Benchmarks end lackluster trade on quiet note

Tuesday turned-out to be a lackluster day of trade for Indian equity benchmarks, with frontline gauges trading in green and red throughout the session to end flat. Traders remained cautious with president of the International Economic Association, and former chief economist at the World Bank, Kaushik Basu’s statement that in the event of US-China currency war there will be a sideline effect on India and a depreciation of the rupee, which, if managed well by policymakers, will be good for the country. Anxiety also spread among investors, with a report stating that the rupee is over-valued and the fair value of the local currency is 70-71 to a greenback. The widening current account deficit and higher interest rates have made the rupee the worst among its Asian peers so far this year.

However, traders took some solace with rating agency ICRA’s report that revenues of Indian corporates have grown by 22% in the June quarter from a year ago. It added that the increase in revenues has been attributed to the strong growth in both consumer-based industries such as consumer goods, and auto; and commodity sectors such as cement, iron, steel, and oil and gas. Traders also took note of a report that the government will set up a group of ministers (GoM) to look into issues related to the proposed mega free trade agreement the Regional Comprehensive Economic Partnership (RCEP). Meanwhile, the government withdrew the Financial Resolution and Deposit Insurance (FRDI) Bill following widespread concerns over certain provisions in the proposed legislation. There have been concerns over the proposed bail-in clause to resolve a failing bank and insurance cover on bank deposits.

Positive opening in European markets provided some support to domestic markets as Euro zone confidence among investors improved to a 3-month high in August as they see signs of relief in the EU’s trade dispute with the US. The survey data published by think tank Sentix showed that the investor sentiment index climbed to 14.7 in August from 12.1 in July. This was the highest score since June. Asian markets ended mostly in green, following Wall Street higher as strong corporate profits helped to defuse fears over US-China trade tensions.

Back home, steel sector stocks gained sheen with India Ratings and Research’s (Ind-Ra) statement that there is a moderate risk of global trade war with domino effect due to US trade restrictions on steel imports but rebounding steel margins could help domestic steel companies withstand the challenges. Stocks related to auto component sector are exhibiting mixed trend with report highlighting that auto component industry sought uniform 18% GST across the sector stating that low taxation would lead to better compliance and larger tax base. Stocks related to tea sector edged lower after ICRA stating that higher wage rates for tea estate workers is likely to impact the operating cost of bulk tea players significantly. Besides, tourism sector was in focus after a report stating that there has been 14% growth in foreign tourists’ arrivals (FTAs) in India in 2017 as compared to 2016. The total foreign exchange earnings (FEEs) accrued through tourism in 2017 was Rs 1,77,874 crore.

Finally, the BSE Sensex shed 26.09 points or 0.07% to 37,665.80, while the CNX Nifty was up by 2.35 points or 0.02% to 11,389.45.

The BSE Sensex touched a high and a low of 37,876.87 and 37,586.88, respectively and there were 14 stocks advancing against 17 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index lost 0.18%, while Small cap index was down by 0.22%.

The top gaining sectoral indices on the BSE were Metal up by 1.27%, Consumer Durables up by 1.25%, Basic Materials up by 0.71%, Consumer Discretionary Goods & Services up by 0.45% and Auto was up by 0.15%, while PSU down by 1.08%, Oil & Gas down by 1.02%, Energy down by 0.88%, Telecom down by 0.72% and Industrials was down by 0.65% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 3.61%, Asian Paints up by 1.63%, NTPC up by 1.31%, Vedanta up by 1.25% and Maruti Suzuki up by 1.18%. On the flip side, Adani Ports & SEZ down by 6.49%, Coal India down by 2.63%, SBI down by 1.47%, ONGC down by 1.24% and Sun Pharma down by 1.13% were the top losers.

Meanwhile, in order to look into issues related to the proposed mega free trade deal -- Regional Comprehensive Economic Partnership (RCEP), the government will set up a four-member group of ministers (GoM). The RCEP bloc comprises 10 Asean group members (Brunei, Cambodia, Indonesia, Malaysia, Myanmar, Singapore, Thailand, the Philippines, Laos and Vietnam) and their six Free Trade Agreement (FTA) partners - India, China, Japan, South Korea, Australia and New Zealand. 

The development assumes significance as Indian industry and exporters have raised anxieties about the presence of China in the grouping, with which India has huge trade deficit. India had trade deficit with as many as 10 member countries, including China, South Korea and Australia, of the RCEP grouping of 16 nations which have been negotiating a mega trade pact since November 2012. The trade gap with China, Korea, Indonesia and Australia has increased to $63.12 billion; $11.96 billion; $ 12.47 billion and $10.16 billion in 2017-18. It was $51.11 billion, $8.34 billion, $9.94 billion and $8.19 billion respectively in the previous financial year, 2016-17.

Giving zero duty access to China would led to flooding of Chinese goods in the domestic market and impact the manufacturing sector. The mega trade pact aims to cover goods, services, investments, economic and technical cooperation, competition and intellectual property rights. Pressure is also mounting on member countries including India for early conclusion of the proposed free trade pact. Member countries are looking to conclude the talks by end of this year but a lot of issues are yet to be finalised including the number of products over which duties will be eliminated. Domestic steel and other metal industries want these sectors to be kept out of the deal. Under services, India wants greater market access for its professionals in the proposed agreement.

The CNX Nifty traded in a range of 11,359.70 and 11,428.95. There were 22 stocks in green as against 28 stocks in red on the index.

The top gainers on Nifty were Tata Steel up by 4.02%, Titan Company up by 3.03%, Bajaj Finance up by 2.10%, Eicher Motors up by 2.06% and Asian Paints up by 1.98%. On the flip side, Adani Ports & SEZ down by 6.08%, Coal India down by 2.70%, HPCL down by 1.80%, BPCL down by 1.70% and Cipla down by 1.55% were the top losers.

European markets were trading in green; UK’s FTSE 100 rose by 68.22 points or 0.88% to 7,732.00, France’s CAC added 42.27 points or 0.77% to 5,519.45 and Germany’s DAX was up by 113.79 points or 0.90% to 12,712.00.

Asian equity markets ended mostly in green on Tuesday, with upbeat corporate earnings results from the United States. Though, some gains were capped by ongoing concerns about the simmering trade war between China and the United States. Meanwhile, Iranian President Hassan Rouhani dismissed calls for talks with the US as the first phase of sanctions came into effect overnight. Rouhani said that America ‘cannot be trusted’ and wants to ‘create chaos in Iran’. Chinese shares bounced back on bargain hunting after recent steep losses on concerns about the impact of trade war on businesses. Further, Japanese shares ended higher as Chinese markets rebounded and heavyweight SoftBank posted strong first-quarter results.