Benchmarks end choppy session in red terrain

Indian equity benchmark ended the choppy day of trade in red terrain on Thursday, with frontline gauges breaching their crucial 35,600 (Sensex) and 10,750 (Nifty) levels, as traders booked some of their gains from previous two sessions’ rally, ahead of June quarter earnings season to be starting next week. Traders remained cautious on report that the Securities and Exchange Board of India has issued a fresh show-cause notice to the National Stock Exchange and some of the key officials - including former CEOs Ravi Narain and Chitra Ramkrishna - on Wednesday, asking them to explain the allegations of preferential access to a few high-frequency traders and brokers to its trading platform. Traders also remained cautious with global credit rating agency, Moody’s Investors Services’ latest report 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. Selling in Reliance Industries too dampened sentiments post its 41st AGM.

However, losses remained capped as traders got some solace with Union Minister Arun Jaitley’s statement that the government’s fiscal deficit target would not be breached on account of higher MSP for 14 crops as large provisioning for food subsidy has already been made in the Budget for current fiscal. Market participants also took some comfort with Niti Aayog’s Vice-Chairman, Rajiv Kumar’s statement that food and fuel are not contributing to the overall inflationary pressures in the economy. So this constant talk about inflationary pressures because of the MSP is quite misplaced. Traders also took note of Commerce and Industry Minister Suresh Prabhu’s statement that India’s exports are growing at a healthy rate and may record about 20% growth in June. However, these are challenging times for global trade as countries are taking protectionist measures.

On the global front, European markets made an optimistic start on Thursday, as reassuring economic data from Germany and a report that its big carmakers could be spared from US tariffs offset another gloomy session for Asia. Asian markets ended mixed. Investors fretted over US-China tariffs which are due to kick in within hours and threaten to trigger a trade war between the world’s top two economies.

Back home, oil stocks remained in focus on report that petrol and diesel prices hiked for the first time in more than a month on the back of rising international rates and weakening rupee. The increase of 16 paisa a litre in petrol and 12 paisa per litre in diesel came after an 8-day self-imposed hiatus in rate revisions by state-oil firms. Select farm sector stocks closed in green after Karnataka Chief Minister H D Kumaraswamy announced a mega Rs 34,000 crore farm loan waiver scheme in the maiden budget of the Congress-JDS coalition government. However, shares of the four cable television service provider dropped after Reliance Industries announced the launch of fixed-line broadband service Jio GigaFiber from August 15, 2018. Besides, shares of liquor makers such United Breweries and Pincon Spirit fell after Karnataka chief minister HD Kumaraswamy proposed four percent tax hike on liquor in today’s Budget speech.

Finally, the BSE Sensex declined 70.85 points or 0.20% to 35,574.55, while the CNX Nifty was down by 20.15 points or 0.19% to 10,749.75.

The BSE Sensex touched a high and a low of 35,748.26 and 35,517.79, respectively and there were 15 stocks advancing against 16 stocks declining on the index.
The broader indices ended in red; the BSE Mid cap index fell 0.71%, while Small cap index was down by 0.40%.

The few gaining sectoral indices on the BSE were FMCG up by 1.03%, Auto up by 0.15%, Bankex up by 0.14% and Consumer Discretionary Goods & Services was up by 0.03%, while Consumer Durables down by 2.78%, Realty down by 1.70%, IT down by 1.60%, Metal down by 1.41% and TECK was down by 1.34% were the top losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 3.96%, ITC up by 2.97%, Asian Paints up by 2.35%, Coal India up by 2.27% and Mahindra & Mahindra up by 1.34%. On the flip side, Infosys down by 4.47%, Vedanta down by 3.09%, Tata Steel down by 2.71%, Tata Motors - DVR down by 2.66% and Reliance Industries down by 2.53% were the top losers.

Meanwhile, with an aim to strengthen Regional Rural Banks (RRBs) lending capacity, the government has approved extension of recapitalisation scheme for RRBs for next three years up to 2019-20. This will enable the RRBs to maintain the minimum prescribed Capital to Risk Weighted Assets Ratio (CRAR) of 9 per cent. A strong capital structure and minimum required level of CRAR will ensure financial stability of RRBs which will enable them to play a greater role in financial inclusion and meeting the credit requirements of rural areas. 

The scheme started in 2010-11 and was extended twice in 2012-13 and 2015-16. The last extension was up to March, 2017.  A total of Rs 1,107.20 crore, as government’s share, out of Rs 1,450 crore, has been released to RRBs till March 2017. The remaining Rs 342.80 crore will be utilised to provide recapitalisation support to RRBs whose Capital to CRAR is below 9 per cent, during 2017-18, 2018-19 and 2019-20.  There were 56 functioning RRBs as of March, 2017 and had extended credit of Rs 2,28,599 crore.

RRBs were set up with the objective to provide credit and other facilities, especially to the small and marginal farmers, agricultural labourers, artisans and small entrepreneurs in rural areas.  They are jointly owned by the Centre, the concerned state government and sponsor banks with the issued capital shared in the proportion of 50 per cent, 15 per cent and 35 per cent, respectively.

The CNX Nifty traded in a range of 10,786.05 and 10,726.25. There were 26 stocks in green as against 24 stocks in red on the index.

The top gainers on Nifty were Yes Bank up by 3.89%, Ultratech Cement up by 3.86%, ITC up by 3.16%, Asian Paints up by 2.65% and Coal India up by 2.61%. On the flip side, Titan Company down by 5.70%, Infosys down by 4.36%, Vedanta down by 3.88%, Reliance Industries down by 2.57% and Sun pharma down by 2.00% were the top losers.

European markets were trading in green; Germany’s DAX gained 178.56 points or 1.43% to 12,496.17, France’s CAC surged 62.75 points or 1.17% to 5,383.25 and UK’s FTSE 100 was up by 42.78 points or 0.56% to 7,615.87.

Asian equity markets ended on a mixed note on Thursday as lingering trade war fears and a public holiday in the US discouraged traders from taking long positions ahead of the July 6 deadline when the US administration is due to slap tariffs on $34 billion worth of Chinese goods. The minutes from the Federal Reserve's June meeting, due out later in the day and Friday's US jobs report were also on investors' radar. Chinese shares fell sharply as tariff worries overshadowed positive economic data. China's private sector expanded at the fastest pace in four months in June on stronger increase across manufacturing and services, data from IHS Markit showed. Meanwhile, Japanese shares hit three-month lows as the deadline neared for the US to start imposing tariffs on Chinese goods worth $34 billion.