Selloff in second half drag benchmarks lower on Tuesday

Tuesday turned out to be a dismal day of trade for Indian equity benchmarks where frontline gauges ended the session below their crucial 10,650 (Nifty) and 35,000 (Sensex) levels, as traders opted to book profit after three days of continuous rally. Markets started the session on cautious note but gained traction with traders taking support from Economic Affairs Secretary Subhash Chandra Garg’s statement that the Indian economy is expected to grow between 7.3-7.5 percent in the March quarter. The government will release GDP data on Thursday. He said the country was expected to grow at 6.7 percent in the 2017/18 financial year that ended in March. Adding to the optimism, the India Meteorological Department (IMD) said that the southwest monsoon hit Kerala today, three days before its scheduled arrival. The onset of monsoon over the southern state marks the commencement of the four-month long rainy season in the country. The IMD has made a forecast of normal rainfall this season. Some support also came with External Affairs Minister Sushma Swaraj’s statement that her ministry’s economic diplomacy attracted $209.83 billion for India’s flagship development programmes. She also said that the External Affairs Ministry also created two new divisions for this - Department of Economic Diplomacy and Department of States - and merged both of them.

However, selling which emerged in second half of the trade dragged markets below their respective crucial levels. Sentiments weakened with a private report stating that the June policy review meeting is likely to be a close call, while the tone of the policy statement is expected to remain hawkish. The markets participants paid no heed towards report that the Finance Ministry has clarified applicability of the Goods and Services Tax (GST) on farmers. It has said that support services like renting or leasing of land by farmers for agriculture, forestry, fishing or animal husbandry are exempt from the ambit of new indirect tax. 

Weak opening in European counters too dampened sentiments amid renewed fears of a euro zone break-up risk in Italy and political turmoil in Spain. Asian markets closed in red, as the fall in crude oil prices and the prospects of fresh elections in Italy offset optimism over a possible revival in diplomatic talks between the US and North Korea.

Back home, software stocks remained in focus today on the back of weakness in rupee against dollar. Meanwhile, Midcaps in the information technology (IT) service sector had a sweet run in the March quarter of FY18 with most of them managing to deliver better than expected numbers backed by strong growth in their digital business and a robust deal pipeline. Public sector oil marketing companies (OMCs) edged higher on report that State oil companies spent a record Rs 129,000 crore in 2017-18 on acquisitions as well as expanding oil production, refining and distribution facilities. Capex was 22% more than the previous year.

Finally, the BSE Sensex declined 216.24 points or 0.61% to 34,949.24, while the CNX Nifty was down by 55.35 points or 0.52% to 10,633.30.

The BSE Sensex touched a high and a low of 35,234.14 and 34,922.18, 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 0.44%, while Small cap index was down by 0.26%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 0.49%, Auto up by 0.43%, IT up by 0.34%, Telecom up by 0.23% and TECK was up by 0.10%, while Bankex down by 1.61%, Healthcare down by 0.80%, Consumer Durables down by 0.77%, Realty down by 0.76% and PSU was down by 0.55% were the top losing indices on BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 2.26%, Bharti Airtel up by 1.08%, Infosys up by 0.72%, TCS up by 0.54% and Hero MotoCorp up by 0.45%. On the flip side, ICICI Bank down by 2.87%, SBI down by 2.70%, Indusind Bank down by 2.08%, Yes Bank down by 1.78% and Kotak Mahindra Bank down by 1.63% were the top losers.

Meanwhile, global credit rating agency, Moody’s Investors Services in its latest report titled ‘Infrastructure - India: Highway PPPs gaining momentum, supported by government initiatives’ has said that India’s increasing use of public-private partnerships (PPPs) in highway sector supports private infrastructure investment. It pointed out that private investment in highway projects had been falling in recent years, amid issues such as slow project approvals and cost overruns, but the government’s introduction of the hybrid annuity model (HAM) in 2016-as a variation of PPPs-has triggered new investment inflows.

According to the report, other sectors such as the port, shipping and rail sectors, have also started looking at improving the PPP framework in order to attract private investment to fund India's substantial infrastructure needs. It explained that the HAM model adopted in India’s highways sector, relative to more traditional PPPs, rebalances certain project risks between the public and private sectors. In addition, it said that the government provides funding during the construction phase, thus addressing some of the key concerns of the earlier model. Further, it indicated that the HAM model has triggered a significant increase in projects awarded, with HAM projects accounting for around 46% of total awards in terms of highway length and 63% in terms of total value in the 12 months to March 2018. 

Moody’s has stated that recently, the government has implemented measures in an attempt to attract private investment for India's vast infrastructure needs, including in the port and rail sectors. It also noted that the improving credit profiles of infrastructure developers is increasing their capacity to participate in PPP projects. However, it said that their access to funding remains a key concern, with banks constrained by sector-specific exposure limits and existing stressed assets in their infrastructure portfolios.

The CNX Nifty traded in a range of 10,717.25 and 10,616.10. There were 16 stocks in green as against 34 stocks in red, while 1 stock remained unchanged on the index.

The top gainers on Nifty were Mahindra & Mahindra up by 2.94%, GAIL India up by 2.14%, HCL Tech up by 1.62%, Bharti Airtel up by 1.59% and Indian Oil Corporation was up by 1.09%. On the flip side, ICICI Bank down by 3.11%, SBI down by 3.09%, Bajaj Finserv down by 2.35%, Zee Entertainment down by 2.29% and Yes Bank down by 1.98% were the top losers.

The European markets were trading in red; Germany’s DAX declined 180.19 points or 1.4% to 12,683.27, UK’s FTSE 100 decreased 102.51 points or 1.33% to 7,627.77 and France’s CAC was down by 71.15 points or 1.29% to 5,437.78.

Asian equity markets ended lower on Tuesday as investors monitored oil prices and kept an eye on political developments in Italy. The prospects of fresh elections in the country offset optimism over a possible revival in diplomatic talks between the US and North Korea. Chinese shares ended lower on concerns about rising credit risks in the country. Further, Japanese shares hit a one-month low as concerns over European politics and uncertainty over the prospects for a US-North Korea summit sapped investors' appetite for risk. Meanwhile, the markets in Malaysia, Singapore, and Indonesia are closed for Wesak Day.