Markets extend losing streak for third straight session

Extending southward journey for third day in a row, Indian equity benchmarks ended the session with a cut of around one third of a percent on Tuesday, as traders remained on sidelines ahead of Reserve Bank of India’s (RBI’s) second bi-monthly monetary policy outcome for 2018-19, due on June 6. Markets made a cautious start and traded choppy throughout the session with Commerce and Industry Minister Suresh Prabhu’s statement that unilateral trade restrictive actions by some developed countries could derail the fragile global economic recovery which would have implications on job scenario. Sentiments also remain dampened with private report that global economic growth could slow down by 1 percentage point - or more than a quarter of the expansion rates projected by various international bodies - if US President Donald Trump’s tariff threats against China and others escalate into a full-blown trade war. The markets also remained under pressure on a report stating that the demand for Indian goods has been on a decline in the Chinese market, India’s increasing dependence on China for items such as electric equipment, machines, medical and surgical instruments and fertilizers, among others, is widening India’s trade deficit with the country.

Market extended losses in last leg of trade to end near intraday low levels on account of negative Services PMI data. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index contracted to 49.6 in the month of May from 51.4 in April. The Nikkei India Composite PMI Output Index, which measures both manufacturing and services, also fell to 50.4 in May from 51.9 in April. Traders failed to get any sense of relief with report that markets regulator SEBI has drastically slashed the additional expense charged by mutual funds to just 5 basis points to help increase the penetration of such products among investors. The move will help reduce the cost of investing in MFs and industry players believe that it may result in lower commissions for distributors. Traders also shrugged off report from International Monetary Fund which highlighted that India, the $2.85 trillion economy is currently the 7th largest in the world in terms of Gross Domestic Product, and all it needs is to add $90 billion to conquer not only the United Kingdom but also France.

On the global front, European markets were trading mixed, as trade concerns continued to impact global markets. As Italian concerns abate, investors now looked forward to next week’s FOMC meeting for indications whether the Federal Reserve will accelerate the pace of its rate hikes. Asian markets closed mostly higher, as optimism over the improving US economy was helping overcome worries about a possible trade war and geopolitical uncertainty.

Back on the domestic turf, market participants paid no heed towards report that as many as 15 projects, including setting up of a cold chain in Madhya Pradesh, were approved under by a commerce ministry scheme to develop infrastructure for promoting exports. On the sectoral front, select stocks from steel sector lost sheen with a private report stating that the large NPAs of the banks with predominant share by the defaulting big steel players specifically the PSBs have already hurt the institutional credit flow. However, most of the sugar stocks remained in sweet spot on report that Centre is expected to announce a fresh package of almost Rs 8000 crore to bail out the sugar sector. This will be in addition to the financial assistance of Rs 5.50 per quintal of sugarcane announced a few weeks ago, costing over Rs 1500 crore.

Finally, the BSE Sensex declined 108.68 points or 0.31% to 34,903.21, while the CNX Nifty was down by 35.35 points or 0.33% to 10,593.15.

The BSE Sensex touched a high and a low of 35,073.12 and 34,784.68, respectively and there were 10 stocks on gaining side as against 21 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index declined 1.20%, while Small cap index was down by 2.43%.

The only gaining sectoral indices on the BSE were Energy up by 0.25% and Oil & Gas was up by 0.10%, while Telecom down by 3.08%, Capital Goods down by 1.96%, Industrials down by 1.80%, TECK down by 1.58% and IT was down by 1.52% were the top losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 0.90%, Tata Steel up by 0.88%, HDFC up by 0.78%, Maruti Suzuki up by 0.69% and HDFC Bank up by 0.68%. On the flip side, Coal India down by 2.36%, Bharti Airtel down by 2.16%, Larsen & Toubro down by 1.93%, Dr. Reddy’s Lab down by 1.87% and Yes Bank down by 1.84% were the top losers.

Meanwhile, credit rating agency, ICRA in its latest report has said that the capacity addition in the wind power segment is expected to rise to around 3-3.5 Gigawatt (GW) in FY19, after witnessing a weak performance in FY18. It showed that the wind energy witnessed a capacity addition of only 1.7 GW in FY18, which is a significant drop from the 5.5 GW capacity added in FY17. It added that the Ministry of New and Renewable Energy (MNRE) along with the distribution utilities in Gujarat, Maharashtra and Tamil Nadu have awarded wind-power capacity of 7.6 GW over the past 15 months and another 10 GW each are proposed to be awarded in FY19 and FY20.

The rating agency has stated that this is in line with the trajectory of project awards announced by the MNRE in November 2017 to achieve the cumulative wind capacity target of 60 GW by FY22. However, on a cautious note, it said that the winning bidders in these auctions face the twin challenges of project viability at the quoted tariffs and securing connectivity and long-term access to inter-state transmission network. It added that while the regulations recently notified by the Central Electricity Regulatory Commission (CERC) on connectivity for renewable energy projects are positive for these developers, the adequacy of the existing inter-state transmission infrastructure in the states with high wind potential remains a challenge.

According to the report, the connectivity regulations recently notified by the power regulator CERC provide clarity on the procedure and timelines for securing connectivity from the central transmission utility and accord priority to projects holding a letter of award under the tariff-based competitive bidding. However, it said that the uncertainty on availability of adequate evacuation infrastructure persists, given that the existing inter-state transmission infrastructure in the states with high wind potential may not be sufficient to provide connectivity to the projects bid out so far and proposed bids by the SECI. Moreover, it pointed out that the augmentation of transmission infrastructure would take about 24-36 months, whereas the winning developers must commission the wind power projects within 18 months from the date of award.

The CNX Nifty traded in a range of 10,633.15 and 10,550.90. There were 19 stocks in green as against 31 stocks in red on the index.

The top gainers on Nifty were Cipla up by 4.11%, Bajaj Finance up by 2.49%, HPCL up by 1.76%, Tata Steel up by 1.32% and Bajaj Finserv up by 1.21%. On the flip side, Zee Entertainment down by 3.08%, Titan Company down by 2.41%, Bharti Airtel down by 2.11%, Coal India down by 2.00% and Larsen & Toubro down by 1.83% were the top losers.

The European markets were trading mixed; France’s CAC rose 26.92 points or 0.49% to 5,499.83 and Germany’s DAX was up by 106.49 points or 0.83% to 12,877.24, while UK’s FTSE 100 was down by 40.95 points or 0.53% to 7,700.34.

Asian equity markets ended mostly higher on Tuesday. Chinese shares ended higher after data showed activity in China's services sector expanded at a steady pace in May. The Caixin Services PMI stood at 52.9 in the month, matching expectations and unchanged from the previous month. Japanese shares eked out modest gains as the yen edged lower against the dollar and data on services sector activity and household spending painted a mixed picture of the economy. However, weak commodity prices pulled down resource stocks and investors waited for cues from the G-7 summit in Canada later this week as well the June 12 summit in Singapore between US President Donald Trump and North Korean leader Kim Jong Un.