Benchmarks trade slightly lower in early deals on weak global cues

Pressurized by weak global cues, Indian equity benchmarks made a pessimistic start and are trading slightly in red in early deals on Monday. Traders remained cautious on renewed concerns over a global trade war after US President Donald Trump on Friday announced plans to impose a 25% tariff on $50 billion worth of Chinese goods that contain industrially significant technologies. Sentiments remained dampened with rating agency Moody’s sounding a note of caution that any reduction in excise duty on petrol and diesel would adversely affect fiscal deficit unless it is matched by a commensurate cut in expenditure. Observing that fiscal consolidation would be closely watched for assigning the sovereign rating, Moody’s said India’s biggest challenge is its fiscal strength which is relatively low as compared to -- Baa -- rated peers. Sentiment also weighed down with a private report stating that growth in the current fiscal year will be faster in the first half and will likely face pressure in the second half to end the year at 7.5%.

Global cues too remained sluggish with all the Asian peers trading in red at this point of time as investors remained concerned as trade tensions between the US and China escalated after both countries announced tariffs last week. The US markets ended lower on Friday, but well off the lows of the sessions as investors looked past signs of escalating Washington-Beijing trade tensions.

Back home, losses remained capped with commerce ministry’s data that India’s exports grew 20.18% to $28.86 billion in May -- the highest in six months, even though the trade deficit widened to a four month high of $14.62 billion. Imports too rose by 14.85% to $43.48 billion during the month. Traders also got some relief with ICRA’s report that thirteen states have reported an average 25% decline in their fiscal deficit primarily due to a contraction in capital outlay, even though their revenue has gone up by 7.5% in the fiscal year to March 2018.

The BSE Sensex is currently trading at 35562.23, down by 59.91 points or 0.17% after trading in a range of 35529.25 and 35721.55. There were 14 stocks advancing against 17 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index slipped 0.05%, while Small cap index was down by 0.59%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 0.67%, Auto up by 0.23%, Healthcare up by 0.19%, Energy up by 0.04% and Telecom was up by 0.02%, while Metal down by 2.44%, Basic Materials down by 1.44%, Realty down by 0.66%, Consumer Durables down by 0.53% and Utilities was down by 0.40% were the top losing indices on BSE.

The top gainers on the Sensex were ICICI Bank up by 2.37%, NTPC up by 0.74%, ONGC up by 0.66%, Mahindra & Mahindra up by 0.64% and Bharti Airtel up by 0.54%. On the flip side, Vedanta down by 3.39%, Tata Steel down by 2.31%, Kotak Mahindra Bank down by 1.56%, Coal India down by 1.54% and Power Grid Corporation down by 0.68% were the top losers.

Meanwhile, expressing concern over India’s fiscal deficit, global rating agency Moody’s Investors Service in its latest report has said that any cut in excise duty on petrol and diesel would adversely affect fiscal deficit unless it is matched by a commensurate cut in expenditure. In order to bring down petrol and diesel prices which have gone up following a spike in crude prices in the international market, pressure has been mounting on the government to cut excise duty on these products. According to government estimates, every rupee cut in excise duty on petrol and diesel will result in a revenue loss of about Rs 13,000 crore.

The ratings agency has said that the country’s biggest challenge is its fiscal strength which is relatively low as compared to ‘Baa’ rated peers. It added that fiscal consolidation would be closely watched for assigning the sovereign rating. It also said that any reduction in revenues, including through the excise duty on petroleum and diesel, would most likely need to be offset by a comparable reduction in expenditure in order to achieve fiscal consolidation. Moody’s had upped India's sovereign rating for the first time in over 13 years to 'Baa2' with a stable outlook and said that growth prospects have improved with continued economic and institutional reforms.

Moody’s further said that India's biggest credit challenge is its fiscal strength due to persistently large general government fiscal deficits and a high debt burden. Additionally, maintaining the government’s commitment to fiscal consolidation will be a very important contributor to the strengthening of India's fiscal dynamics and overall sovereign credit profile. Besides, the government plans to bring down the fiscal deficit -- the gap between total expenditure and total revenue -- during 2018-19 to 3.3% of the gross domestic product (GDP), from 3.53% in last fiscal.

The CNX Nifty is currently trading at 10798.40, down by 19.30 points or 0.18% after trading in a range of 10787.35 and 10830.20. There were 21 stocks advancing against 29 stocks declining on the index.

The top gainers on Nifty were HPCL up by 2.53%, ICICI Bank up by 2.32%, Indian Oil Corp. up by 1.85%, BPCL up by 1.25% and Zee Entertainment up by 0.79%. On the flip side, Vedanta down by 3.35%, Hindalco down by 2.74%, Tata Steel down by 2.35%, Kotak Mahindra Bank down by 1.59% and Coal India down by 1.56% were the top losers.

All the Asian markets are trading in red; Nikkei 225 decreased 211.82 points or 0.93% to 22,639.93, KOSPI Index dropped 26.57 points or 1.11% to 2,377.47 and FTSE Bursa Malaysia KLCI was down by 15.23 points or 0.86% to 1,746.55.