Weak trade persists on high WPI data

Indian equity benchmarks continued their weak trade in afternoon session, on the back of high Wholesale Price Index (WPI) data. India's wholesale inflation shot up to a 14-month high of 4.43 percent in May on increasing prices of petrol and diesel as well as vegetables. The WPI based inflation stood at 3.18 percent in April and 2.26 percent in May last year. Some anxiety was also among the local traders with a private report stating that the Centre and some states strongly disagree on the inclusion of certain petroleum products--natural gas and aviation turbine fuel--under the ambit of Goods and Services Tax (GST). Moreover, concerns over widening current account deficit (CAD) too weighed on the sentiment. India’s CAD rose to $13 billion (Rs 878 billion and 1.9 per cent of gross domestic product, or GDP) in the fourth 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. Barring Healthcare, all other BSE sectoral indices were trading in the negative zone. In scrip specific development, Lupin surged by over a percent on launching its Tobramycin Inhalation Solution USP, having received an approval from the USFDA earlier.

On the global front, Asian counters were trading lower, after the U.S. Federal Reserve raised its key interest rate and said it would pick up the pace of future increases. Back home, the BSE Sensex is currently trading at 35513.32, down by 225.84 points or 0.63% after trading in a range of 35492.74 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 was down by 0.55%, while Small cap index was down by 0.25%.

The lone gaining sectoral index on the BSE was Healthcare up by 0.76%, while IT down by 1.45%, PSU down by 1.42%, TECK down by 1.38%, Oil & Gas down by 1.26% and Energy down by 1.12% were the top losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 1.79%, Dr. Reddys Lab up by 0.44%, Yes Bank up by 0.41%, HDFC Bank up by 0.26% and Kotak Mahindra Bank up by 0.21%. On the flip side, Infosys down by 2.75%, SBI down by 1.83%, Coal India down by 1.64%, ICICI Bank down by 1.62% and Adani Ports &SEZ down by 1.61% 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 10783.40, down by 73.30 points or 0.68% after trading in a range of 10773.55 and 10833.70. There were 12 stocks advancing against 38 stocks declining on the index.

The top gainers on Nifty were Sun Pharma up by 1.64%, HCL Tech. up by 1.28%, Lupin up by 0.83%, Cipla up by 0.72% and Grasim Industries up by 0.56%. On the flip side, Tech Mahindra down by 2.81%, Infosys down by 2.67%, Indian Oil Corp. down by 2.11%, Adani Ports &SEZ down by 1.93% and SBI down by 1.84% were the top losers.

Asian counters were trading lower; Hang Seng decreased 348.07 points or 1.13% to 30,377.08, Nikkei 225 was down by 227.77 points or 0.99% to 22,738.61, Taiwan Weighted shed 159.23 points or 1.43% to 11,013.98, KOSPI Index dipped 45.35 points or 1.84% to 2,423.48, Shanghai Composite decreased 2.8 points or 0.09% to 3,047.00 and FTSE Bursa Malaysia KLCI dropped 1.79 points or 0.1% to 1,761.78.