Markets once again settle in red zone; Nifty slips below 10,600 mark

Magnifying previous day’s losses, the local equity indices ended Thursday’s session on disappointing note, in line with weak global markets on deteriorating trade relations between the US and China along with weakness in rupee. After a cautious start, the markets remained under pressure, as anxiety spread among investors with outgoing chief economic adviser Arvind Subramanian’s statement that apart from high oil prices, the biggest headwind for India’s growth prospects was stigmatised capitalism, or the view that the private sector could not be trusted. Traders also remained cautious with a report stating that the Goods and Services Tax (GST) investigation wing has detected tax evasion of over Rs 2,000 crore in two months, and data analysis reveals that only 1% of over 1.11 crore registered businesses pay 80% of the taxes.

Further, in the last hours of the trade, selling got intensified on the counters, ahead of June F&O expiry due today. Domestic sentiments also got hit with a report stating that the US has issued a strict warning and threatened all countries including India and China to stop oil imports from Iran or face sanctions. However, the markets participants paid no heed towards the Indian Meteorological Department’s latest report that monsoon will cover the entire country in the next 2-3 days. Investors also failed to take any sense of relief from interim Finance Minister Piyush Goyal’s statement that cabinet has approved establishment of two strategic petroleum reserves (SPRs) with a total capacity of 6.5 mln tonnes. India has built three SPR of 5.33 million tonnes in southern India equivalent to meet 10 days of crude requirement.

On the global front, European markets were trading in red, as concerns over global trade persisted and investors turned their focus to the two-day European Union meeting on migration policy that's kicking off in Brussels today. In economic releases, Germany's consumer confidence is set to remain stable in July. As survey data from market research group GfK, the forward-looking consumer sentiment index held steady at 10.7 points. This was slightly above the expected level of 10.6. Asian markets ended mostly lower, as investors worried that the Trump administration's approach to trade is harming global economic growth - even as the White House approach to Chinese investment in US technology companies appeared to be softening.

Back home, ceramics stocks ended in red territory, despite a private report stating that the ceramic tiles industry is likely to post volume growth of 8% in FY19E and 13% in FY20E, due to a 1.6x Y-o-Y rise in FY18 projects under execution under the Pradhan Mantri Awas Yojana (Urban) and 42% Y-o-Y pre-sales growth in FY18 of listed real estate firms, while telecom stocks ended lower, as TRAI indicated that the gross revenue of telecom operators slipped 1.76 percent year-on-year during the quarter ending March 2018, while licence fee and spectrum charges, that government collects from them, fell 12.7 percent and 23.4 percent respectively. Stocks of Oil, Aviation and Tyre companies also remained in focused, as international crude oil prices spiked further.

Finally, the BSE Sensex slipped 179.47 points or 0.51% to 35,037.64, while the CNX Nifty was down by 82.30 points or 0.77% to 10,589.10.

The BSE Sensex touched a high and a low of 35,282.40 and 34,937.15, respectively and there were 10 stocks advancing against 21 stocks declining on the index.
The broader indices ended in red; the BSE Mid cap index fell 1.62%, while Small cap index was down by 1.50%.

The only gaining sectoral indices on the BSE were Telecom up by 0.19% and Metal up by 0.18%, while Oil & Gas down by 2.51%, Consumer Durables down by 2.40%, Energy down by 2.22%, Realty down by 2.07%, PSU down by 1.70% were the top losing indices on BSE.

The top gainers on the Sensex were NTPC up by 1.79%, Mahindra & Mahindra up by 1.78%, Bharti Airtel up by 1.64%, Infosys up by 1.01% and Kotak Mahindra Bank up by 1.01%. On the flip side, ICICI Bank down by 2.78%, Tata Motors down by 2.69%, Tata Motors - DVR down by 2.59%, Coal India down by 2.23% and Reliance Industries down by 2.13% were the top losers.

Meanwhile, the credit ratings agency, ICRA in its latest report has said that the recent move by the United States (US) to tighten H-1B visa norms is likely to put pressure on Indian IT firms’ margin, largely due to rise in compliances and increase in onsite hiring. However, it said that the impact will be company specific and relative to H-1B visa dependence. It added that the changes will disqualify certain positions currently eligible for H-1B visas, thereby impeding the movement of low-cost skilled labour from India and will have direct bearing on margins.

According to the report, this move will work against the Indian IT services sector (H-1B dependent) as the average wage is approximately lower by 25 percent compared to companies that are not dependent on H-1B visas as per estimates. It noted that a firm is defined as H-1B dependent if more than 15 percent of its US full-time employees are on an H-1B visa. It pointed out that awarding of H-1B visas based on highest skill or compensation, will leave less headroom for Indian companies to get such visas. It added that consequently, increased onsite hiring or raising the compensation for H-1B visa applicants will impact companies’ margins and will be credit negative.

ICRA further stated that the Trump administration is also planning to end H-4 visa regime which allows the spouses of H1-B visa holders to work legally in the US. It also feels revoking such visas will have an indirect negative impact on workers currently employed on H-1B visas or seeking such visas whose spouses are working professionals. He added that Indian companies have started to ramp up onshore hiring. 

The CNX Nifty traded in a range of 10,674.20 and 10,557.70. There were 14 stocks in green as against 36 stocks in red on the index.

The top gainers on Nifty were NTPC up by 1.76%, Kotak Mahindra Bank up by 1.62%, Mahindra & Mahindra up by 1.61%, Hindalco up by 1.45% and Bharti Airtel was up by 1.42%.On the flip side, Tech Mahindra down by 7.04%, HPCL down by 4.72%, Titan down by 4.04%, Indiabulls Housing Finance down by 3.98% and BPCL was down by 3.68% were the top losers.

European markets were trading mostly in red; Germany’s DAX decreased 79.90 points or 0.65% to 12,268.71 and France’s CAC shed 15.77 points or 0.30% to 5,311.43. On the flip side, UK’s FTSE 100 was up by 1.55 points or 0.02% to 7,623.24.

Asian equity markets ended mostly lower on Thursday as investors grappled with conflicting signals from senior officials in the Trump administration on trade policy. Japanese shares ended largely unchanged near one-month lows due to uncertainty over the Trump administration's trade policy. However, Chinese shares ended lower amid renewed trade tensions and ahead of Chinese manufacturing and non-manufacturing data due on Saturday.