Markets trade with caution on sluggish global cues

Indian equity benchmarks made a cautious start and are trading lower in early deals with frontline gauges breaching their crucial 35,400 (Sensex) and 10,750 (Nifty) levels amid feeble global cues. The sentiments were also affected after rupee fell to its one week low against the dollar in the morning trade. Traders also seems to be cautious with Moody’s Investors Service’s statement that India could prune its capital expenditure to avoid any slippage of its fiscal deficit target of 3.3% of GDP in the current fiscal, but warned any reduction in the excise duty on petroleum products would exert negative pressure on the country’s sovereign credit profile. Meanwhile, the International Monetary Fund (IMF) has said addressing the ongoing crisis in the banking sector was important for India to support investment and inclusive growth agenda.

On the global front, all the Asian counters are trading lower at this point of time as investors sentiment turned slightly cautious after recent gains seen earlier in the week. The US markets ended mostly lower on Thursday due to profit taking after the tech-heavy index rose to new record highs in recent sessions.

Back home, sugar stocks edged higher on report that sugar prices at the wholesale markets in Mumbai has crossed Rs 29 a kg after Wednesday’s decision by the Union government to fix this as the legal minimum sale price (MSP) for mills. Steel stocks remained in focus on report that the government has set aside Rs 200 crore for an innovation fund to increase domestic steel production. The government has set a target to increase steel capacity to 300 mt by 2030 from the current levels of 160-170 mt per year.

The BSE Sensex is currently trading at 35390.15, down by 72.93 points or 0.21% after trading in a range of 35309.12 and 35413.61. There were 11 stocks advancing against 19 stocks declining on the index, while 1 stock remained unchanged.

The broader indices were trading in green; the BSE Mid cap index gained 0.20%, while Small cap index was up by 0.22%.

The top gaining sectoral indices on the BSE were Healthcare up by 2.06%, IT up by 0.91%, TECK up by 0.80%, Consumer Durables up by 0.43% and Telecom up by 0.30%, while Power down by 0.72%, Energy down by 0.69%, Oil & Gas down by 0.68%, Bankex down by 0.66% and Utilities down by 0.57% were the top losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 3.17%, Dr. Reddys Lab up by 2.62%, Tata Motors up by 1.75%, Tata Motors - DVR up by 1.42% and TCS up by 1.06%. On the flip side, Power Grid Corporation down by 1.85%, ICICI Bank down by 1.48%, Yes Bank down by 0.96%, Axis Bank down by 0.85% and Indusind Bank down by 0.72% were the top losers.

Meanwhile, global rating agency Moody's Investors Service, in its latest report has said that India should cut its capital expenditure to avoid any slippage of its fiscal deficit target of 3.3% of gross domestic product (GDP) in the current fiscal (2018-19). However, it warned that any reduction in the excise duty on petroleum and diesel products in view of high crude oil prices, would exert negative pressure on the country’s sovereign credit profile. In the last year, it had upped India’s sovereign rating for the first time in over 13 years to ‘Baa2’ with a stable outlook, saying that growth prospects have improved with continued economic and institutional reforms.

The report also said that rating agency expects the government to meet its fiscal deficit target of 3.3% for 2018-19, based on its commitment to gradual fiscal consolidation and budget assumptions which appear achievable. But, it expressed some concern on the revenue side, saying that there is some downside risk to the government’s assumptions on the collections from the Goods and Services Tax (GST) and petroleum products excise duty. It added that the ongoing uncertainty around GST implementation and compliance, including the timely provision of input tax credit refunds and iterative changes to tax rates, could result in some potential revenue losses. However, it said that the initial setbacks on implementation appear to be fading and, over the medium term and expects that GST compliance to stabilise and revenues to become more predictable as the economy becomes more formalised.

As per the Moody's Indian affiliate, ICRA, the high crude oil price is likely to widen India's current account deficit (CAD) and points at slowing foreign portfolio investments as an area of concern. It added that if global oil prices remain at current levels, India’s CAD to widen to 2.4% of GDP in 2018-19 from 0.7% in 2016-17. However, it said that higher crude oil prices and a weaker Rupee would improve remittances and the services trade surplus in 2018-19, offsetting some of the adverse effects of rising commodity prices.

The CNX Nifty is currently trading at 10746.05, down by 22.30 points or 0.21% after trading in a range of 10717.70 and 10748.05. There were 18 stocks advancing against 32 stocks declining on the index.

The top gainers on Nifty were Sun Pharma up by 3.70%, Dr. Reddys Lab up by 2.95%, Cipla up by 2.37%, Lupin up by 2.09% and Tata Motors up by 1.96%. On the flip side, BPCL down by 2.42%, HPCL down by 2.06%, Power Grid Corporation down by 1.92%, ICICI Bank down by 1.39% and Indian Oil Corporation down by 1.32% were the top losers.

All the Asian markets are trading in red; Hang Seng declined 386.23 points or 1.23% to 31,126.40, Taiwan Weighted dropped 92.41 points or 0.82% to 11,159.34, Nikkei 225 decreased 89.69 points or 0.39% to 22,733.57, Jakarta Composite shed 50.14 points or 0.82% to 6,056.56, Shanghai Composite fell 39.02 points or 1.25% to 3,070.48, KOSPI Index dipped 14.22 points or 0.58% to 2,456.36 and FTSE Bursa Malaysia KLCI was down by 11.25 points or 0.63% to 1,774.56.