Post Session: Quick Review

Indian equity benchmarks traded in negative territory for most part of the day and ended with a cut of around half a percent. The market breadth was in favour of advances with two stocks advancing against each declining one. Indian equity benchmarks made a cautious start and traded slightly in red in early deals amid concerns that growing trade tensions would hurt the global economy. US President Donald Trump has sought to impose fresh tariffs on China, intensifying fears of a trade war. The sentiments were also dampened taking cues from yesterday’s election result prompting the BJP to admit that it badly underestimated the opposition’s electoral understanding. The BJP has lost the crucial Gorakhpur and Phulpur Lok Sabha bypolls in Uttar Pradesh to the Samajwadi Party and the Araria seat in Bihar to Lalu Yadav’s RJD, a shocking setback ahead of the 2019 general elections. Traders also remained concerned with a report stating that the US challenged Indian export subsidies schemes at the World Trade Organisation, saying these programmes harm American workers by creating an uneven playing field. The US Trade Representative (USTR) argued that at least half a dozen Indian programmes provide financial benefits to Indian exporters, which allow them to sell their goods more cheaply to the detriment of American workers and manufacturers.

Meanwhile, market-men took note that the proceedings of the Lok Sabha were paralysed for the ninth consecutive day today as several parties, including NDA constituent TDP, continued their noisy protests over various issues, including the PNB scam and special status for Andhra Pradesh. Besides, anxiety also spread among the investors, as Industry bodies said that RBI’s decision to ban Letters of Undertaking (LOUs) for trade credit for imports will have a disruptive impact, at least in the immediate term, as small businesses would require higher working capital. Additionally, a day after Reserve Bank of India (RBI) banned banks from issuing letters of undertaking (LoU), Finance Ministry’s Principal Economic Advisor Sanjeev Sanyal said that no issue can be dealt in silos and policymakers have to be careful that blocking of one route does not spread to rest of the system. The country’s apex bank the RBI barred banks from issuing guarantees in the form of LoU as it clamped down on the import financing route used by fugitive jeweller Nirav Modi and his uncle Mehul Choksi for allegedly committing India’s biggest bank fraud.

The street overlooked World Bank’s report which highlighted that India’s economy is expected to grow 7.3% in the next financial year and accelerate to 7.5% in 2019-20, bottoming out from the impact of demonetization and GST, even as it highlighted private investments and exports as the two lagging engines of growth. The World Bank said it expected Indian economy to clock a growth rate of 6.7% in the current financial year. Realty sector stocks were under pressure despite a private report enlightening that the market size of the Indian real estate sector is expected to reach $180 billion by 2020 with the housing sector contribution doubling to 11.2% of GDP. Select banking stocks were under pressure as the overseas branches of Indian banks will have to rejig their business model after the RBI decided to ban LoUs as a trade finance instrument, since most of their assets abroad are linked through this instrument.

On the global front, Asian markets closed mostly in red. Bank of Japan Governor Haruhiko Kuroda said that the central bank’s powerful monetary easing has had a significant impact on financial institutions’ profits. Kuroda added that BoJ will closely watch how its policy affects bank profits, financial intermediation and the stability of Japan’s banking system. The European markets were trading in green. The European Central Bank’s long-delayed guidelines on treating new soured bank debt will go into effect on April 1, but lenders may get a reprieve from full implementation until 2021.

Back home, majority of fertiliser stocks rallied in today’s trade after the government approved a proposal to extend urea subsidy till 2020. The urea subsidy has been extended for three years till 2020 at a total estimated cost of Rs 1,64,935 crore. The continuation of the urea subsidy scheme will ensure adequate quantity of urea is made available to the farmers at statutory controlled price.

