Benchmarks end slightly in red on Thursday

Indian equity benchmarks ended the volatile day of trade with marginal losses, mirroring weak cues from global markets after the U.S. Federal Reserve sprang no surprises with its latest policy statement. Markets made pessimistic start as sentiments remained dampened on report that India has slipped by three spots to eleventh position in the FDI Confidence Index 2018 released by American global management consulting firm AT Kearney. India falls by three spots, reversing its two-year streak of rising in the rankings. The report also said that India fell out of the top 10 for the first time since 2015. Investors remained cautious with RBI’s research paper highlighting 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.

Markets pared almost all of their early losses in second half of the session as traders took some encouragement with report stating 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. But, recovery proved short-lived and markets once again lost momentum and settled marginally in red. Sentiments turned pessimistic 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.

Weak opening in European counters too dampened sentiments 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. 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.

Back home, telecom stocks remained under pressure despite the government unveiling a new draft policy for the telecom sector branded as National Digital Communications Policy 2018 that proposes broadband access for all with 50 mbps speed, 5G services and 40 lakh new jobs in the sector by 2022. Aviation stocks InterGlobe Aviation, SpiceJet and Jet Airways ended in red. InterGlobe Aviation ended 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.

Finally, the BSE Sensex declined 73.28 points or 0.21% to 35,103.14, while the CNX Nifty was down by 38.40 points or 0.36% to 10,679.65.

The BSE Sensex touched a high and a low of 35,257.31 and 35,020.08, respectively and there were 13 stocks on gaining side as against 18 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index declined 1.16%, while Small cap index was down by 0.84%.

The few gaining sectoral indices on the BSE were Metal up by 0.80%, Bankex up by 0.22%, PSU up by 0.18% and Utilities was up by 0.04%, while Realty down by 1.79%, IT down by 1.62%, Capital Goods down by 1.60%, TECK down by 1.39% and Industrials was down by 1.30% were the top losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 3.68%, NTPC up by 2.32%, Tata Steel up by 1.84%, Axis Bank up by 1.71% and ICICI Bank up by 1.61%. On the flip side, Wipro down by 1.94%, Kotak Mahindra Bank down by 1.90%, Asian Paints down by 1.74%, Larsen & Toubro down by 1.52% and Hindustan Unilever down by 1.39% were the top losers.

Meanwhile, the government has come out with a draft new telecom policy which aims to rationalise levies, including spectrum charges to rejuvenate the debt-ridden telecom sector. Apart from this, it also proposes to give broadband access to all with 50 mbps speed, 5G services and create 40 lakh new jobs in the sector by 2022. The draft policy branded as 'National Digital Communications Policy 2018' also aims to attract $100 billion in the digital communications sector by 2022 with help of regulatory reforms and enhance the contribution of digital communications to 8% of India’s GDP from about 6% in 2017.

Under the new policy, the government aims to enable fixed line broadband access to 50 percent of households and start landline portability services. It also proposes to adopt ‘Optimal Pricing of Spectrum’ to ensure sustainable and affordable access to digital communications. High spectrum price and related charges have been main concern of telecom services segment which is reeling under a debt of around Rs 7.8 lakh crore.

Additionally, the draft policy proposes recognising of mid-band spectrum, particularly the 3 GHz to 24 GHz range, for next-generation networks. It also promises to remove regulatory barriers and reduce the regulatory burden that hampers investments, innovation and consumer interest. Besides, it proposed to rationalise taxes and levies on digital communications equipment, infrastructure and services.

The CNX Nifty traded in a range of 10,720.60 and 10,647.45. There were 17 stocks in green as against 33 stocks in red on the index.

The top gainers on Nifty were Sun Pharma up by 3.60%, Bharti Infratel up by 3.35%, Tata Steel up by 2.12%, NTPC up by 1.82% and ICICI Bank up by 1.79%. On the flip side, HCL Tech down by 7.95%, UPL down by 3.60%, Eicher Motors down by 2.36%, Kotak Mahindra Bank down by 1.99% and Indiabulls Housing down by 1.95% were the top losers.

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 slipped 38.5 points or 0.3% to 12,763.75 and France’s CAC was down by 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.