Benchmarks erase gains to enter into negative terrain

Indian equity benchmarks erased their gains and entered into negative terrain in morning session on account of selling in frontline blue chip counters. Uninspiring earnings and political jitters too weighed on market sentiment. The rupee opened higher against the US dollar. The Indian rupee had plunged to a 16-month low on Wednesday due to a combination of macro worries against the backdrop of surging global crude prices and consistent outflow of foreign funds along with uncertainty over government formation in Karnataka. 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. Petrol prices continued to rise across the country and crossed the Rs 75 per litre mark in the national capital. The sentiment were dampened on report that the share of Foreign Portfolio Investments (FPI) through Participatory notes (P-notes) in domestic capital markets has declined to nine-year low of Rs 1 lakh crore at the end of April, due to tough rules put in place by Securities and Exchange Board of India (SEBI) to check the misuse of these instruments.

Select solar companies like Moser Baer India, Ujaas Energy, Surana Solar and Veer Energy & Infrastructure were trading 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. India Ratings reported that this could be due to a significant exchange rate variation between the bidding and finalization time for projects. 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.

Meanwhile, select PSU stocks were buzzing after the Cabinet approved a mechanism 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. PSU bank stocks were buzzing on report that the government is looking to impose strict deadlines on banks that are under the Reserve Bank of India’s watch to implement a turnaround plan. This will include fixed targets for recoveries of bad loans, sale of non-core assets and a differentiated lending road map with each bank specializing in a particular area. The Finance Ministry is scheduled to review the performance of around 11 banks under RBI’s prompt corrective action framework.

Traders were seen piling position in Consumer Durables, Capital Goods and Industrials sector stocks, while selling was witnessed in Metal, Basic Materials and Oil & Gas sector stocks. In scrip specific developments, Granules India was trading in green on receiving approval from the United States Food & Drug Administration (USFDA) for its Abbreviated New Drug Applications (ANDA) for Methylergonovine 0.2 mg Tablets. Divis Laboratories was trading in green after its Unit-I at Choutuppal in state of Telangana has been inspected by the United States Food & Drug Administration (USFDA) from May 14 to May 16, 2018. The inspection has been concluded with no 483 observations.

On the global front, Asian markets were trading mostly in red. Japan’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, the BSE Sensex and NSE Nifty were trading below the psychological 35,400 and 10,750 levels, respectively. The market breadth on BSE was positive in the ratio of 1166:917, while 93 scrips remained unchanged.

The BSE Sensex is currently trading at 35325.86, down by 62.02 points or 0.18% after trading in a range of 35308.16 and 35510.01. There were 14 stocks advancing against 17 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.24%, while Small cap index was up by 0.33%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.47%, Capital Goods up by 0.45%, Industrials up by 0.37%, Telecom up by 0.26% and Power up by 0.23%, while Metal down by 1.28%, Basic Materials down by 0.38%, Oil & Gas down by 0.37%, Energy down by 0.34% and Healthcare down by 0.27% were the top losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 1.25%, Coal India up by 0.87%, Tata Motors up by 0.77%, Wipro up by 0.62% and SBI up by 0.58%.

On the flip side, Tata Steel down by 2.22%, Hero MotoCorp down by 1.13%, HDFC down by 1.06%, Dr. Reddy’s Lab down by 0.96% and Infosys down by 0.93% were the top losers.

Meanwhile, in a major move on sustainable development, the Union Cabinet, headed by Prime Minister Narendra Modi, has approved National Policy on Biofuels 2018, which is expected to not only reduce pollution but also help farmers in case of surplus production. The Biofuels policy allows doping of ethanol produced from damaged foodgrains, rotten potatoes, corn and sugar beet with petrol to cut oil imports by Rs 4,000 crore this year alone. Till now only ethanol produced from sugarcane was allowed to be mixed in petrol.

The policy categorises biofuels into different groups such as first generation (1G), second generation (2G) and third generation (3G) fuels. The first generation category of biofuels includes bioethanol and biodiesel. The second generation comprises ethanol and municipal solid waste. The third generation includes bio-compressed natural gas (CNG). The policy expands the scope of raw material for ethanol production by allowing use of sugarcane juice, sugar containing materials like sugar beet, sweet sorghum, starch containing materials like corn, cassava, damaged food grains like wheat and broken rice, and rotten potatoes.

Considering that farmers are at a risk of not getting appropriate price for their produce, the policy allows use of surplus food grains for production of ethanol for blending with petrol, with the approval of National Biofuel Coordination Committee. Under the policy, a viability gap funding scheme for 2G ethanol bio refineries of Rs 5000 crore in 6 years in addition to additional tax incentives, higher purchase price as compared to 1G biofuels will be provided. Moreover, it also encourages setting up of supply chain mechanisms for biodiesel production from non-edible oilseeds, used cooking oil and short gestation crops.

The CNX Nifty is currently trading at 10720.60, down by 20.50 points or 0.19% after trading in a range of 10715.65 and 10777.25. There were 24 stocks advancing against 26 stocks declining on the index.

The top gainers on Nifty were Coal India up by 1.33%, Bharti Infratel up by 1.22%, Hindustan Unilever up by 1.14%, Titan Co up by 1.11% and Eicher Motors up by 1.00%.

On the flip side, Hindalco down by 3.77%, BPCL down by 3.19%, Cipla down by 2.66%, Tata Steel down by 2.05% and HPCL down by 1.48% were the top losers.

The Asian markets were trading mostly in red; Taiwan Weighted decreased 20.14 points or 0.18% to 10,877.43, Shanghai Composite decreased 7.97 points or 0.25% to 3,161.60, KOSPI Index decreased 4.89 points or 0.2% to 2,454.93 and Hang Seng decreased 2.84 points or 0.01% to 31,107.36.

On the other hand, FTSE Bursa Malaysia KLCI increased 4.91 points or 0.26% to 1,863.17, Jakarta Composite increased 42.98 points or 0.74% to 5,884.44 and Nikkei 225 increased 156.41 points or 0.69% to 22,873.64.