Post Session: Quick Review

Indian equity benchmarks traded on a volatile with volatility throughout the day and ended with modest cut. The benchmarks garnered strength during the second half of the day but it proved short lived with Sensex drifting below 35,100 mark. Indian equity benchmarks made pessimistic start in early deals on Thursday, as sentiments were dampened with a private report highlighting that tax authorities have asked many companies to reverse claims of input credit made on investments in mutual funds and other securities, in a move that could increase the tax burden on corporate India. The report added that notices were recently issued to companies such as Mahindra & Mahindra, Japanese automobile giant Honda, South Korean major Hyundai and pharma company Cipla, informing them that their claims of input tax credit on non-core services would not be allowed. Separately, reversing its two-year streak of rising in the rankings, India has fallen out of the top 10 in the FDI Confidence Index 2018 of global consultancy firm, for the first time since 2015. India slipped three places to 11th position on the index. The report said that some policies may have deterred investors, at least in the short term.

Meanwhile, a RBI research paper highlighted that bad loans have impaired monetary policy transmission in India as banks were unable to increase their lending rates and protect net interest margins (NIMs) amid a broad deterioration in asset quality between 2013 and 2017. The report showed that NIMs of public sector banks, which had large NPA/stressed assets, were negatively impacted, while NIMs of private sector and foreign banks were not. Investors took note of foreign brokerage report stating that India’s weight-age in the MSCI Emerging Market Index is likely to fall 20 basis points as a result of inclusion of China A-shares, which would entail total outflows of around $540 million by passive funds. The MSCI will announce the results of its semi-annual index review on the morning of May 15 and the changes will be effective from June 1. Separately, three years after the launch of Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Modi government’s flagship initiative to introduce urban reforms and provide civic amenities in 500 cities, 0.38% of the mission outlay has been utilized so far.

However, some buying crept in on report that economic growth in India is expected to strengthen to 7.3 percent in financial year 2018-19 on the back of robust activity from construction, manufacturing, and services sectors. According to a BMI Research, a Fitch group company, the negative shock from demonetization and GST implementation has largely subsided. Some relief also came with a report that the government approved an ordinance to amend a law for speedy disposal of commercial disputes, seeking to improve India’s ranking in the ease of doing business index. Traders took note of a report that the revenue department will look at quarterly revenue trends to better gauge the revenue trend. The aim is to increase the average revenue collection from what it achieved last fiscal

On the global front, Asian markets closed mostly in red as hopes waned for real progress in Sino-US trade talks. China’s senior government said that the country won’t succumb to threats from the US. The official said the government won’t accept any US preconditions for negotiations such as abandoning its long-term advanced manufacturing ambitions or narrowing the trade gap by $100 billion. The European markets were trading in red as investors digested new earnings reports. Euro zone inflation unexpectedly slipped in April as prices of services increased at a slower pace, data showed, raising questions about the European Central Bank’s plan for a gradual withdrawal of monetary stimulus.

Back home, aviation stocks InterGlobe Aviation, SpiceJet and Jet Airways slipped in today’s trade. InterGlobe Aviation edged lower after its March quarter net profit slumped to almost a fourth of last time’s to Rs 117.6 crore due to high fuel costs, decline in yields and adverse foreign exchange. Revenue was up by almost a fifth to Rs 5799.1 crore. Margin at the level of earnings before finance income and cost, tax, depreciation, amortization and aircraft and engine rentals margin was down 811 basis points to 19.4 percent.

The BSE Sensex ended at 35089.05, down by 87.37 points or 0.25% after trading in a range of 35020.08 and 35257.31. There were 12 stocks advancing against 19 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index down by 1.21%, while Small cap index was down by 0.94%. (Provisional)

The only gaining sectoral indices on the BSE were Metal up by 0.82%, Bankex up by 0.25% and PSU up by 0.08%, while Realty down by 1.82%, IT down by 1.68%, Capital Goods down by 1.57%, TECK down by 1.44% and Industrials down by 1.33% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Sun Pharma up by 3.65%, Tata Steel up by 2.06%, NTPC up by 1.91%, Axis Bank up by 1.54% and ICICI Bank up by 1.53%. (Provisional)

On the flip side, Kotak Mahindra Bank down by 1.77%, Wipro down by 1.63%, Asian Paints down by 1.61%, Larsen & Toubro down by 1.57% and Infosys down by 1.48% were the top losers. (Provisional)

Meanwhile, after a year of disruptions following the note-ban and the Goods and Services Tax (GST), the BMI Research, a Fitch group company, in its latest report has predicted that the Indian economy is likely to grow at 7.3% in the current financial year (FY19) from 6.6% rate reported in the previous year (FY18) on account of robust activity from the construction, manufacturing, and services sectors.

The report further said that the demonetisation and GST disruptions have almost faded and increasing public infrastructure spending to improve the nation's transport and rural infrastructure is expected to drive the growth of construction sector. Besides, BMI noted that solid economic activity in the US and the UAE, would also support a further expansion of the export manufacturing sector.

Besides, the rating agency praised the various reform measures being taken by the government, saying that continued economic liberalisation will likely provide tailwinds for India's large services sector. It further said that ongoing improvements to domestic business conditions and regulatory amendments to encourage higher foreign investor participation has led to rise in foreign direct investment (FDI) and this will also boost the country’s economic growth.

The CNX Nifty ended at 10668.50, down by 49.55 points or 0.46% after trading in a range of 10647.45 and 10720.60. There were 17 stocks advancing against 33 stocks declining on the index. (Provisional)

The top gainers on Nifty were Sun Pharma up by 3.60%, Bharti Infratel up by 3.35%, Tata Steel up by 2.03%, Axis Bank up by 1.79% and NTPC up by 1.73%. (Provisional)

On the flip side, HCL Tech down by 7.95%, UPL down by 3.60%, Eicher Motors down by 2.18%, Indiabulls Housing down by 2.05% and Kotak Mahindra Bank down by 1.99% were the top losers. (Provisional)

The European markets were trading in red; UK’s FTSE 100 decreased 5.1 points or 0.07% to 7,538.10, Germany’s DAX decreased 38.5 points or 0.3% to 12,763.75 and France’s CAC decreased 13.6 points or 0.25% to 5,515.62.

Asian equity markets ended mostly lower on Thursday as investors harbour very little hope that the Sino-US trade talks will lead to a breakthrough. A US trade delegation arrived in Beijing on Thursday for key talks over tariffs. A breakthrough deal to fundamentally change China’s economic policies is viewed as highly unlikely during the two-day visit, though a package of short-term Chinese measures could delay a US decision to impose tariffs on around $50 billion worth of Chinese exports. Meanwhile, the Japanese market was closed for a public holiday.