Benchmarks continue lackluster trade slightly in red

Indian equity benchmarks continued their lackluster trade slightly in red in afternoon session, on the back of selling activities by market-participants. Investors’ sentiments remain dented with report that India’s trade deficit soared to a near five-year high of $18 billion. The commerce ministry data showed that the country’s exports rose by 14.32% to $25.77 billion in July mainly on account of better performance of gems and jewellery sector as well as petroleum products, while imports during July were valued at $43.79 billion, a growth of 28.81% compared to $33.99 billion in the year ago period. Some anxiety also remained among the local traders with India Ratings’ report that if the steep decline in the household savings rate -- which has fallen to 16.3% from 23.6% between fiscals 2012 and 2017 -- continues, it may pose a serious challenge to overall growth and the macroeconomic stability. However, losses were limited as traders found some support with FICCI’s latest Economic Outlook Survey stated that the Indian economy is expected to grow at 7.4% in the current fiscal, higher than the previous year. On the sectoral front, Pharma stocks were trading higher despite report stating that Indian drug makers are staring at diminishing margins as raw material imports from China has increased while drug prices have stagnated. The cost of raw materials sourced from China has risen after Chinese government started cracking down on facilities that violate the country’s pollution control norms. 

On the global front, Asian markets were trading in red, after deepening worries about global economic growth, particularly in China, set off a rout on Wall Street. Back home, the BSE Sensex is currently trading at 37818.22, down by 33.78 points or 0.09% after trading in a range of 37644.97 and 37891.92. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.11%, while Small cap index was up by 0.31%.

The top gaining sectoral indices on the BSE were Utilities up by 0.92%, Healthcare up by 0.80%, IT up by 0.75%, Auto up by 0.67% and TECK up by 0.55%, while Realty down by 1.39%, Metal down by 1.37%, Consumer Durables down by 0.70%, Basic Materials down by 0.50% and Energy down by 0.17% were the top losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 2.05%, Axis Bank up by 1.90%, Tata Motors up by 1.37%, Infosys up by 1.24% and ICICI Bank up by 1.22%. On the flip side, Kotak Mahindra Bank down by 3.06%, Vedanta down by 2.37%, HDFC down by 1.65%, Wipro down by 1.30% and ONGC down by 1.02% were the top losers.

Meanwhile, the India Ratings and Research (Ind-Ra) in its latest report has warned that if the declining trend of household savings continues, it may pose a serious challenge to overall economic growth and the macroeconomic stability. It noted that the household savings rate has plunged to 16.3% as compared to 23.6% between fiscals 2012 and 2017. It pointed out that the fall was mainly due to the shocks from demonetisation and Goods and Services Tax (GST) implementation. It said that these twin policy shock although had economy-wide ramification, it was more pronounced in the case of the household sector.

According to the report, the household savings rates plummeted 153 bps in FY17, while for private corporations fell only 12 bps, while savings rate for the public sector increased 37 bps. But the overall impact was a 128 bps decline in the savings rate. It noted that since this sector is the largest contributor to savings in the economy, the overall savings rate declined to about 30 percent in FY17, after remaining well above 32% for many years. In FY12, the rate was a robust 34.6%. It also said that household savings include savings by households, not-for-profit institutions and quasi-corporates, and it is the largest contributor to the savings in the economy. It added that these savings, intermediated by banks and non-banking financial entities, are a major source of investment funding.

The ratings agency said that declining share of household sector is visible even in the case of nominal gross value added (GVA), where its share declined to 43.2% in FY17 from 45.5% in FY12. It attributed this to the lower nominal GVA growth of the household sector compared to the private corporations and the overall economy. It mentioned that in FY17, the household sector contributed 94.8% to agriculture, 27.5% to industrial and 34.4% to services sectors’ nominal GVA. It also observed that tighter financial conditions (increasing median working capital days) have been one of the key reasons for the slowdown in the household sector’s growth.

The CNX Nifty is currently trading at 11427.30, down by 7.80 points or 0.07% after trading in a range of 11376.95 and 11449.85. There were 29 stocks advancing against 21 stocks declining on the index.

The top gainers on Nifty were GAIL India up by 4.46%, Dr. Reddys Lab up by 2.42%, Sun Pharma up by 2.04%, Axis Bank up by 1.97% and Grasim Industries up by 1.77%. On the flip side, Kotak Mahindra Bank down by 3.17%, Vedanta down by 2.49%, Ultratech Cement down by 1.91%, Hindalco down by 1.87% and Indiabulls Housing Finance down by 1.84% were the top losers.

All the Asian markets were trading in red; Hang Seng decreased 209.46 points or 0.77% to 27,114.13, Straits Times dipped 10.59 points or 0.33% to 3,223.53, Shanghai Composite dropped 16.73 points or 0.62% to 2,706.53, Jakarta Composite shed 14.81 points or 0.26% to 5,801.78, KOSPI decreased 18.11 points or 0.81% to 2,240.80, Nikkei 225 fell 12.18 points or 0.05% to 22,192.04 and Taiwan Weighted was down by 32.85 points or 0.31% to 10,683.90.