Benchmarks extend southward journey for fifth straight day

Extending their losing streak for fifth straight day, Indian equity benchmarks ended the Monday’s trade with a cut of over half a percent, with frontline gauges ending below their crucial 34,700 (Sensex) and 10,550 (Nifty) levels, as Karnataka elections is weighing on the markets as the outlook of the 2019 election is looking obfuscate. Markets started the session slightly in green as traders took some support with economic affairs secretary Subhash Chandra Garg’s statement that India’s growth trajectory continues to be stable with strong macroeconomic fundamentals, despite a continual rise in global oil prices and hardening bond yields. He also said that the fiscal deficit programme has been going on very smoothly and there has been no reason to believe that there will be any greater impact. Traders also got some support with report that India is the sixth wealthiest country in the world with a total wealth of $8,230 billion, while the US is the richest nation globally.

However, markets failed to hold on to the green terrain and slipped into red on report that even as monsoon is predicted to be normal this year, its uneven distribution could spike food prices, and inflation is likely to edge further. Sentiments also remained dampened with a private report stating that Corporate India, especially the chunk comprising over-leveraged companies, is worried about a recent Reserve Bank of India (RBI) circular that says companies with even a day of loan-default can be set on the path of debt resolution and subsequent bankruptcy proceedings. Markets extended losses to end near intraday lows with the Comptroller and Auditor General (CAG) of India Rajiv Mehrishi’s statement that the root cause of Indian banking sector crisis is the problem in the bond market as the RBI acts as regulator as well as trader. He noted that the RBI, in its effort to ensure that banks don’t fail, has slowed down giving licences to new banks, so it promotes uncompetitive behavior. Adding to the pessimism, Niti Aayog CEO Amitabh Kant said that achieving 9-10% growth rate in the next 30 years would be a challenge for India, even though the country is expanding at 7.5% growth rate per annum.

On the global front, European markets were trading mostly in green in early deals as easing trade war worries lifted the dollar, supporting exporters. Asian markets closed mostly higher, after US Treasury Secretary Steven Mnuchin said that the US trade war with China is ‘on hold’ as the world’s two largest economies work on a wider trade agreement.

Back home, Indostar Capital Finance made a decent debut on the bourses and ended with a gain of around two and a half percent. On the sectoral front, banking stocks declined despite report that the finance ministry is expecting banks to write back more than Rs 1 lakh crore after the resolution of all 12 NPA cases referred to insolvency proceedings by the RBI it its first list. Stocks related to steel and aluminium counters too remained under pressure despite report that India has told the WTO that it proposes to raise duties by up to 100% on 20 products such as almonds, apple and specific motorcycles imported from the US from next month, if Washington does not roll back high tariffs on certain steel and aluminium items.

Finally, the BSE Sensex declined 232.17 points or 0.67% to 34,616.13, while the CNX Nifty was down by 79.70 points or 0.75% to 10,516.70.

The BSE Sensex touched a high and a low of 34,973.95 and 34,593.82, respectively and there were 6 stocks on gaining side as against 25 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index declined 1.64%, while Small cap index was up down by 2.20%.

The few gaining sectoral indices on the BSE were PSU up by 0.57%, IT up by 0.14%, Oil & Gas up by 0.10% and TECK was up by 0.07%, while Realty down by 3.11%, Healthcare down by 2.55%, Consumer Durables down by 2.07%, Industrials down by 2.03% and Auto was down by 1.92% were the top losing indices on BSE.

The top gainers on the Sensex were SBI up by 2.47%, TCS up by 1.59%, Coal India up by 1.26%, ICICI Bank up by 1.13% and ONGC up by 0.43%. On the flip side, Sun Pharma down by 4.50%, Dr. Reddy’s Lab down by 4.23%, Yes Bank down by 3.27%, Tata Motors down by 2.85% and Tata Motors - DVR down by 2.69% were the top losers.

Meanwhile, the Comptroller and Auditor General (CAG) of India Rajiv Mehrishi has said that the root cause of Indian banking sector crisis is the problem in the bond market as the Reserve Bank of India (RBI) acts as regulator as well as trader. He noted that the RBI, in its effort to ensure that banks don’t fail, has slowed down giving licences to new banks, so it promotes uncompetitive behavior.

Mehrishi has pointed out that very few new banks have got licence in India in recent years, and that is example of abuse of market dominance by the state. Referring to the Walmart-Flipkart $16 billion deal, he said that Walmart may have several common shareholding with Amazon, and that also needs to be worried about.

The CAG further said that the market must work efficiently but that does not happen due to asymmetry of information and abuse of power etc. Therefore, he said that state intervention is required in the market. Noting there has been huge expansion of markets and growth of new economy, he said that new economy is also likely to have dominance and abuse of dominance so we need to look at new economy.

The CNX Nifty traded in a range of 10,621.70 and 10,505.80. There were 15 stocks in green as against 33 stocks in red, while two stocks remained unchanged on the index.

The top gainers on Nifty were SBI up by 2.37%, BPCL up by 1.95%, Coal India up by 1.76%, TCS up by 1.57% and GAIL India up by 1.42%. On the flip side, Dr. Reddy’s Lab down by 4.64%, Sun Pharma down by 4.53%, UPL down by 3.84%, Yes Bank down by 3.30% and Zee Entertainment Enterprises down by 2.91% were the top losers.

The European markets were trading mostly in green; France’s CAC increased 41.44 points or 0.74% to 5,655.95 and UK’s FTSE 100 was up by 62.25 points or 0.8% to 7,841.04, while Germany’s DAX was down by 36.89 points or 0.28% to 13,077.72.

Asian equity markets ended mostly higher on Monday after the US and China agreed to put the trade war on hold and set up a framework for addressing trade imbalances in the future. Chinese stocks rose after the US and China made meaningful progress in two days of high-level talks. Japanese shares ended higher as the dollars’ rise against the yen supported some exporters after news of easing US-China trade tensions. Further, a solid trade balance data also helped lift Japanese shares. Japan posted a merchandise trade surplus of 625.977 billion yen in April, the Ministry of Finance said - up 30.9 percent on year. The headline figure exceeded expectations for a surplus of 440.0 billion yen following the downwardly revised 797.0 billion yen surplus in March (originally 797.3 billion yen).