Benchmarks end slightly lower as BJP falls shy of majority in Karnataka

Tuesday’s trading session turned out to be a disappointing day of trade for Indian equity benchmarks where frontline gauges failed to hold their initial gains and ended slightly in red, as uncertainty with respect to formation of government in Karnataka loomed. Despite making cautious start to the session, markets gained traction to trade jubilantly for most part of the day, as sentiments remained up-beat with India Ratings and Research (Ind-Ra) expecting the Corporate Outlook for FY19 to remain stable, driven by profitability improvement in FY18, leading to deleveraging. However, the improvement remains restricted to the metals sector and a broader recovery could take much longer. Meanwhile, in order to meet the ever- increasing demands of India’s growing population, NITI Aayog CEO Amitabh Kant has said that the country’s real Gross domestic product (GDP) must register a growth of around 10 percent annually over the next three decades.

However, market participants pared all of their initial gains in second half of the trade which dragged market lower after reports of Congress-JD(S) alliance in Karnataka. According to media reports, JD(S) has accepted Congress’ proposal of making HD Kumaraswamy the state’s chief minister. Sentiments also remained dampened on a private report stating that the Reserve Bank of India is expected to begin its rate hike cycle from December quarter, and may go for three rate hikes by 2019 taking the key policy rate to 6.75%. Adding to the pessimism, India’s Retail inflation, measured by the consumer price index (CPI) rose to 4.58% in April 2018 as compared to 4.28% in March 2018, while rural inflation increased to 4.67% and urban inflation surged to 4.42% in April 2018. However, CPI food inflation for April eased marginally to 2.80% versus 2.81% in last month.

On the global front, European markets were trading mostly in green despite 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. Asian markets ended mostly in red, as investors still focused on US-China trade ties ahead of second round of negotiations expected this week.

Back home, 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. On the sectoral front, select real estate stocks were buzzing on report that housing sales increased by 25% in the country’s seven major cities in April to 1,726 units over the previous month, driven by the Delhi-NCR market which saw a sharp rise in demand. Total housing sales stood at 1,382 units in March at seven major cities -- the National Capital Region (NCR), Mumbai Metropolitan Region (MMR), Kolkata, Chennai, Bengaluru, Hyderabad and Pune.

Finally, the BSE Sensex slipped 12.77 points or 0.04% to 35,543.94, while the CNX Nifty was up by 4.75 points or 0.04% to 10,801.85.

The BSE Sensex touched a high and a low of 35,993.53 and 35,497.92, respectively and there were 14 stocks on gaining side as against 17 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index declined 0.81%, while Small cap index was down by 0.65%.

The few gaining sectoral indices on the BSE were IT up by 0.48%, TECK up by 0.34% and Metal was up by 0.21%, while Realty down by 1.90%, Industrials down by 1.02%, PSU down by 0.76%, Auto down by 0.71% and Telecom was down by 0.65% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 2.29%, Power Grid Corporation up by 2.27%, TCS up by 1.33%, Asian Paints up by 0.89% and HDFC Bank up by 0.85%. On the flip side, Tata Motors down by 4.29%, Tata Motors - DVR down by 4.27%, Coal India down by 2.11%, SBI down by 1.87% and Sun Pharma down by 1.22% were the top losers.

Meanwhile, in yet another effort to boost clean energy generation, the Ministry of New and Renewable Energy (MNRE) has unveiled India’s national wind-solar hybrid policy. The new policy seeks to provide a comprehensive framework for promotion of large grid connected wind-solar photovoltaic (PV) hybrid system for efficient utilization of transmission infrastructure and land. It also aims at reducing the variability in renewable power generation and achieving better grid stability. That apart, it also aims to encourage new technologies, methods and way-outs involving combined operation of wind and solar PV plants.

The Ministry has said that solar and wind power being variable in nature pose certain challenges on grid security and stability and therefore suitable policy interventions are required not only for new wind-solar hybrid plants, but also for encouraging hybridisation of existing plants. Further, the policy provides for procurement of power from a hybrid project on tariff-based transparent bidding process for which government entities may invite bids. It also permits use of battery storage in hybrid projects for optimising output and further reduce variability.

The renewable energy policy also mandates the regulatory authorities to formulate necessary standards and regulations for wind-solar hybrid systems. Under the policy which is first, the government will extend all fiscal and financial incentives available to wind and solar power projects to hybrid projects. It will also support technology development projects in the field. On the technology front, the policy provides for the integration of both the energy sources, wind and solar, at Alternating Current (AC) as well as Direct Current (DC) levels. Besides, the government has set a target of 175 gigawatt (GW) renewable power installed capacity by the end of 2022.

The CNX Nifty traded in a range of 10,929.20 and 10,781.40. There were 23 stocks in green as against 27 stocks in red on the index.

The top gainers on Nifty were Tata Steel up by 2.73%, Power Grid Corporation up by 2.37%, Bajaj Finance up by 1.90%, TCS up by 1.56% and Asian Paints up by 1.28%. On the flip side, Tata Motors down by 3.99%, SBI down by 2.78%, Coal India down by 2.24%, Indiabulls Housing Finance down by 1.39% and NTPC down by 1.08% were the top losers.

The European markets were trading mostly in green; France’s CAC increased 4.35 points or 0.08% to 5,545.03 and UK’s FTSE 100 was up by 20.79 points or 0.27% to 7,731.77, while Germany’s DAX was down by 14.67 points or 0.11% to 12,963.04.

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.