Weak Asian cues drag local markets lower; Sensex drifts below 35,600 level

Indian markets extended their initial losses with Sensex drifting below its 35,600 level in early morning session following subdued Asian markets.  A weak rupee and heavy selling in index heavyweights Infosys, Vedanta, Tata Motors, Tata Steel also dented investors’ risk-taking appetite. The markets were also dull with a private report stating that the steep hike in MSP for several kharif crops may stoke inflation, prompt the Reserve Bank of India (RBI) to hike interest rate, as well as widen fiscal deficit. Meanwhile, the government has approved extension of recapitalisation scheme for RRBs for next three years up to 2019-20 with an aim to strengthen Regional Rural Banks (RRBs) lending capacity. On the sectoral front, the banking sector remained in focus with Crisil Ratings in its latest report stating that banks’ unsecured loans clocked a CAGR of 27 percent, or nearly four times growth in bank credit between FY15 and FY18. Telecom stocks were dragged lower amid Reliance Industries announcing the launch of a brand new JioPhone scheme, JioPhone “Monsoon Hungama”. Besides, broader indices were underperforming the larger peers, with both mid cap and small cap indices trading down by 0.39% and 0.20% respectively.

On the global front, All the Asian markets were tottering under intense selling pressure as investors look for direction amid growing global trade war tensions. Back home, in scrip specific development, Yes Bank jumped on getting approval from SEBI to commence Mutual Fund business and Seamec gained on entering into contract with ONGC.

The BSE Sensex is currently trading at 35593.17, down by 52.23 points or 0.15% after trading in a range of 35522.88 and 35748.26. There were 12 stocks advancing against 19 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell 0.39%, while Small cap index down by 0.20%.

The top gaining sectoral indices on the BSE were FMCG up by 0.38%, Energy up by 0.37%, Bankex up by 0.28% and Oil & Gas up by 0.04%, while Consumer Durables down by 2.61%, IT down by 1.73%, Metal down by 1.70%, TECK down by 1.54% and Realty down by 1.02% were the losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 2.80%, ITC up by 1.15%, Maruti Suzuki up by 0.96%, Mahindra & Mahindra up by 0.75% and HDFC Bank up by 0.70%. On the flip side, Infosys down by 4.14%, Vedanta down by 2.74%, Tata Motors down by 2.62%, Tata Motors - DVR down by 1.94% and Tata Steel down by 1.78% were the top losers.

Meanwhile, global credit rating agency, Moody’s Investors Services in its latest report has said that high oil price is the biggest risk to India’s Gross domestic product (GDP) growth. However, it also said that risks to sovereign credit dynamics from oil has lessened in recent years following subsidy reforms to petroleum and diesel fuel and only liquefied petroleum gas and kerosene oil remain subsidized. It does not expect oil prices to remain elevated for an extended period, but this possibility remains a downside risk. Besides, it indicated that the price of Indian basket of crude surged from $66 a barrel in April to around $75 a barrel at present.

Talking on the recapitalisation plan for public sector banks, Moody’s said that although they expects the recapitalisation package to be sufficient to meet the minimum regulatory capital needs, it will be insufficient to support credit growth. It also said that banks have not been able to raise new capital from the equity markets as planned under the government’s recapitalisation measures. Further, it mentioned that in October 2017, the union government unveiled an ambitious plan to infuse Rs 2.11 lakh crore capital over the next two years into public sector banks (PSBs) that are saddled with high, non-performing assets (NPAs). Of this, Rs 1.35 lakh crore is to come from the sale of recapitalisation bonds. The remaining Rs 76,000 crore will be through budgetary allocation and raising of funds by banks from the markets.

The report also expects that the government will achieve 3.3 percent fiscal deficit target for the current fiscal, which will end in March 2019. It said “While we see risks to achieving both budgeted revenue and spending targets, in our view the government would likely cut back on planned capital spending, as in past years, to offset any potential slippage.”

The CNX Nifty is currently trading at 10753.55, down by 16.35 points or 0.15% after trading in a range of 10726.25 and 10786.05. There were 24 stocks advancing against 26 stocks declining on the index.

The top gainers on Nifty were Yes Bank up by 2.77%, Ultratech Cement up by 2.18%, ITC up by 1.21%, Dr. Reddys Lab up by 1.13% and HPCL up by 1.07%. On the flip side, Titan Co down by 4.96%, Infosys down by 4.19%, Vedanta down by 2.74%, Tata Motors down by 2.73% and Tata Steel down by 2.21% were the top losers.

All the Asian markets were trading under pressure; Nikkei 225 decreased 170.05 points or 0.79% to 21,546.99, Hang Seng plunged 291.35 points or 1.04% to 27,950.32, KOSPI declined 10.23 points or 0.45% to 2,255.23, Shanghai Composite slipped 26.97 points or 0.99% to 2,732.16, Taiwan Weighted fell 110.06 points or 1.04% to 10,611.81, Straits Times lost 0.30 points or 0.01% to 3,244.59 and Jakarta Composite was down 20.12 points or 0.35% to 5,713.52.