Trade tensions drag benchmarks lower on Monday

Indian equity benchmarks reversed half of their previous session’s gains to end lower by around half a percent on Monday, as traders remained concerned on trade worries and political uncertainty in Germany. Markets made a cautious start and turned negative with report of the Reserve Bank of India stating that India’s external debt stood at $529.7 billion at the end of March 2018, recording an increase of $58.4 billion year-on-year, primarily on account of a rise in commercial borrowings, short-term debt and non-resident Indian (NRI) deposits. Sentiments also remained dampened with India’s foreign direct investment (FDI) growth rate hitting five-year low of 3% at in 2017-18. Markets extended losses to hit intraday lows in noon deals as sentiments weighed on reports that India’s fiscal deficit has exceeded 55% of the Budget estimate in just first two months (April-May) of the current Year (FY19), though it is still lower than what was recorded in the same period last fiscal. According to the Controller General of Accounts (CGA) data, fiscal deficit during the same period of the previous financial year had stood at 68.3%.

The selling got intensified and markets even went to test their psychological 35,100 (Sensex) and 10,600 (Nifty), but key gauges got strong support near those levels and managed to prune some of their losses to end off day lows. Traders got some relief with the country’s manufacturing sector activity in June, which grew at the strongest pace this year, supported by rise in domestic and export orders. The Nikkei India Manufacturing Purchasing Managers Index (PMI) rose from 51.2 in May to 53.1 in June, registering the fastest improvement since December 2017. Some solace also came with Finance Secretary Hasmukh Adhia’s statement that the revenue collection under the Goods and Services Tax (GST) during the month of June 2018 increased to Rs 95,610 crore, as compared to previous month’s revenue of Rs 94,016 crore.

On the global front, European markets are trading in red terrain in early deals, amid renewed political uncertainty in Germany over the issue of migration. A resolution to Germany's government crisis is proving to be elusive after interior minister Horst Seehofer offered to resign both his office and his position as head of the hardline conservative Bavarian CSU party. Asian markets ended lower, after surveys showed deterioration in the outlook for Chinese manufacturing, adding to concerns over tighter government controls on lending. Japanese data on manufacturer sentiment also disappointed the investors.

Back home, on the sectoral front, metals stocks lost their sheen, despite Union Steel Minister Chaudhary Birender Singh’s statement that the US’ levy of heavy tariffs on imported steel and aluminum would not have any major impact on steel production in India as steel export to US was only 3.3% of total exports. Auto stocks exhibited mixed trend on reporting June sales numbers. Bajaj Auto edged higher on reporting 65% rise in June sales, while M&M edged lower despite registering 26% growth in June sales. Meanwhile, RITES closed at Rs 212.70 on the BSE after listing at Rs 190, while Fine Organic ends at Rs 822.80 on BSE after listing with 4% premium at Rs 815.

Finally, the BSE Sensex declined 159.07 points or 0.45% to 35,264.41, while the CNX Nifty was down by 57.00 points or 0.53% to 10,657.30.

The BSE Sensex touched a high and a low of 35,578.24 and 35,106.57, respectively and there were 11 stocks advancing against 20 stocks declining on the index.
The broader indices ended in red; the BSE Mid cap index fell 0.75%, while Small cap index was down by 0.70%.

The few gaining sectoral indices on the BSE were IT up by 0.88%, Consumer Durables up by 0.53% and TECK was up by 0.42% while, Telecom down by 2.61%, Metal down by 1.80%, Power down by 1.69%, Utilities down by 1.48% and Realty was down by 1.29% were the top losing indices on BSE.

The top gainers on the Sensex were Asian Paints up by 2.29%, Infosys up by 2.12%, Vedanta up by 1.25%, Bajaj Auto up by 1.00% and ICICI Bank up by 0.71%. On the flip side, NTPC down by 3.67%, Bharti Airtel down by 3.64%, Adani Ports & SEZ down by 2.37%, Hero MotoCorp down by 1.68% and HDFC Bank down by 1.65% were the top losers.

Meanwhile, India’s external debt surged 12.24 percent to $529 billion during January-March quarter (Q4FY18) as compared to $471.3 billion reported for the corresponding period of 2017. The rise in external debt was mainly due to the increase in commercial borrowings, short-term debt and non-resident Indian (NRI) deposits.

As per the data furnished by the Reserve Bank of India (RBI), the increase in the magnitude of external debt was partly due to valuation loss resulting from the depreciation of the US dollar against major currencies. It also noted that the external debt to gross domestic product (GDP) ratio stood at 20.5 percent at end-March 2018, higher than its level of 20.0 percent at end-March 2017.

The data also showed that debt service payments dropped to 7.5 percent of current receipts at end-March 2018 as compared with 8.3 percent at end-March 2017. It further highlighted that commercial borrowings with a share of 38.2% is the largest component of external debt, followed by NRI deposits with 23.8% and short-term trade credit with 19.0%.

The CNX Nifty traded in a range of 10,736.15 and 10,604.65. There were 16 stocks in green as against 34 stocks in red on the index.

The top gainers on Nifty were Infosys up by 2.34%, Asian Paints up by 2.26%, Titan Company up by 1.79%, UPL up by 0.90% and Bajaj Auto up by 0.81%. On the flip side, Bharti Airtel down by 3.52%, NTPC down by 3.51%, Hindalco down by 3.45%, Adani Ports down by 2.85% and Indiabulls Housing Finance down by 2.58% were the top losers.

European markets were trading in red; Germany’s DAX decreased 18.16 points or 0.15% to 12,287.84, France’s CAC shed 40.85 points or 0.77% to 5,282.68 and UK’s FTSE 100 was down by 72.97 points or 0.96% to 7,563.96.

Asian equity markets ended lower on Monday as trade worries persisted, oil prices declined on supply worries, Chinese manufacturing data came in softer than expected and a resolution to Germany's government crisis proved elusive. Crude oil prices fell more than 1 percent in Asian trading after US President Donald Trump claimed that Saudi Arabia has agreed to raise oil production. Chinese shares ended lower after surveys showed deterioration in the outlook for Chinese manufacturing, adding to concerns over tighter government controls on lending. Further, Japanese shares hit 2-1/2-month lows as the dollar pared back gains against the yen ahead of a July 6 deadline when the United States is due to impose the tariffs on Chinese exports. A slump in China's stock market and weak data on manufacturer sentiment also forced investors to unwind long positions. Meanwhile, Hong Kong markets were closed for SAR Day holiday.