Benchmarks end lower for fourth straight day

Indian equity benchmarks extended southward journey for fourth straight session to end below their crucial 34,900 (Sensex) and 10,600 (Nifty) levels, as doubts whether the Bharatiya Janata Party (BJP) could prove its majority in the southern state of Karnataka weighed on investors’ sentiment. Markets started the session on a pessimistic note with a private report stating that Reserve Bank of India is likely to keep policy rates unchanged in the forthcoming monetary policy review, but will have a hawkish tone on concerns over inflation and as crude oil prices remain elevated. Traders shrugged off UN’s report that India’s economy is projected to grow 7.6% in fiscal year 2018-19, remaining the fastest growing economy in the world, as robust private consumption and benefits from past reforms help the country’s GDP gain momentum but sustained recovery in private investment remains a crucial challenge. Market participants failed to get any sense of relief with Niti Aayog CEO Amitabh Kant’s statement that crony capitalism in India will come to an end with the new bankruptcy code though it was facing some teething troubles.

Markets extended losses in last leg of trade on private report stating that crude oil prices may rise further in the coming months, following which India’s current account deficit will be around 2.4% in 2018- 19. 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. Meanwhile, in a major political development, the Supreme Court held a hearing in the Karnataka government formation matter, directing that the Bharatiya Janata Party (BJP) leader and the state’s new chief minister, B S Yeddyurappa, must conduct the floor test on Saturday at 4 pm.

On the global front, European markets were trading mostly in red in early deals amid concerns about trade war and geopolitical issues. Traders, awaiting the outcome of the trade talks between the US and China, are largely tracking quarterly earnings reports for direction. Asian markets ended mostly in green as US and Chinese officials held a new round of talks seeking to avert a trade war between the world’s two largest economies.

Back home, telecom stocks edged lower despite 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. Banking stock declined despite Finance minister Piyush Goyal promising 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. Aviation stocks ended in red despite report that the Civil Aviation Ministry is likely to approach the GST Council soon for bringing aviation turbine fuel (ATF) under the tax regime. Currently, jet fuel or ATF is not under the GST ambit and the levy on it varies from state to state.

Finally, the BSE Sensex declined 300.82 points or 0.86% to 34,848.30, while the CNX Nifty was down by 86.30 points or 0.81% to 10,596.40.

The BSE Sensex touched a high and a low of 35,163.11 and 34,821.62, respectively and there were 7 stocks on gaining side as against 24 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index declined 1.47%, while Small cap index was up down by 1.62%.

The lone gaining sectoral index on the BSE was FMCG up by 0.88%, while Capital Goods down by 3.05%, Industrials down by 2.54%, Metal down by 2.36%, Healthcare down by 2.06% and Auto down by 1.82% were the top losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 2.22%, Kotak Mahindra Bank up by 1.99%, Indusind Bank up by 1.23%, ITC up by 1.13% and Hero MotoCorp up by 0.31%. On the flip side, Larsen & Toubro down by 3.54%, ICICI Bank down by 3.21%, Sun Pharma down by 3.21%, Tata Motors down by 3.14% and Tata Steel down by 3.04% 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 traded in a range of 10,674.95 and 10,589.10. There were 14 stocks in green as against 36 stocks in red on the index.

The top gainers on Nifty were Bajaj Finance up by 3.51%, Tech Mahindra up by 2.97%, Bajaj Finserv up by 2.81%, Hindustan Unilever up by 2.50% and Kotak Mahindra Bank up by 2.07%. On the flip side, Cipla down by 4.00%, Wipro down by 3.52%, Indiabulls Housing Finance down by 3.45%, Sun Pharma down by 3.41% and Tata Motors down by 3.21% were the top losers.

The European markets were trading mostly in red; UK’s FTSE 100 decreased 13.8 points or 0.18% to 7,774.17 and Germany’s DAX was down by 1.47 points or 0.01% to 13,113.14, while France’s CAC was up by 4.57 points or 0.08% to 5,626.49.

Asian equity markets ended mostly higher on Friday as US and Chinese officials held a new round of talks seeking to avert a trade war between the world's two largest economies. Japanese shares ended higher after a weaker yen lifted exporters, while financial stocks extended their rally as US bond yields remained high. Further, Chinese shares rebounded after two days of losses, with oil stocks raising the most.