Benchmarks end lower on US-China trade worries

Wednesday’s session turned-out to be a dismal day of trade for Indian equity benchmarks, where frontline gauges ended the day with a cut of over a percent, breaching their crucial 33,100 (Sensex) and 10,150 (Nifty) levels, as trade war fears escalated after China announced 25% tariff on 106 products in 14 categories imported from the US, including soybeans, automobiles and chemicals. Markets started the session on positive note with traders taking some encouragement from Finance Minister Arun Jaitley’s statement that direct tax collection has grown by 18 per cent to cross Rs 10.02 trillion in the financial year ended on March 31, 2018. He said demonetisation and GST implementation have resulted in higher formalisation of the economy which is evident from additional 10 million IT returns being filed in the previous financial year. The sentiments also remained upbeat on private weather forecasting agency report that monsoon rains in India are expected to be average in 2018, raising prospects of higher farm and economic growth in the $2 trillion economy. The report added that monsoon rains are expected to be 100 percent of the long-term average.

However, markets pared all of their initial gains and entered into red terrain as traders turned anxious on report that the Reserve Bank of India (RBI) is unlikely to yield to the India Inc’s pressure for a benign monetary policy stance by keeping policy rates unchanged in its first monetary policy review of 2018-19 to be announced on Thursday against the backdrop of hardening global crude oil prices. Some concerns also came with the Andhra Pradesh government’s statement that the Centre ‘grossly failed’ in effectively implementing the Goods and Services Tax and accused it of ‘sidetracking’ the new taxation system. The market participants also took note of Chief Economic Advisor Arvind Subramanian’s statement that it is easy to advocate one uniform GST rates for all goods, but it cannot be done ignoring political realities.

Weak opening in European counters too dampened sentiments, as elevated concerns of a tit-for-tat trade war between the world's biggest economies overshadowed a bounce on Wall Street. Late on Tuesday, President Donald Trump revealed plans for a 25 percent tariff on a range of Chinese imports in retaliation for what the US administration alleged had been decades of state-backed intellectual property theft by Beijing. Asian markets ended mostly in red after China’s services sector growth eased to a four-month low in March as new business and employment grew at a slower rate, pointing to cooling demand in a sector Beijing is counting on to maintain economic growth.

Back home, Securities and Exchange Board of India (SEBI), in 2016-17, firms had mobilized Rs 29,558 crore through this route. Besides, State of Finance Shiv Pratap Shukla said that Public Sector Banks (PSBs) wrote off Rs 2.42 lakh crore worth of loans between April 2014 and September 2017. Meanwhile, stocks related to sugar sector edged mostly in green with report highlighting that sugar output increased 49 per cent to 28.18 million tonne (MT) so far in 2017-18 marketing year, but mills are unable to make cane payment to growers owing to low prices. Stocks related to tea space too remained on buyers’ radar on a private report that Profit margins for bulk tea producers, particularly in north India, is likely to improve in the just-concluded financial year on firm price trends from August 2017 to January 2018.

Finally, the BSE Sensex declined 351.56 points or 1.05% to 33,019.07, while the CNX Nifty was down by 116.60 points or 1.14% to 10,128.40.

The BSE Sensex touched a high and a low of 33,505.53 and 32,972.56, respectively and there were 6 stocks on gaining side as against 25 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index declined 0.92%, while Small cap index was down by 1.01%.

The lone gaining sectoral index on the BSE was Auto up by 0.42%, while Metal down by 2.75%, Consumer Durables down by 2.55%, Basic Materials down by 2.07%, Capital Goods down by 1.95% and Bankex was down by 1.63% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 3.60%, Tata Motors - DVR up by 2.84%, Hero MotoCorp up by 0.81%, Hindustan Unilever up by 0.72% and Adani Ports up by 0.49%. On the flip side, Tata Steel down by 3.29%, Axis Bank down by 2.61%, Larsen & Toubro down by 2.52%, Indusind Bank down by 2.26% and Kotak Mahindra Bank down by 2.25% were the top losers.

Meanwhile, public sector banks (PSBs) have written-off non-performing assets (NPAs) or bad loans worth Rs 2.41 lakh crore in over three years. Minister of State of Finance Shiv Pratap Shukla has stated that writing-off bad loans is a regular exercise carried out by banks to clean up their balance sheets and achieving taxation efficiency. As per the Reserve Bank of India (RBI) data on global operations, PSBs wrote off Rs 2,41,911 crore from financial year 2014-15 till September 2017.

Shukla pointed out that loans are written off for tax benefit and capital optimisation, while borrowers of such loans continue to be liable for repayment. He also noted that recovery of dues takes place on ongoing basis under legal mechanism, including SARFAESI Act and debt recovery tribunals. Therefore, he said that write-offs does not benefit borrowers.

Besides, according to the latest RBI data, 21 state-run banks which account for more than two-thirds of the country's banking assets had as of December 31 stressed loans of Rs 8.26 lakh crore, or 15.8 percent of their total loans.

The CNX Nifty traded in a range of 10,279.85 and 10,111.30. There were 8 stocks in green as against 42 stocks in red on the index.

The top gainers on Nifty were Tata Motors up by 3.41%, Eicher Motors up by 3.25%, Hindustan Unilever up by 0.71%, Bajaj Finance up by 0.70% and Adani Ports up by 0.44%. On the flip side, UPL down by 4.13%, Vedanta down by 3.99%, Tata Steel down by 3.55%, Hindalco down by 3.44% and Titan down by 3.17% were the top losers.

European markets were trading in red; Germany’s DAX declined 195.57 points or 1.63% to 11,806.88, UK’s FTSE 100 decreased 56.9 points or 0.81% to 6,973.56 and France’s CAC was down by 52.47 points or 1.02% to 5,099.65.

Asian stocks closed mostly lower on Wednesday as investors braced for China's countermeasures against US tariffs on Chinese products worth about $50 billion focusing on high-tech items. Beijing has immediately vowed to impose measures of the ‘same strength’ against US goods, fueling fears that escalating trade worries could hurt global growth. Traders also awaited cues from Friday's US employment report as well as a slew of US reports on private sector employment, service sector activity, factory orders and international trade due this week amid expectations for further monetary policy tightening. Chinese shares ended slightly lower as investors trimmed their equity exposure ahead of the Tomb-sweeping holiday break. While there was some lingering unease among investors, most see the widely-expected US sanctions as having negligible impact on growth, and expect a full-blown trade war will be averted through negotiations. Meanwhile, Japanese shares ended higher in choppy trade as some automakers rose after they reported strong US sales numbers, helping offset the impact of a stronger yen.