Markets end near at day’s low on feeble global cues

Extending previous session losses, Indian equity benchmarks ended the Thursday’s trade with a cut of around a percent, breaching their crucial 37,200 (Sensex) and 11,250 (Nifty) levels, following the 25 basis points (bps) hike in repo and reverse repo rates by the Reserve Bank of India (RBI) on Wednesday. That apart, weak global sentiment on account of rising trade war fears also impacted sentiment. Markets started the session on pessimistic note and never looked in recovery mood to end near intraday low levels. Sentiments remained dampened since beginning, as traders remained concerned with RBI Governor Urjit Patel flagging the risks to macroeconomic stability from a potential currency war in the wake of rising global trade tensions. Also, traders reacted negatively on EEPC India chairman Ravi Sehgal’s statement that the 25 bps increase in the interest rates by the RBI is a big negative for exporters, as they would become less competitive in a tough global market that is already facing the threat of tariff war.

Markets extended losses in second half of the session as traders paid no heed towards report that RBI has maintained its growth outlook for the economy, estimating the country’s Gross Domestic Product (GDP) to grow at 7.4% in 2018-19. It noted that GDP growth would range between 7.5-7.6% in H1 and 7.3-7.4% in H2. The market participants failed to take any support with Finance Minister Piyush Goyal’s statement that GST revenues will go up in the coming months on improved compliance and market demand. Traders even overlooked the Cabinet’s approval to GST laws amendments which included hiking threshold limit for availing composition scheme dealers to Rs 1.5 crore, among other things.

Weak opening in European markets too dampened sentiments, as trade war fears ratcheted higher after the United States said it was looking at more than doubling threatened tariffs on a range of Chinese imports. Asian markets ended in red on Thursday, tracking losses overnight on Wall Street, where investors sold industrial stocks following reports that the Trump administration is considering a higher tax rate on Chinese imports.

Back home, stocks related to power sector remained in limelight on report from Central Electricity Authority which stated that India forecast for a third year that it will be able to supply more electricity than its distribution companies require as generation and transmission capacity rises. Supply from power plants will exceed demand from distributors by 4.6%. Stocks related to agriculture remained in focus with a report stating that the farm exports have risen dramatically, reversing the trend of falling trade surpluses in the last three years, providing a major fillip to PM Narendra Modi’s dream of doubling farmers’ income by 2022. However, stocks related to energy sector declined despite the department of industrial policy and promotion (DIPP) starting programme for startups in energy sector, to promote budding entrepreneurs. Also, footwear stocks edged lower, despite Union Minister Suresh Prabhu’s statement that Commerce and Industry Ministry is working with the footwear and allied sector industries to formulate a comprehensive strategy to promote exports and manufacturing in this labour intensive segment.

Finally, the BSE Sensex declined 356.46 points or 0.95% to 37,165.16, while the CNX Nifty was down by 101.50 points or 0.89% to 11,244.70.

The BSE Sensex touched a high and a low of 37,529.69 and 37,128.99, respectively and there were 10 stocks advancing against 21 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.09%, while Small cap index was up by 0.07%.

The top gaining sectoral indices on the BSE were Healthcare up by 1.03%, Utilities up by 0.60%, Power up by 0.44%, Metal up by 0.27% and Consumer Durables was up by 0.24%, while Telecom down by 1.47%, Realty down by 1.45%, Auto down by 1.26%, Energy down by 1.05% and Bankex was down by 0.84% were the top losing indices on BSE.

The top gainers on the Sensex were Power Grid Corporation up by 2.25%, Coal India up by 1.07%, Hindustan Unilever up by 0.92%, Indusind Bank up by 0.91% and Wipro up by 0.76%. On the flip side, Bharti Airtel down by 2.79%, Kotak Mahindra Bank down by 2.54%, Maruti Suzuki down by 1.97%, Reliance Industries down by 1.91% and HDFC down by 1.90% were the top losers.

Meanwhile, a day after the Reserve Bank of India (RBI) hiked its repo rate by 25 basis points to 6.50%, Engineering Export Promotion Council (EEPC) of India chairman Ravi Sehgal has said that the decision of raising interest rate is a big negative for exporters, as it would impact competitiveness of exporters.

EEPC India chairman noted that the exporters would become less competitive in a tough global market due to the rate hike. He also pointed that rate of borrowing has been increasing which is certainly not a good news for exporters, as it would increase the overall cost of production for exporters, particularly in the engineering sector, due to rising prices of raw material like steel. 

RBI in its third bi-monthly monetary policy review of 2018-19 has hiked repo rate under the liquidity adjustment facility (LAF) by 25 basis points (bps) to 6.50%, to curb inflation and pre-empt a rout of the rupee as the global trade war escalates. Consequently, the reverse repo rate under the LAF stands adjusted to 6.25%, and the marginal standing facility (MSF) rate and the Bank Rate to 6.75%. Further, the RBI has maintained a ‘neutral’ stance in the policy as it aimed to contain inflation while not chocking growth.

The CNX Nifty traded in a range of 11,328.90 and 11,234.95. There were 15 stocks in green as against 35 stocks in red on the index.

The top gainers on Nifty were Lupin up by 2.64%, Dr. Reddy’s Lab up by 2.36%, Power Grid Corporation up by 1.98%, HPCL up by 1.77% and BPCL up by 1.54%. On the flip side, Kotak Mahindra Bank down by 2.61%, Bharti Airtel down by 2.50%, Grasim Industries down by 2.40%, Maruti Suzuki down by 2.27% and Mahindra & Mahindra down by 1.99% were the top losers.

European markets were trading in red; UK’s FTSE 100 declined by 98.32 points or 1.30% to 7,554.59, France’s CAC dropped 43.91 points or 0.81% to 5,454.46 and Germany’s DAX was down by 235.82 points or 1.89% to 12,501.23.

Asian equity markets closed lower on Thursday as trade tensions intensified and the US Federal Reserve signaled it stayed on course to increase borrowing costs in September and likely again in December. US President Donald Trump has escalated his trade war with China, ordering his administration to consider raising the proposed tariff on $200 billion worth of Chinese imports to 25 percent from the 10 percent announced earlier. A spokesperson for China's Foreign Ministry accused the US of ‘blackmail’ and warned of inevitable countermeasures if the US takes further escalatory steps. Chinese stocks ended lower, with rising trade tensions as well as speculation over even tighter property restrictions weighing on markets. Further, Japanese shares fell as the yen strengthened on safe-haven demand after an escalation in the Sino-US trade war.