Benchmarks eke out slender gains; Sensex reclaims 35,600 mark

Indian equity benchmarks somehow managed to keep their head above water and settled with slender gains on Friday. Markets traded range bound throughout the day with key gauges swinging both ways touching intra-day high in first half and intra-day low in second half to finally end tad above their neutral lines. Markets started the session on a positive note as support with India’s Oil Minister Dharmendra Pradhan conveying India’s concerns when he met ambassadors of OPEC countries in India over high international oil prices. Some support came with a report that India’s home loans touched double-digit mark as a percentage of GDP in the financial year 2018. Housing credit grew 16% in FY18, taking the mortgage penetration to a double-digit mark of 10% for the first time in FY18, up from 9.5% in FY17. The markets also drew some solace with a private report stating that the Centre is planning to change labour laws in order to raise the basic income of salaried employees.

However, markets pared all of their early gains to enter into red terrain in noon deals after India’s trade deficit widened to four-month high of $14.62 billion in May as imports surged nearly 15%. Exports in May rose by 28.18% to $28.86 billion while imports were up 14.85% to $43.48 billion. Trade deficit widened to $14.62 billion from $13.84 billion in May 2017. Oil imports were up 49.46% to $11.5 billion on back of surge in international crude prices. Sentiments also remained dampened on report that Private equity (PE) investments saw 50% decline in value terms in May at $1,180 million amid fall in big-ticket deals and cautious investor approach. But, markets participants went for bargain hunting in last leg of trade which helped markets to reclaim their respective psychological levels of 10,800 (Nifty) and 35,600 (Sensex).

On the global front, European markets were trading mostly in red, after media reports suggested the Trump administration has approved a plan to impose punishing tariffs on tens of billions of dollars of Chinese goods. The US Treasury is expected to unveil the details later in the day. Expectations remain high that China would retaliate with tariffs of its own if the US goes ahead with its plans. Asian markets exhibited mixed trend on dovish ECB statement and BOJ’s weaker view on inflation outlook.

Back home, telecom sector remained under pressure with a report stating that the call drop situation deteriorated in April 2018 after two consecutive months - February and March - of good performance by telecom operators. Infrastructure stocks edged lower despite Road Transport and Highways Minister Nitin Gadkari’s statement that he had expedited 280 national highway projects which would now be completed before the Lok Sabha elections next year. Meanwhile, stocks related to Healthcare, private banks, technology, consumer and auto sector stocks remained in focus on report that the reshuffle of the S&P BSE Sensex composition effective from June 18 will hit these sectors.

Finally, the BSE Sensex gained 22.32 points or 0.06% to 35,622.14, while the CNX Nifty was up by 9.65 points or 0.09% to 10,817.70.

The BSE Sensex touched a high and a low of 35,675.20 and 35,419.68, 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 lost 0.40%, while Small cap index was down by 0.46%.

The few gaining sectoral indices on the BSE were IT up by 2.24%, Healthcare up by 1.88% and TECK was up by 1.83%, while PSU down by 1.64%, Metal down by 1.53%, Realty down by 1.17%, Power down by 1.10% and Oil & Gas was down by 1.08% were the top losing indices on BSE.

The top gainers on the Sensex were Dr. Reddy’s Lab up by 3.65%, Infosys up by 3.37%, TCS up by 2.75%, Sun Pharma up by 2.04% and Reliance Industries up by 0.63%. On the flip side, Yes Bank down by 1.91%, SBI down by 1.82%, ONGC down by 1.81%, Coal India down by 1.59% and Tata Motors - DVR down by 1.56% were the top losers.

Meanwhile, Insurance Regulatory and Development Authority of India (IRDAI) is examining suspected illegal practices by some private sector insurers and their partner banks in bancassurance business. Bancassurance is an arrangement between a bank and an insurance company allowing the insurance company to sell its products to the bank's client base.

Some large insurance firms and their parent firms are preserving current account balances with various banks which also act as corporate agents. The interest forgone on such large balance is counted towards the compensation banks are to receive for the sale of insurance products. Due to this practice, the interest of policy holders is at stake as these funds earn zero returns. Such practices are in gross violation of the IRDAI's norms for bancassurance industry and standard corporate governance norms.

The Insurance regulator has highlighted some unlawful practices in the bancassurance channels to the government and has got a go-ahead to act against errant entities. According to IRDAI’s corporate agency regulations, if a bank enters into an agreement with an insurance company for selling insurance products, then that bank is not eligible for any payout other than commission. IRDAI has also noticed that insurance companies and their promoter organisations have engineered rates to pay excess commission or remuneration to their bancassurance partners through ‘seemingly’ legitimate banking transactions. 

The CNX Nifty traded in a range of 10,834.00 and 10,755.40. There were 20 stocks in green as against 30 stocks in red on the index.

The top gainers on Nifty were Infosys up by 3.96%, Dr. Reddy’s Lab up by 3.90%, Cipla up by 3.74%, TCS up by 2.93% and Sun Phrama up by 2.28%. On the flip side, Hindalco down by 2.88%, Indian Oil Corporation down by 2.36%, Ultratech Cement down by 2.09%, Yes Bank down by 1.76% and Coal India down by 1.75% were the top losers.

The European markets were trading mostly in in red; UK’s FTSE 100 decreased 63.61 points or 0.82% to 7,702.18 and Germany’s DAX was down by 28.65 points or 0.22% to 13,078.45, while France’s CAC was up by 8.96 points or 0.16% to 5,537.42.

Asian equity markets ended mixed on Friday in response to dovish ECB statement and BOJ's weaker view on inflation outlook. Trade concerns persisted ahead of likely announcement of US tariffs on Chinese goods. Hong Kong stocks fell and posted their biggest weekly drop in two-and-a-half months as Washington looked set to unveil a tariff list targeting $50 billion Chinese goods, and Beijing vowed to retaliate, putting investors on edge. Chinese shares hit a 20-month low on worries that rising trade tensions could add pressure to the country's economic growth. Meanwhile, Seoul stocks closed lower amid selling by foreign investors on worries about renewed trade frictions between the US and China. Though, Japanese equities rose amid a weaker yen as the Bank of Japan downgraded its assessment of inflation. The markets in Malaysia, Singapore and Indonesia are remained closed in observance of Eid-ul-Fitr.