Weak trade prevails in morning session

Indian equity benchmarks continued their weak trade in morning session on account of selling in frontline blue chip counters as the street failed to garner momentum. The sentiments were dampened with bears taking control on account of falling rupee, rising oil prices and drama over Karnataka election. The rupee started on a weak note as the domestic unit slipped against the US currency. Oil prices held firm on strong demand, ongoing supply cuts led by producer cartel OPEC and looming US sanctions against major crude exporter Iran. Oil prices hit $80 a barrel on Thursday for the first time since November 2014. Separately, India’s oil imports from Iran surged to 640,000 barrels per day (bpd) in April, its highest level since October 2016, according to data from shipping and industry sources, as refiners raised purchases ahead of looming US sanctions against Tehran. Overall, India imported 4.51 million bpd in April, 2.5% higher than a year ago. Some pessimism also crept in on private report stating that Reserve Bank of India (RBI) is likely to keep policy rates unchanged in the forthcoming monetary policy review. The RBI will announce its second bi-monthly monetary policy on June 6. The report added that the probability of a June hike would increase if international oil prices rise further, or the rupee depreciates significantly ahead of the June meeting.

The street shrugged off report which highlighted that with robust private consumption, a slightly more supportive fiscal stance and benefits from past reforms, the United Nations (UN) in its mid-2018 report projected Indian economy to grow at 7.6% in the fiscal year 2018-19. It added that the country will remain the fastest growing economy in the world. But, it also said that although capital spending has shown signs of revival, a more widespread and sustained recovery in private investment remains a crucial challenge in the nation. Mixed reactions were witnessed in telecom companies stocks after the Cellular Operators Association of India (COAI) said that players in the telecom industry have so far invested Rs 10.4 lakh crore in India. It added that the proliferation of telecom infrastructure in the rural and remote areas has resulted in efficient connectivity and improved usability of telecom services.

Meanwhile, select banking stock were buzzing as Finance minister Piyush Goyal promised all possible support to the 11 state-run banks that are under the RBI’s Prompt Corrective Action (PCA) framework and expressed confidence that public sector banks will overcome legacy issues very soon. Mixed reactions were witnessed in gold and jewellery stock after the World Gold Council (WGC) in its report said that the gold jewellery demand is likely to face pressure in the long term, however, the country’s demographics will offset the trends and boost demand. The report added that jewellery demand will persist in developed markets, however, the excitement will be in the emerging markets as their economies grow. Select aviation stocks were buzzing after Directorate General of Civil Aviation (DGCA) data showed that domestic air passenger volume surged 26% in April to 11.51 million over the year-ago period driven by the tourists season, which began from the previous month. 

Traders were seen piling position in FMCG, Energy and Consumer Durables sector stocks, while selling was witnessed in Telecom, Healthcare and Bankex sector stocks. In scrip specific developments, Reliance Communications continued its yesterday’s firm trend after reports emerged that the telco is in talks with Ericsson to settle their dispute over the telco’s dues outside the insolvency and bankruptcy proceedings. Vijaya Bank was trading in green after the lender announced that a board meeting will be held on May 20, 2018 to discuss on the capital raising plan under BASEL-III for the financial year 2018-2019.

On the global front, Asian markets were trading in green. The Bank of Japan’s key inflation gauge showed that price gains slowed for a second straight month in April, underscoring the central bank’s struggles to hit its 2% inflation target. The latest fall in the BOJ’s key inflation gauge will likely heighten questions about the sustainability of its stimulus program. Back home, the BSE Sensex and NSE Nifty were trading below the psychological 35,100 and 10,700 levels, respectively. The market breadth on BSE was negative in the ratio of 1024:1047, while 128 scrips remained unchanged.

The BSE Sensex is currently trading at 35014.14, down by 134.98 points or 0.38% after trading in a range of 34961.78 and 35163.11. There were 10 stocks advancing against 21 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.22%, while Small cap index was down by 0.29%.

The few gaining sectoral indices on the BSE were FMCG up by 0.23%, Energy up by 0.22%, Consumer Durables up by 0.16% and Power up by 0.07%, while Telecom down by 0.81%, Healthcare down by 0.69%, Bankex down by 0.64%, Industrials down by 0.48% and Capital Goods down by 0.47% were the top losing indices on BSE.

The top gainers on the Sensex were Bajaj Auto up by 3.27%, Hindustan Unilever up by 1.13%, Yes Bank up by 0.81%, ONGC up by 0.42% and Coal India up by 0.41%.

On the flip side, Bharti Airtel down by 2.48%, ICICI Bank down by 1.81%, Wipro down by 1.64%, Tata Motors down by 1.57% and Sun Pharma down by 1.25% were the top losers.

Meanwhile, highlighting the government’s major structural reforms, Niti Aayog CEO Amitabh Kant has said that the world of crony capitalism in India will come to an end with the introduction of Insolvency and Bankruptcy Code (IBC). He acknowledged that there are some teething problems as IBC is a new law and is still at a nascent stage, but it would mature in the coming days.

Kant has stated that earlier one could borrow money from banks and not repay. Now, if one does not repay, he/she loses the business empire. He pointed out that one after another, the businesses are losing their empire because it is going to NCLT (National Company Law Tribunal) and NCLT is later bailing them out. Besides, he said that there had been questions on IBC as it had failed to achieve time bound completion of the resolution process on major NPA accounts released by the Reserve Bank of India. He noted that IBC had mandated 270 days time-bound resolution or send to liquidation but due to various litigations, there had been delays.

Adding further, Niti Aayog CEO has said that banks are going bust due to NPA and government has to bring in some discipline as it is public money. He also said that one of the key constraints of having high GDP growth is the old outdated institutions in the country which need to be 'radically restructured'.  He said “You can’t get into 9-10 percent economic growth till you don’t restructure many of the institutions.”

The CNX Nifty is currently trading at 10650.05, down by 32.65 points or 0.31% after trading in a range of 10631.15 and 10674.95. There were 19 stocks advancing against 31 stocks declining on the index.

The top gainers on Nifty were Bajaj Auto up by 3.00%, Tech Mahindra up by 2.89%, Bajaj Finance up by 1.83%, Hindustan Unilever up by 1.61% and ONGC up by 0.85%.

On the flip side, Bharti Airtel down by 2.63%, Wipro down by 2.14%, ICICI Bank down by 2.03%, Ultratech Cement down by 2.00% and Cipla down by 1.54% were the top losers.

The Asian markets were trading in green; Taiwan Weighted increased 2.03 points or 0.02% to 10,835.84, FTSE Bursa Malaysia KLCI increased 4.3 points or 0.23% to 1,858.74, KOSPI Index increased 6.57 points or 0.27% to 2,455.02, Shanghai Composite increased 10.32 points or 0.33% to 3,164.60, Jakarta Composite increased 16.93 points or 0.29% to 5,832.85, Hang Seng increased 77.46 points or 0.25% to 31,019.61 and Nikkei 225 increased 90.28 points or 0.4% to 22,928.65.