The BSE Sensex ended at 33665.60, down by 170.14 points or 0.50% after trading in a range of 33644.58 and 33866.28. There were 9 stocks advancing against 22 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index was up by 0.47%, while Small cap index was up by 0.80%. (Provisional)

The top gaining sectoral indices on the BSE were Consumer Disc up by 0.28%, Industrials up by 0.22%, Consumer Durables up by 0.12%, Power up by 0.07% and Capital Goods up by 0.01%, while Energy down by 1.28%, Oil & Gas down by 1.15%, FMCG down by 0.57%, Bankex down by 0.57% and Metal down by 0.54% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Asian Paints up by 2.19%, Mahindra & Mahindra up by 0.80%, HDFC Bank up by 0.55%, Coal India up by 0.53% and Kotak Mahindra Bank up by 0.40%. (Provisional)

On the flip side, Yes Bank down by 1.93%, Reliance Industries down by 1.90%, ICICI Bank down by 1.66%, Hindustan Unilever down by 1.59% and Tata Steel down by 1.43% were the top losers. (Provisional)

Meanwhile, highlighting waning influence of one-off policy-related factor, the global credit rating agency, Fitch Ratings in its latest ‘Global Economic Outlook’ has forecasted that the Indian economy is likely to grow at the rate of 7.3% in the next fiscal (FY19) and further to 7.5% in FY20.  However, for the current fiscal year, the rating agency predicted lower growth rate of 6.5% as compared to Central Statistics Office’s (CSO) estimation of 6.6%.

Fitch noted that the currency in circulation is back to pre-demonetisation level in mid-2017 and is now increasing steadily, similar to the previous trend. Besides, it also highlighted that Goods and Services Tax (GST) led disruptions have slowly diminished. It further said that 2018-19 budget envisages a slower pace of fiscal consolidation and therefore should support the near-term growth outlook and added that the measures included in the budget such as a minimum price support and free health insurance will benefit low-income earners and will also support rural demand. It further listed various initiative reforms taken by the government for the sectors like infrastructure and banking and noted that policies come on top of substantial road construction plans and a bank recapitalisation plan would also support the country’s growth in the medium term.

On inflation front, the rating agency said that headline inflation picked up, due to accelerating food prices and it expects the Reserve Bank of India to start raising interest rates next year as growth gains further traction. Besides, it also expects inflationary pressures to remain quite high. However, it noted that fuel price increases have been contained by the government's decision to roll back excise duties to keep pump prices stable in the face of rising oil prices.

The CNX Nifty ended at 10351.75, down by 59.15 points or 0.57% after trading in a range of 10346.20 and 10420.00. There were 12 stocks advancing against 38 stocks declining on the index. (Provisional)

The top gainers on Nifty were Asian Paints up by 2.11%, Mahindra & Mahindra up by 0.87%, Coal India up by 0.75%, Bajaj Finance up by 0.73% and Indiabulls Housing up by 0.69%. (Provisional)

On the flip side, Indian Oil Corporation down by 3.00%, Yes Bank down by 2.15%, Reliance Industries down by 1.94%, GAIL India down by 1.79% and ICICI Bank down by 1.67% were the top losers. (Provisional)

The European markets were trading in green; UK’s FTSE 100 increased 23.02 points or 0.32% to 7,155.71, Germany’s DAX increased 72.91 points or 0.6% to 12,310.65 and France’s CAC increased 28.22 points or 0.54% to 5,261.58.

Asian markets closed mostly in red on Thursday due to lingering concerns over trade war after the White House said the Donald Trump administration wanted China to reduce its trade surplus with the US by $100 billion. The overnight negative close on Wall Street and lack of positive news from the Asian region too contributed to the mostly weak and sluggish trend in most of the markets in Asia. Japanese shares eked out small gains with traders noting the Bank of Japan bought up exchange traded funds, offsetting weakness in machinery makers. Japan’s construction machinery and machine tool makers underperformed, hit by worries that global trade tensions could hurt demand after U.S. President Donald Trump sought to impose fresh tariffs on China. Meanwhile, China stocks ended flat, with gains led by consumer and healthcare firms, while small-caps, particularly newly-listed shares, were dumped after regulators warned of risks and bubbles.