Benchmarks end lower on political uncertainty

Indian equity benchmarks ended the Wednesday’s session with a cut of around half a percent with frontline gauges breaching their crucial 35,400 (Sensex) and 10,750 (Nifty) levels, amid uncertainty over government formation in Karnataka. Markets started the session on subdued note as sentiments remained downbeat on report that India’s trade deficit slightly widened to $13.72 billion in April from $13.25 billion a year ago. Exports grew by 5.17% to $25.91 billion in April compared to the same month last year on account of healthy performance by engineering, chemicals and pharmaceutical segments. Imports too grew by 4.60% to $39.63 billion in the month on yearly basis. Traders also reacted negatively to a private report which stated that inflation is set to rise further towards the second half of the fiscal, and could average 5.1% this financial year compared to 3.6% last year. According to the global financial services major, the factors that are likely to impact inflation going forward include higher oil prices, a weaker rupee, higher MSPs and more currency in circulation.

Though, markets trimmed most of their losses in second half of the session as traders took some solace with media reports that Yeddyurappa was elected as BJP legislature party head and Karnataka governor may invite BJP to form the government. Meanwhile, in a bid to promote growth of the global economy, Commerce and Industry Minister Suresh Prabhu has pitched for inclusion of a comprehensive trade facilitation agreement (TFA) on services in the World Trade Organization (WTO). However, the recovery was not enough to bring markets back in green and selling in dying hour of trade dragged markets below their respective crucial levels as traders turned pessimistic on report that the total investment via Participatory notes (P-notes) into Indian capital markets plunged to nearly 9-year low of Rs 1 lakh crore in April amid stringent norms put in place by the regulator SEBI to check misuse of these instruments.

On the global front, European markets were trading mostly in green in early deals as investors monitor surging interest rates in the bond markets. Eurostat confirmed its preliminary flash estimate that its consumer price index slowed to 1.2% year-on-year in April, down from 1.3% in March. Asian markets exhibited mixed trend on expectations for further interest rate hikes from the Federal Reserve and North Korea suspended talks with South Korea scheduled for later in the day.

Back home, banking stocks remained under pressure on CARE Ratings report that the 20 banks that have declared their earnings for the March quarter so far saw their collective non-performing assets rise to 8.32% of all the loans on their books. In absolute terms, NPAs increased 32.7% year on year to Rs 3.46 lakh crore at the end of March. In comparison, all their advances put together rose 14.4% over the same period. Shares of Anil Dhirubhai Ambani Group (ADAG) companies ended lower for the second straight day with Reliance Communications (RCom) falling 14% in intra-day trade on Wednesday after bankruptcy court admits Ericsson’s plea against the company.

Finally, the BSE Sensex shed 156.06 points or 0.44% to 35,387.88, while the CNX Nifty was down by 60.75 points or 0.56% to 10,741.10.

The BSE Sensex touched a high and a low of 35,543.89 and 35,241.63, respectively and there were 12 stocks on gaining side as against 19 stocks on losing side on the index.

The broader indices ended mixed; the BSE Mid cap index declined 0.27%, while Small cap index was up by 0.06%.

The top gaining sectoral indices on the BSE were Realty up by 1.99%, FMCG up by 1.65%, IT up by 0.18%, TECK up by 0.11% and Consumer Discretionary Goods & Services was up by 0.05%, while Energy down by 1.75%, Oil & Gas down by 1.58%, PSU down by 1.18%, Bankex down by 1.17% and Utilities was down by 0.70% were the top losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 3.84%, ITC up by 1.47%, Wipro up by 1.44%, Yes Bank up by 1.11% and Tata Motors - DVR up by 1.05%. On the flip side, ICICI Bank down by 3.28%, Reliance Industries down by 2.34%, SBI down by 2.19%, Hero MotoCorp down by 2.10% and Adani Ports & SEZ down by 1.25% were the top losers.

Meanwhile, in a bid to promote growth of the global economy, Commerce and Industry Minister Suresh Prabhu has pitched for inclusion of a comprehensive trade facilitation agreement (TFA) on services in the World Trade Organisation (WTO). He noted that WTO will not be doing full justice to the world economic development unless services sectors are taken on board, so they are trying to work on that. He believed that the planned agreement would help professionals move smoothly from one place to another.

Prabhu has stated that India has submitted a detailed proposal to the WTO to negotiate a trade facilitation agreement in services (TFS). He noted that the proposal aims at liberalising rules for movement of professionals and other steps to reduce transaction costs with a view to boost growth of the services sector. He added that it will focus on issues like liberalised visa regime, long-term visas for business community and freer movement of professionals for the greater benefit of both India and the world, among others.

The minister further pointed out that India is pitching for this agreement as the sector contributes about 60 percent to the Gross domestic product (GDP) and 28 percent to the total employment. He also said that the commerce ministry is working on state-wise plan to promote the services sector. He added that India’s GDP is expected to reach a volume of $5 trillion in the coming years and out of this services segment would contribute about $3 trillion.

The CNX Nifty traded in a range of 10,790.45 and 10,699.70. There were 17 stocks in green as against 33 stocks in red on the index.

The top gainers on Nifty were Hindustan Unilever up by 3.87%, Lupin up by 2.26%, ITC up by 1.60%, Bajaj Finance up by 1.42% and Wipro up by 1.37%. On the flip side, ICICI Bank down by 3.67%, Cipla down by 3.40%, Ultratech Cement down by 3.15%, Reliance Industries down by 2.51% and GAIL India down by 2.37% were the top losers.

The European markets were trading mostly in green; UK’s FTSE 100 increased 2.82 points or 0.04% to 7,725.80 and Germany’s DAX gained 24.22 points or 0.19% to 12,994.26, while France’s CAC was down by 4.61 points or 0.08% to 5,548.55.

Asian equity markets ended mixed on Wednesday after US government bond yields surged on expectations for further interest rate hikes from the Federal Reserve and North Korea suspended talks with South Korea scheduled for later in the day, citing the South Korea-US joint military exercises. This has raised concerns about the planned summit between leader Kim Jong Un and US President Donald Trump in June. Japanese shares fell amid renewed geopolitical uncertainty on the Korean Peninsula. Weak GDP data also weighed on markets. Data showed that the world's third-biggest economy contracted a more than expected 0.6 percent in the January-March period on an annualized basis to suffer its first contraction since 2015.