Markets trade lower in early deals on sluggish global cues

Indian equity benchmarks made a pessimistic start and are trading lower in early deals on Thursday amid feeble global cues. Sentiments remained downbeat with report showing that the country’s current account deficit (CAD) rose to $13 billion (Rs 878 billion and 1.9 per cent of gross domestic product, or GDP) in the fourth and final quarter (Q4 of 2017-18), compared to $2.6 billion (Rs 176 billion and 0.4 per cent of GDP) in the same period of 2016 -17. Traders also remained concerned on report that Reserve Bank of India to hike rates once again at its August monetary policy review as headline inflation surging to a four-month high of 4.87 per cent in May. However, market participants shrugged off report that Fitch Ratings raised India growth forecast for 2018-19 to 7.4 per cent from 7.3 per cent, but cited higher financing costs and rising oil prices as risks to growth. For 2019-20, it estimated the country to grow at 7.5 per cent.

Global cues remained feeble with all the Asian counters trading in red at this point of time, as concerns about US-China trade frictions kept investors on edge. The US markets ended in red on Wednesday, as the Federal Reserve completed its second increase to benchmark interest rates in 2018, as expected, but signaled a slightly more aggressive plan to tighten monetary policy this year than had previously been projected.

Back home, telecom stocks were trading mixed after Communications Minister Manoj Sinha said that the new telecom policy is expected to be cleared by the Union Cabinet by the end of next month. In scrip specific development, Cipla surged on getting USFDA’s approval for Isoproterenol Hydrochloride Injection and Tata Power gained with arm entering into PPA with GE to provide solar rooftop solutions.

The BSE Sensex is currently trading at 35598.70, down by 140.46 points or 0.39% after trading in a range of 35576.29 and 35749.88. There were 9 stocks advancing against 22 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index slipped 0.19%, while Small cap index was down by 0.05%.

The few gaining sectoral indices on the BSE were Metal up by 0.32%, Telecom up by 0.24% and Basic Materials was up by 0.02%, while IT down by 0.84%, TECK down by 0.73%, Energy down by 0.64%, PSU down by 0.61% and Bankex was down by 0.54% were the top losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 0.77%, Dr. Reddys Lab up by 0.75%, Tata Steel up by 0.59%, Sun Pharma up by 0.29% and HDFC Bank up by 0.22%. On the flip side, Infosys down by 2.05%, SBI down by 1.36%, Wipro down by 1.08%, Axis Bank down by 1.07% and ICICI Bank down by 1.05% were the top losers.

Meanwhile, the global credit rating agency Fitch Ratings has raised India’s gross domestic product (GDP) growth forecast to 7.4 per cent for FY19 as against a growth estimation of 7.3 per cent earlier. The rating agency has also projected a GDP growth of 7.5 per cent for FY20. However, it mentioned that there are concern regarding higher finance costs and rising oil prices. The rating agency has protected global oil price to stay around $70 per barrel in 2018, up from $54.9 a barrel last year. It is expecting oil price to ease at around $65 a barrel next year. Moreover, the rating agency has cited that the rupee has been among the worst performers vis-a-vis Asian currencies this year, although the depreciation was more muted than during the 2013 taper-tantrum episode.

The Indian economy grew at 6.7 per cent in 2017-18. In the fourth quarter (January-March) the GDP grew at 7.7 per cent. The global rating agency said that India has better macroeconomic fundamentals than in 2013 and very low foreign ownership rates in the domestic government bond market, but the current account deficit has been widening as a result of rising oil prices, reviving domestic demand and poor manufacturing export performance.

In addition, Fitch projected retail inflation to be five per cent by the end of 2018. It said inflation has picked up since mid-2017, despite food inflation being muted. The rise in the oil price and the INR depreciation should add to price pressure in the coming months, although it expects inflation to be contained within the upper band of the RBI's target range.

Further, Fitch retained the global growth forecast at 3.3 per cent in 2018 and 3.2 per cent for 2019, reflecting the disappointment over the distribution of growth, with shortfalls in a number of smaller economies. It said however that expansion will be on-track or slightly better in the world’s two largest economies the US and China. It also said the near-term global growth prospects remain robust despite rising trade tensions and political risks.

The CNX Nifty is currently trading at 10810.40, down by 46.30 points or 0.43% after trading in a range of 10803.80 and 10833.70. There were 12 stocks advancing against 38 stocks declining on the index.

The top gainers on Nifty were Bharti Airtel up by 0.84%, HCL Tech up by 0.80%, Hindalco up by 0.78%, Tata Steel up by 0.62% and Dr. Reddys Lab up by 0.50%. On the flip side, Infosys down by 1.95%, SBI down by 1.34%, Axis Bank down by 1.21%, Bajaj Finance down by 1.10% and ICICI Bank down by 1.08% were the top losers.

Asian markets are trading in red; Hang Seng decreased 191.51 points or 0.62% to 30,533.64, Nikkei 225 shed 117.24 points or 0.51% to 22,849.14, Taiwan Weighted declined 106.43 points or 0.95% to 11,066.78, KOSPI Index tumbled 39.04 points or 1.58% to 2,429.79, FTSE Bursa Malaysia KLCI fell 14.4 points or 0.82% to 1,749.17 and Shanghai Composite down by 8.58 points or 0.28% to 3,041.22.