Markets off intra-day highs in early noon session

Indian markets were off intra-day highs but still trading in green terrain in the early noon session on the back of buying in IT, TECK and Energy stocks. However, gains remained capped as investors looked worrisome after two sets of data released showed that Industrial production slipped to a seven-month low of 3.2% in May, while retail inflation jumped to a five-month high of 5% in June. Some cautiousness also came in with Reserve Bank of India’s report stating that loan waivers have reduced burden on the farmers but there may be no visible benefits to the overall economy.  

On the global front, Asian counters were trading in green, followed by gains on Wall Street fuelled by the expectation of strong US earnings, but China’s markets wobbled as investors braced for the impact of broadening, tit-for-tat Chinese-US tariffs. Back home, RBI in its latest study on state finances based on state budgets has said that higher expenditure on salaries, farm loan waivers, and a revenue shortfall on GST implementation, led to a slippage of 0.35 per cent in states’ fiscal targets to 3.1 per cent in FY18. In scrip specific development, SpiceJet gained on planning to enter into business partnerships with US companies.

The BSE Sensex is currently trading at 36632.86, up by 84.45 points or 0.23% after trading in a range of 36528.05 and 36740.07. There were 13 stocks advancing against 18 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index slipped 0.75%, while Small cap index down by 1.08%.

The few gaining sectoral indices on the BSE were IT up by 1.17%, TECK up by 0.79% and Energy up by 0.73%, while Telecom down by 1.38%, Realty down by 1.21%, PSU down by 1.14%, Basic Materials down by 1.05% and Power down by 0.91% were the top losing indices on BSE.

The top gainers on the Sensex were Infosys up by 2.66%, Wipro up by 1.54%, Reliance Industries up by 1.44%, Coal India up by 1.23% and Kotak Mahindra Bank up by 0.94%. On the flip side, Axis Bank down by 2.47%, ONGC down by 1.92%, SBI down by 1.88%, ICICI Bank down by 1.54% and Mahindra & Mahindra down by 1.32% were the top losers.

Meanwhile, the Reserve Bank of India (RBI) in its study on state finances based on state budgets has said that higher expenditure on salaries and farm loan waivers, coupled with a revenue shortfall on GST implementation, led to a slippage of 0.35 per cent in states’ fiscal targets to 3.1 per cent in FY18. This is the third consecutive year where the states have failed to meet their gross fiscal deficit (GFD) target, despite expectations of an improvement on higher devolution from the Centre. 

The apex bank highlighted, in the last financial year, (FY18), farm loan waivers touched 0.32 per cent of the GDP as against budget estimates of 0.27 per cent, and more such moves are pending for the fiscals ahead. States which have announced the waivers have also reported a decline in capital expenditure, and development has also been a casualty because of it. Waivers impact credit discipline, vitiate credit culture and dis-incentivise borrowers to repay loans, thus engendering moral hazard. Hikes in salaries, mainly as a higher proportion of states implement proposals in line with the seventh pay panel, resulted in 0.09 per cent slippage on the revenue expenditure. There was a 0.27 per cent impact in the GFD on account of the revenue shortfall, and the study attributed the same to implementation of the goods and services tax (GST). The decline in states’ tax revenues is essentially associated with the pending accounting issues related to GST implementation.

The central bank further stated that for Current financial year (FY19), states are hoping for a 0.2 per cent revenue surplus as against a revenue deficit of 0.4 per cent as per the revised estimates, which will lead to an overall GFD of 2.6 per cent, against 3.1 per cent in FY18.  At a country-wide level, farm loan waivers alone contributed to a third of the overall slippage worries, with a 0.05 per cent slippage of the overall 0.13 per cent on revenue expenditure. It reiterated its concerns on the ‘moral hazard’ farm loan waivers, saying their track record for improving productivity is ‘unproven’.

The CNX Nifty is currently trading at 11032.95, up by 9.75 points or 0.09% after trading in a range of 10999.75 and 11071.35. There were 19 stocks advancing against 31 stocks declining on the index.

The top gainers on Nifty were Infosys up by 2.55%, Wipro up by 1.70%, Reliance Industries up by 1.62%, Coal India up by 1.32% and Kotak Mahindra Bank up by 1.19%. On the flip side, UPL down by 3.93%, Bharti Infratel down by 2.79%, Axis Bank down by 2.70%, ONGC down by 1.95% and Grasim Industries down by 1.91% were the top losers.

Asian markets were trading mostly in green; Nikkei 225 increased 409.39 points or 1.81% to 22,597.35, Hang Seng strengthened by 113.17 points or 0.4% to 28,594.00, KOSPI soured 25.63 points or 1.11% to 2,310.69, Taiwan Weighted surged 126.16 points or 1.16% to 10,864.54, Straits Times moved up 6.46 points or 0.2% to 3,259.47 and Jakarta Composite was up 39.64 points or 0.67% to 5,947.51.

On the contrary, Shanghai Composite was down 11.97 points or 0.42% to 2,825.69.