Benchmarks languish in red terrain; Sensex breaches 35,200 bastion

Benchmarks languish in red terrain in the early noon session with frontline gauges breaching their crucial psychological marks of 35,200 (Sensex) and 10,650 (Nifty). Bearish sentiments of the investors across the Asian markets seem to have taken over the domestic stock markets with Nifty and Sensex failing to come out of the red terrain. Investors looked worrisome 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. Further, caution also prevailed after a report stated 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. Adding to the woes, Arvind Subramanian said that the biggest headwind for the nation’s growth prospects was ‘stigmatised capitalism’ apart from high oil prices. Besides, in the currency market the rupee sinks to an all-time low of 68.89 against the US dollar, which also exerted pressure on the equity markets.

Moreover, the markets are likely to remain choppy today as traders may roll over positions in the Futures & Options (F&O) segment from the near month i.e. June 2018 series to next month i.e. July 2018 series. The near month June 2018 derivatives contract will expire today i.e. June 28, 2018. Separately, Realty, Consumer Durables, Utilities were the top losers on the BSE sectoral front, which were dragging the markets lower. On the NSE sectoral front, except for Nifty Auto and Nifty Metal all other sectors on the index were losing, with Nifty Realty the top loser.

On the global front, Most of the Asian counters were trading in red. In China, the markets have taken a battering as worries about a wobbly yuan and the trade spat with the United States have left investors bracing for a rocky final six months of the year. Back home, broader markets were underperforming the larger peers, with Mid cap index falling 3 fourth a percent, while Small cap index declining 1%. Meanwhile, market breadth favoring negative trend; there were 731 shares on the gaining side against 1554 shares on the losing side while 110 shares remained unchanged. 

The BSE Sensex is currently trading at 35122.76, down by 94.35 points or 0.27% after trading in a range of 35099.50 and 35282.40. There were 8 stocks advancing against 23 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index declined 0.75%, while Small cap index down by 1.00%.

The few gaining sectoral indices on the BSE were Metal up by 0.18%, IT up by 0.01% and TECK up by 0.01%, while Realty down by 2.30%, Consumer Durables down by 1.52%, Utilities down by 1.06%, Capital Goods down by 0.77% and Energy down by 0.73% were the losing indices on BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 1.59%, Infosys up by 1.41%, Tata Steel up by 1.19%, ONGC up by 0.93% and Wipro up by 0.82%. On the flip side, Coal India down by 2.38%, ICICI Bank down by 1.76%, Power Grid down by 1.59%, HDFC down by 1.42% and Tata Motors - DVR down by 1.11% 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 is currently trading at 10628.45, down by 42.95 points or 0.40% after trading in a range of 10622.10 and 10674.20. There were 16 stocks advancing against 34 stocks declining on the index.

The top gainers on Nifty were Mahindra & Mahindra up by 1.66%, Indian Oil up by 1.57%, Infosys up by 1.42%, Tata Steel up by 1.05% and ONGC up by 0.93%.  On the flip side, Tech Mahindra down by 3.92%, Titan Co down by 3.54%, HPCL down by 2.17%, Coal India down by 2.16% and GAIL India down by 2.13% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 declined 4.63 points or 0.02% to 22,267.14, Straits Times slightly down by 0.30 points or 0.01% to 3,254.47, Taiwan Weighted slipped 21.80 points or 0.20% to 10,679.23, KOSPI decreased 28.17 points or 1.22% to 2,313.86, Shanghai Composite slipped 2.72 points or 0.10% to 2,810.46 and Jakarta Composite was down by 94.68 points or 1.66% to 5,692.87.

On the flip side, Hang Seng increased 14.29 points or 0.05% to 28,370.55.