effort will be to work towards a rubber policy in consultation with state governments.

The CNX Nifty traded in a range of 10,441.35 and 10,215.90. There were 9 stocks in green as against 41 stocks in red on the index.

The top gainers on Nifty were BPCL up by 2.49%, Ultratech Cement up by 1.33%, Indusind Bank up by 1.23%, Cipla up by 0.99% and Zee Entertainment up by 0.80%. On the flip side, Sun Pharma down by 3.30%, SBI down by 3.09%, ICICI Bank down by 2.84%, UPL down by 2.70% and Mahindra & Mahindra down by 2.66% were the top losers.

European markets were trading in green; France’s CAC increased 36.14 points or 0.7% to 5,203.37, UK’s FTSE 100 surged 71.59 points or 1.01% to 7,187.57 and Germany’s DAX was up by 134.69 points or 1.11% to 12,225.56.

The Asian markets closed mostly in green on Tuesday amid receding worries about a trade war as US President Donald Trump faced mounting pressure from political allies to reconsider his decision to impose tariffs on steel and aluminum imports. US House of Representatives Speaker Paul Ryan urged Trump to rethink the planned tariffs on steel and aluminum as confusion persisted about the timing and extent of the planned tariffs. Trump indicated that the tariffs would be removed if the US negotiates a ‘new & fair’ NAFTA agreement. Chinese stocks posted strong gains after reports that China's securities regulator is considering giving Chinese investors access to offshore-listed tech companies via depositary receipts. Further, the Japanese index Nikkei rose after Wall Street shares rallied overnight, with the dollar’s bounce lifting exporter shares.