Markets eke out slender gains; Nifty holds 10,750 mark

Indian equity benchmarks pared their gains to end flat on Tuesday, ahead of the June F&O expiry due on June 28. Markets started the session on a negative note but managed to trade in green terrain for the most part of the trade, supported by finance ministry’s statement that it has simplified the process of granting additional borrowing limits to the states, keeping in view the government’s policy for cooperative federalism. Some support also came with Employees’ Provident Fund Organisation’s (EPFO) payroll data that as many as 41.26 lakh new jobs were created in the eight months till April this year, with largest ever addition of 6.85 lakh in April alone. The street also got comfort with MSME secretary A K Panda’s statement that the credit guarantee to the micro and small enterprises (MSEs) sector will double to over Rs 40,000 crore this fiscal under the Credit Guarantee Fund Trust for MSE. Adding some optimism, Prime Minister Narendra Modi said that the rising crude prices have not resulted in a spike in inflation and the macroeconomic fundamentals of the country remain strong. Some relief also came with a report noting that a significant percentage of the country’s chief financial officers believe that GST had a positive impact on the overall business climate.

Further, markets touched their intraday highs in late afternoon session, but a selloff in the last leg of trade lead benchmarks to end near neutral lines. Traders got cautious with report that the share of foreign portfolio investments (FPIs) in domestic capital markets through participatory notes (P-notes) slipped over 9-year low of more than Rs 93,000 crore at the end of May, amid stringent norms put in place by SEBI to check the misuse of these instruments. Domestic sentiments also got hit with the Reserve Bank of India’s (RBI’s) data report that Indian companies’ investments into their overseas subsidiaries/joint ventures have dropped by 63% to $1.17 billion in May 2018 as compared to $3.12 billion in May 2017. Investors took note of a private report that the RBI is expected to push key policy rates higher again in order to keep inflation in check.

On the global front, European markets were trading in green, rebounding after trade concerns caused a sharp sell-off for global markets in the previous session. However, Asian markets ended in red, amid rising fears of a global trade war between the US and other leading economies. The Trump administration’s plans regarding investment restrictions have heightened risk aversion.

Back home, cement stocks ended in green terrain, amid reports that the goods and services tax (GST) Council will consider a proposal to reduce GST rates on more items used in construction to 18% from 28%. Stocks related to oil companies remained in focus, with Vice Chairman of Niti Aayog, Rajiv Kumar noting that oil can’t be brought under GST. That’s because the total state and central taxes on petrol put together are around 90 per cent right now.

Finally, the BSE Sensex gained 19.69 points or 0.06% to 35,490.04, while the CNX Nifty was up by 6.70 points or 0.06% to 10,769.15.

The BSE Sensex touched a high and a low of 35,616.64 and 35,338.09, respectively and there were 19 stocks advancing against 12 stocks declining on the index.
The broader indices ended in red; the BSE Mid cap index fell 0.33%, while Small cap index was down by 0.59%.

The top gaining sectoral indices on the BSE were Telecom up by 1.09%, FMCG up by 0.77%, TECK up by 0.70%, IT up by 0.61% and Consumer Durables up by 0.54%, while Energy down by 1.15%, Power down by 0.82%, Industrials down by 0.74%, Realty down by 0.69% and Healthcare down by 0.58% were the top losing indices on BSE.

The top gainers on the Sensex were Coal India up by 2.10%, TCS up by 1.77%, Maruti Suzuki up by 1.68%, Asian Paints up by 1.57% and Bharti Airtel up by 1.34%. On the flip side, Tata Motors down by 4.31%, Reliance Industries down by 2.48%, Power Grid Corporation down by 1.82%, Tata Motors - DVR down by 1.69% and Tata Steel down by 1.64% were the top losers.

Meanwhile, continuing their declining trend, the share of foreign portfolio investments (FPIs) in domestic capital markets through participatory notes (P-notes) has slipped over 9-year low of more than Rs 93,000 crore at the end of May, amid stringent norms put in place by Securities and Exchange Board of India (SEBI) to check the misuse of these instruments. This is the lowest level since April 2009 when the cumulative value of such investments stood at Rs 72,314 crore. According to SEBI data, total value of P-Notes investments in Indian markets including equity, debt and derivatives, at May end dropped to Rs 93,497 crore from Rs 1,00,245 crore at the end of April. Prior to that, the figure was Rs 1,06,403 crore.

Of the total, P-note holdings in equities at May-end were at Rs 70,442  crore, while in debts and derivatives were at Rs 19,532 crore and Rs 3,523 crore respectively. The quantum of FPI investments via P-notes declined to 2.9 percent during the period under review from 3 percent in the preceding month. P-notes are issued by registered foreign portfolio investors (FPIs) to overseas investors who wish to be part of the Indian stock markets without registering themselves directly. They, however, need to go through a proper due diligence process.

The fall in P-notes could be attributed to several measures taken by the market regulator to stop the misuse of the controversy-ridden participatory notes. In July 2017, SEBI had notified stricter norms stipulating a fee of $1,000 on each instrument to check any misuse for channelising black money. It had also prohibited FPIs from issuing such notes where the underlying asset is a derivative, except those which are used for hedging purposes. These measures were an outcome of a slew of other steps taken by the regulator in the recent past. In April last year, SEBI had barred resident Indians, NRIs and entities owned by them from making investment through P-notes.

The CNX Nifty traded in a range of 10,805.25 and 10,732.55. There were 26 stocks in green as against 24 stocks in red.

The top gainers on Nifty were Grasim Industries up by 2.93%, Coal India up by 2.36%, Ultratech Cement up by 2.21%, Hindalco up by 2.15% and Asian Paint up by 2.02%. On the flip side, Tata Motors down by 4.44%, Reliance Industries down by 2.63%, Cipla down by 1.89%, Tata Steel down by 1.83% and Bajaj Finserv was down by 1.65% were the top losers.

European markets were trading mostly in green; UK’s FTSE 100 gained 24.42 points or 0.32% to 7,534.26 and France’s CAC increased 10.54 points or 0.20% to 5,294.40. On the flip side, Germany’s DAX fell 9.13 points or 0.07% to 12,261.20.

Asian equity markets ended mostly in red on Tuesday amid conflicting signals from the Trump administration over proposed restrictions on foreign investment in US technology companies. Chinese shares ended lower ahead of manufacturing and non-manufacturing data due on Saturday. However, Japanese shares finished marginally higher after hitting 3-1/2-week lows earlier in the day on concerns over a deepening trade row between the United States and major economies.