Post Session: Quick Review

Indian equity benchmarks traded on a firm note for most part of the day but ended with minor cut. Selling during last hour of trade dragged the markets lower with Sensex slipping below 35,600 mark as uncertainty with respect to formation of government in Karnataka loomed. Indian equity benchmarks gained traction despite a cautious start and traded with gain of over half a percent in early deals. The sentiments were upbeat as vote count for Karnataka elections kicked off, with BJP leading the halfway mark. A total of 113 of 222 seats were needed for a majority. Separately, a private report enlightened that capex by Indian companies is slowly making a comeback as Tata Steel, Ambuja Cements, Eicher Motors, Hero MotoCorp, Asian Paints, CEAT, Apollo Tyres and Jubilant FoodWorks among other companies have announced investments totaling Rs 50,000 crore in the past four months.

Investors took note of India Ratings’ report which highlighted that profitability improvement in FY18 mainly in the metals sector is expected to keep corporate outlook for the new fiscal stable. Some support also came with private report stating that India’s GDP is expected to grow by 7.7% in January-March, up from 7.2% in the preceding quarter, despite moderation in factory output growth in March. Separately, a SBI research report highlighted that delayed payments under the guaranteed rural employment programme MNREGA fell to 6-year low of Rs 67,956 crore last fiscal ended March 31. On the other hand total payments under the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) was also at 6-year high of Rs 3.87 lakh crore. 

However, selling crept in after reports emerged that the Congress has joined hands with the JD(S) in Karnataka to deny the BJP power. Counting was in the final rounds and it looked that the BJP might land short of a majority. There were reports that Congress has offered to make HD Kumaraswamy chief minister of the state. Some weakness also prevailed after CARE Ratings said that the Reserve Bank of India (RBI) may go for a rate change in case inflation touches 5 percent mark. The agency added that the inflation trajectory would remain dependent on how the monsoons fare. In addition to this, firming of global crude oil prices, HRA increases by state government, implementation of higher MSP from June onwards and demand side pressures from higher fiscal deficit pose risks to price levels. Separately, India’s retail inflation inched up to 4.58% in the month of April 2018, as compared to 4.28% in March 2018 and 2.99% in April 2017. Inflation based on Consumer Price Index (CPI) firmed up due to faster rises in prices of food and fuel products.

On the global front, Asian markets closed mostly lower. Fixed asset investment in China rose 7% in the first four months of 2018 from a year earlier, compared to the general consensus of a 7.4% gain, official data showed, suggesting that the country’s economy might be losing steam. Real estate investments in China rose 10.3% in the first four months of 2018 from a year earlier, while property sales softened in the face of government cooling measures. The European markets were trading mostly in green. Growth in the euro area economy slowed slightly in the first quarter, according to a revised estimate, underlining the European Central Bank’s caution about scaling back stimulus.

The BSE Sensex ended at 35526.56, down by 30.15 points or 0.08% after trading in a range of 35497.92 and 35993.53. There were 14 stocks advancing against 17 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index was down by 0.83%, while Small cap index was down by 0.66%. (Provisional)

The few gaining sectoral indices on the BSE were IT up by 0.41%, TECK up by 0.34% and Metal up by 0.19%, while Realty down by 2.03%, Industrials down by 1.01%, PSU down by 1.00%, Auto down by 0.67% and Energy down by 0.50% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Tata Steel up by 2.40%, Power Grid up by 2.30%, TCS up by 1.39%, Asian Paints up by 0.89% and HDFC Bank up by 0.88%. (Provisional)

On the flip side, Tata Motors - DVR down by 5.19%, Tata Motors down by 4.16%, SBI down by 2.78%, Coal India down by 1.87% and Sun Pharma down by 1.28% were the top losers. (Provisional)

Meanwhile, with profitability improvement in the last fiscal year (FY18), credit rating agency, India Ratings and Research (Ind-Ra) in its latest report has said that corporate outlook is expected to remain stable in the current fiscal year (FY19). However, it said that the improvement will be limited to the metals sector and added that a broader recovery may be after much longer period.

As per the report titled ‘Corporate Risk Radar FY19’, India Inc revenue is likely to grow at rate of 7%-9% and EBITDA may grow at 8%-11%, on the back of rising demand in consumption-led sectors such as automobiles and retail, low base effect and higher realisation in commodity-linked sectors. However, the report found that export-linked sectors such as pharmaceuticals and information technology are expected to face challenges in the year amid concerns of global trade headwinds.

Ind-Ra further said that EBITDA growth will be limited, owing to the factors like higher commodity prices, higher interest cost and depreciation in rupee. Besides, it said that EBITDA growth will also be limited by little capital expenditure until 2019-2020. It also expects the working capital cycle to further deteriorate, given the impact of the implementation of the Goods and Services Tax regime and an initial pick-up in economic activities. Sectors such as oil and gas, metals, and chemicals could witness elongation of working capital cycle with rising commodity prices. However, auto and auto ancillary sectors will continue to have a stable working capital cycle, amid strong demand.

The CNX Nifty ended at 10804.45, down by 2.15 points or 0.02% after trading in a range of 10781.40 and 10929.20. There were 23 stocks advancing against 27 stocks declining on the index. (Provisional)

The top gainers on Nifty were Tata Steel up by 2.73%, Power Grid up by 2.37%, Bajaj Finance up by 1.90%, TCS up by 1.56% and Lupin up by 1.29%. (Provisional)

On the flip side, Tata Motors down by 4.08%, SBI down by 2.78%, Coal India down by 2.24%, Indiabulls Housing down by 1.39% and NTPC down by 1.08% were the top losers. (Provisional)

The European markets were trading mostly in green; UK’s FTSE 100 increased 15.05 points or 0.2% to 7,726.03, France’s CAC increased 4.92 points or 0.09% to 5,545.60, while Germany’s DAX decreased 13.2 points or 0.1% to 12,964.51.

Asian equity markets ended mostly lower on Tuesday amid continued uncertainty over trade after US President Donald Trump expressed optimism about trade talks with China but claimed past negotiations have been one-sided in favor of Beijing, for so many years. A raft of mixed economic data from China also kept investors nervous. Japanese shares ended modestly lower as investors opted to book some profits following three consecutive sessions of gains. However, Chinese shares ended higher as optimism towards MSCI inclusion of 234 China-listed shares helped investors shrug off renewed trade tensions and mixed economic readings. Chinese industrial output grew 7.0 percent year-on-year in April, the National Bureau of Statistics said. That topped expectations for an increase of 6.4 percent and was up from 6.0 percent in March.