Post Session: Quick Review

Monday’s session turned out to be a choppy day of trade for Indian equity markets with frontline gauges ending the session with marginal losses. Markets made a pessimistic start and traded slightly in red, as traders remained worried 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 were under pressure 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.

Key indices continued their choppy trade in second half of the day as anxiety remained among the traders with a report showing that India’s trade deficit widened to $14.62 billion during the month under review as against $13.84 billion in May 2017, the highest in nearly four months mainly because of rising oil imports. Adding some weakness, a private FDI Report 2018 said that the number of greenfield FDI projects in India during the year fell sharply by 21% to 637. The US has surpassed India to become the top destination for greenfield FDI investment in 2017. However, further losses got restricted as investors found some comfort with report that India’s merchandise exports grew to a six-month high of 20.18% in the month of May 2018, boosted by a rise in receipts of petroleum, engineering and pharmaceutical products. Some relief also came with a report that Reserve Bank of India eased investment norms for foreign portfolio investors (FPIs) in debt, especially into individual large corporates, a move that can help attract more overseas flows and thereby help arrest the recent fall in the rupee on one hand and also lift the recent fall in demand for corporate bonds.

On the global front, Asian markets ended in red, after U.S. President Donald Trump cranked up trade tensions with China by going ahead with tariffs on Chinese imports, prompting Beijing to immediately respond in kind. European markets were trading in red in early deals on Monday, after President Donald Trump announced new tariffs against China.

Back home, majority of Auto stocks ended higher with the Heavy Industry Ministry stating that the new National Auto Policy, which may seek emission-linked taxation for automobiles and a technology agnostic green mobility roadmap, is likely to be finalised in the next three months. Besides, shares of oil marketing companies were in limelight after crude fell for second day in a row ahead of OPEC meet to discuss whether to relax oil output caps.

The BSE Sensex ended at 35543.40, down by 78.74 points or 0.22% after trading in a range of 35518.73 and 35721.55. There were 13 stocks advancing against 18 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index fell 0.26%, while Small cap index was down by 0.73%. (Provisional)

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.23%, Energy up by 0.44%, Auto up by 0.28%, PSU up by 0.26% and Healthcare up by 0.19%, while Metal down by 1.74%, Basic Materials down by 1.19%, Telecom down by 1.07%, IT down by 0.79% and TECK down by 0.72% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were ICICI Bank up by 3.70%, Tata Motors - DVR up by 1.92%, Tata Motors up by 1.72%, Bajaj Auto up by 0.67% and Maruti Suzuki up by 0.46%. (Provisional)

On the flip side, Vedanta down by 2.93%, Kotak Mahindra Bank down by 2.10%, Bharti Airtel down by 2.07%, Coal India down by 1.56% and Tata Steel down by 1.17% were the top losers. (Provisional)

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 ended at 10795.05, down by 22.65 points or 0.21% after trading in a range of 10787.35 and 10830.20. There were 19 stocks advancing against 31 stocks declining on the index. (Provisional)

The top gainers on Nifty were HPCL up by 4.75%, ICICI Bank up by 4.07%, Indian Oil Corporation up by 3.61%, Dr. Reddys Lab up by 2.35% and BPCL up by 2.24%. (Provisional)

On the flip side, Hindalco down by 2.97%, Vedanta down by 2.95%, Bharti Airtel down by 2.31%, Kotak Mahindra Bank down by 2.01% and Bajaj Finance down by 1.92% were the top losers. (Provisional)

European markets were trading in red; Germany’s DAX decreased 140.66 points or 1.08% to 12,869.89, France’s CAC decreased 50.94 points or 0.93% to 5,450.94 and UK’s FTSE 100 decreased 12.65 points or 0.17% to 7,621.26.

Asian equity markets ended in red on Monday as oil extended Friday's slump and escalating trade tensions between the US and China curbed investors' appetite for risk. Oil extended falls from late last week amid fears of a global trade war as well as expectations that major oil producers will soon start to increase supplies. After US President Donald Trump announced hefty tariffs on $50 billion worth of Chinese goods, China announced new tariffs on 545 products imported from the US. Japanese shares ended lower as fears of growing protectionism and news of a strong earthquake in Osaka and surrounding areas of western Japan overshadowed stronger-than-expected export data for May. Japanese exports climbed 8.1 percent year-on-year to 6.323 trillion yen in May, exceeding forecasts for 7.5 percent and up from 7.8 percent in the previous month, official data showed. While, imports soared an annual 14 percent to 6.901 trillion yen versus forecasts for 8 percent and up from 5.9 percent a month earlier. The markets in Taiwan, China and Hong Kong were closed for the Dragon Boat Festival and Indonesia is closed for Eid-ul-Fitr.