Benchmarks extend southward journey for third straight day

Extending losing streak for third straight day, Indian equity benchmarks ended the Thursday’s trade in red terrain with a cut of over half a percent, with frontline gauges breaching their crucial 10,700 (Nifty) and 35,200 (Sensex) levels, as doubts whether the Bharatiya Janata Party (BJP) could prove its majority in the southern state of Karnataka weighed on investor sentiment. State BJP president B S Yeddyurappa was sworn in as chief minister on Thursday morning even though his party fell short of an outright majority. He has now 15 days to prove his majority in the state legislative assembly. Markets started the session slightly in green terrain on report that the Centre has contained its fiscal deficit for FY18 at 3.42% of gross domestic product (GDP), down from 3.5% estimated (RE) when Budget FY19 was presented on February 1. An Rs 85,000 crore (3.8%) reduction in expenditure from the RE level of Rs 22.18 lakh crore and a marginal upward revision in nominal GDP in the second advance estimate (the Budget relied on the first advance estimate) allowed the government to curb the deficit.

Key gauges pared all of their initial gains and entered into red terrain on report that total investments via participatory notes (P-notes) into Indian capital markets plunged to a 9-year low of Rs 1 lakh crore in April amid stringent norms put in place by the Securities and Exchange Board of India to check the misuse of these instruments. Investors shrugged off private report that there was a 23% jump in venture investments in April at $2.4 billion, led by e-commerce, infrastructure and realty plays by funds. The report added that the increase in activity was driven largely by a jump in deal sizes, it said, pointing out that going by the number of deals, there were 69 transactions this April as against 66 in the year-ago period. Selling got intensified in last leg of trade to drag benchmarks below their respective crucial levels.

On the global front, European markets were trading in green as European Commission Vice President Valdis Dombrovskis said that Italy’s new government needs to stick to fiscal discipline and keep reducing the country’s public debt. Asia markets ended mostly in red, however, Japanese Nikkei edged higher despite the country’s core machinery orders fell in March for the first time in three months, but manufacturers forecast a rise for April-June, suggesting capital expenditure could hold up despite news that the economy contracted in the first quarter.

Back home, select stocks related to public sector undertakings (PSU) space edged higher after the Cabinet approved a mechanism within the government for speedy resolution of commercial disputes of central public sector enterprises without cases going to courts. A new two-tier mechanism will be put in place of the existing Permanent Machinery of Arbitration mechanism to resolve such commercial disputes. However, aviation company stocks InterGlobe Aviation, Jet Airways and SpiceJet closed in red as oil prices firmed with Brent crude creeping ever closer to $80 per barrel, a level it has not seen since November 2014, as supplies tighten while demand remains strong. Select solar companies like Moser Baer India, Surana Solar etc. ended in red on report that investors are cautious in bidding for solar power projects, fearing that depreciation in rupee, if un-hedged, may reduce their returns and in turn increase tariffs.

Finally, the BSE Sensex declined 238.76 points or 0.67% to 35,149.12, while the CNX Nifty was down by 58.40 points or 0.54% to 10,682.70.

The BSE Sensex touched a high and a low of 35,510.01 and 35,087.82, respectively and there were 10 stocks on gaining side as against 20 stocks on losing side, while one stock remained unchanged on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.67%, while Small cap index was up by 0.43%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.37%, Realty up by 0.41%, Telecom up by 0.40%, Industrials up by 0.30% and Capital Goods was up by 0.24%, while FMCG down by 0.90%, Bankex down by 0.63%, Metal down by 0.59%, Basic Materials down by 0.39% and Energy was down by 0.37% were the top losing indices on BSE.

The top gainers on the Sensex were Coal India up by 2.53%, Sun Pharma up by 1.75%, Tata Motors up by 1.53%, Wipro up by 1.15% and Tata Motors - DVR up by 0.98%. On the flip side, ITC down by 2.43%, Bharti Airtel down by 2.34%, HDFC down by 2.08%, Tata Steel down by 1.93% and Axis Bank down by 1.79% were the top losers.

Meanwhile, the Union Cabinet, Chaired by Prime Minister Narendra Modi, has approved a new two-tier mechanism to strengthen commercial dispute resolution between Central Public Sector Enterprises (CPSEs) and also between CPSEs and other government departments, through an institutionalised framework. Once implemented, these entities will not have to approach court and the matter will be resolved within three months.

The new mechanism will replace the Permanent Machinery of Arbitration (PMA). It has a two-tier system, at the first level (tier), a committee comprising of secretaries of the relevant administrative and secretary department of legal affairs will look at the dispute. At the second level (tier), in case the dispute remains unresolved, it will be referred to the Cabinet Secretary, whose decision will be final and binding on all concerned.  For the prompt disposal of disputes, a time schedule of 3 months at the first level has been prescribed. The government has said that it would reduce the number of litigations regarding commercial disputes in Court of Law and also avoid wastage of public money.

Department of Public Enterprises (DPE) will issue guidelines immediately to all CPSEs through their administrative Ministries/Departments and State Governments/UTs for compliance. The new mechanism will promote equity through mutual/collective efforts to resolve commercial disputes thereby reducing the number of litigations regarding commercial disputes in Court of Law and also avoid wastage of public money.

The CNX Nifty traded in a range of 10,777.25 and 10,664.50. There were 13 stocks in green as against 36 stocks in red, while one stock remained unchanged on the index.

The top gainers on Nifty were Bajaj Finance up by 7.71%, Bajaj Finserv up by 4.49%, Coal India up by 2.98%, Sun Pharma up by 2.77% and Bharti Infratel up by 1.52%. On the flip side, Hindalco down by 3.15%, UPL down by 2.58%, ITC down by 2.36%, Axis Bank down by 2.32% and HDFC down by 2.01% were the top losers.

The European markets were trading in green; UK’s FTSE 100 rose 7.7 points or 0.1% to 7,741.90, France’s CAC increased 25.44 points or 0.46% to 5,592.98 and Germany’s DAX was up by 43.63 points or 0.34% to 13,039.96.

Asian equity markets ended mostly lower on Thursday. Chinese stocks ended lower as investors turned cautious amid trade talks between China and the US in Washington. However, Japanese shares ended marginally higher after Wall Street gained overnight, with financial stocks rallying on an increase in US bond yields while tech shares attracted buyers after the yen weakened. Investors shrugged off weak Japanese core machinery orders data for March. The Cabinet Office said that the total value of core machine orders in Japan dropped 3.9 percent on month in March, coming in at 856.6 billion yen. That missed expectations for a decline of 3.0 percent following the 2.1 percent increase in February.