Weak trade persists on Dalal Street as RBI hikes repo rate by 25 bps

Weak trade continued on the Dalal Street in late afternoon session, with both Sensex and Nifty crumbling in negative terrain, as the Reserve Bank of India (RBI) increased its benchmark repo rate by 25 basis points to 6.50%. Weak opening in European markets coupled with weaker manufacturing data, also weighed on domestic sentiments. As per the survey report, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) - a composite single-figure indicator of manufacturing performance -fell to 52.3 in July from 53.1 in June 2018, as new orders and output rose at slower pace. Adding some anxiety on the street, weather forecasting agency Skymet cut 2018 monsoon estimate to 92% of the long period average (LPA) from the earlier normal monsoon prediction, noting that as of now, the oceanic parameters are not at all favourable for enhancing monsoon rain during the second half of the season.

Traders also got cautious after the All-India Consumer Price Index for Industrial Workers (CPI-IW) for June, 2018 increased by 2 points and pegged at 291. The maximum upward pressure to the change in current index came from Food group contributing (+) 1.86 percentage points to the total change. Meanwhile, the government has detected GST evasion worth Rs 3,026 crore in the last one year in relation to misuse of input tax credit and non-payment of taxes. Some concerns also came with the Minister of State for Finance Shiv Pratap Shukla’s statement that gross bad loans in Indian banks surged to more than Rs 9.61 lakh crore by the end of 2017-18, while loans to industries formed a major chunk of such non-performing assets. However, the broader markets were holding their heads in green terrain, but with marginal gains, while Oil & Gas, Healthcare and Energy stocks gained in the markets. 

On the global front, European markets were trading in red, ahead of the Federal Reserve's monetary policy decision later today and the Bank of England's (BoE) 'Super Thursday' event. The Bank of England may raise interest rates from 0.5% to 0.75% on Thursday despite Brexit gloom. Asian markets were trading in green, as the manufacturing sector in China continued to expand in July, albeit at a slower pace. The latest survey from Caixin revealed with a PMI score of 50.8, down from 51.0 in June. Separately, the state-run Xinhua news agency said that China will keep its economic growth within a reasonable range and achieve this year's target despite significant changes in the external environment. Back home, in scrip specific development, DCM Shriram traded higher after the company received an approval for the investment of Rs 300 crore, to be financed through internal generations and debts, to set up 200 KLD distillery at Ajbapur, instead of expansion of 100 KLD at Hariawan which was approved by the Board in November 2017.

The BSE Sensex is currently trading at 37477.86, down by 128.72 points or 0.34% after trading in a range of 37437.63 and 37711.87. There were 11 stocks advancing against 20 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.10%, while Small cap index was up by 0.13%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 0.94%, Healthcare up by 0.85%, Energy up by 0.80%, IT up by 0.39% and TECK up by 0.32%, while Metal down by 0.89%, Bankex down by 0.68%, Auto down by 0.62%, Basic Materials down by 0.46% and Consumer Disc down by 0.35% were the top losing indices on BSE.

The top gainers on the Sensex were Coal India up by 3.13%, TCS up by 1.71%, Sun Pharma up by 1.08%, ONGC up by 1.03% and Tata Motors up by 1.00%. On the flip side, Vedanta down by 2.27%, Maruti Suzuki down by 1.68%, Axis Bank down by 1.57%, Tata Steel down by 1.48% and Asian Paints down by 1.09% were the top losers.

Meanwhile, business activity in Indian manufacturing sector eased in the month of July 2018 as new orders and output rose at slower pace. As per the survey report, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) - a composite single-figure indicator of manufacturing performance -fell to 52.3 in July from 53.1 in June 2018. Nevertheless, despite a slight deceleration, the manufacturing sector activity expanded for the twelfth consecutive month as the PMI reading stood above the watershed 50 mark, which differentiates growth from contraction.

The report further noted that strong demand and favourable market conditions led to the growth of new business and output in the reported month, despite easing from June’s six-month high. Reflecting the trend for new business, new export orders rose for the ninth month in succession during July, on the back of strong demand from international markets for Indian goods. However, job creation slowed down marginally, even though firms were encouraged to raise their staffing levels for the fourth successive month in July.

On the inflation front, inflationary pressures in the Indian manufacturing economy rose in July, thereby stretching the period of inflation to 34 months amid rising steel and crude oil prices. However, the rate of increase eased from June’s near four-year high and was in line with the series trend.  Subsequently, firms raised their output charges at a modest and slower pace.

The CNX Nifty is currently trading at 11323.65, down by 32.85 points or 0.29% after trading in a range of 11323.35 and 11390.55. There were 23 stocks advancing against 27 stocks declining on the index.

The top gainers on Nifty were Coal India up by 2.91%, Lupin up by 2.26%, Dr. Reddy’s Lab up by 2.22%, Bharti Infratel up by 2.20% and Indian Oil Corporation up by 1.70%. On the flip side, Hindalco down by 2.69%, Vedanta down by 2.43%, Eicher Motors down by 2.10%, Indiabulls Housing Finance down by 1.97% and Axis Bank down by 1.82% were the top losers.

Asian markets were trading mostly in green; Taiwan Weighted surged 40.62 points or 0.37% to 11,098.13, KOSPI jumped 11.81 points or 0.51% to 2,307.07, Nikkei 225 zoomed 192.98 points or 0.85% to 22,746.70, Straits Times rose 8.63 points or 0.26% to 3,328.48 and Jakarta Composite was up by 94.13 points or 1.56% to 6,030.57. On the flip side, Shanghai Composite decreased 52.19 points or 1.85% to 2,824.21 and Hang Seng plunged 242.27 points or 0.85% to 28,340.74.

European markets were trading mostly in red; UK’s FTSE 100 fell 63.56 points or 0.83% to 7,685.20 and Germany’s DAX lost 14.72 points or 0.12% to 12,790.78. On the flip side, France’s CAC increased 5.82 points or 0.11% to 5,517.12.