Key gauges extend losses in last leg of trade

Key domestic bourses extended losses to trade near intraday lows in last leg of trade as sentiments remained dampened on continued weakness in Indian Rupee against Dollar and sluggish trend in Asian markets. Traders remain concerned on report that India’s crude oil import bill is likely to jump by about $26 billion in 2018-19 as rupee dropping to a record low has made buying of oil from overseas costlier. Some cautiousness also crept in on 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. Selling in metal, basic material and consumer durables counters dragged the bourses lower, while some buying witnessed in software and healthcare stocks as rupee trade near all-time low.

On the global front, European markets are trading in green in early deals following news that China has accepted an invitation from the United States to talk trade in late August. Corporate earnings also boosted sentiment across the continent. However, Asian markets trading in red terrain, following the negative cues from Wall Street amid worries about Turkey’s financial crisis and an economic showdown in China.

Back home, shares of midcap information technology (IT) companies rallied by up to 15% on the BSE after they reported a good set of numbers for the quarter ended June 2018 (Q1FY18). In scrip specific developments, Vardhman Industries gained despite reporting net loss of Rs 1.45 crore in Q1 and Sun Pharma hits 52-week high on USFDA approval and good Q1 results.

The BSE Sensex is currently trading at 37641.75, down by 210.25 points or 0.56% after trading in a range of 37634.13 and 37891.92. There were 15 stocks advancing against 15 stocks declining, while 1 stock remained unchanged on the index.

The broader indices were trading mixed; the BSE Mid cap index slipped 0.20%, while Small cap index was up by 0.01%.

The top gaining sectoral indices on the BSE were IT up by 0.85%, Healthcare up by 0.83%, Utilities up by 0.72%, TECK up by 0.60% and Auto was up by 0.52%, while Metal down by 1.90%, Basic Materials down by 0.84%, Consumer Durables down by 0.77%, Capital Goods down by 0.66% and Energy was down by 0.56% were the top losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 2.18%, Infosys up by 1.63%, ICICI Bank up by 1.52%, Axis Bank up by 1.50% and Bharti Airtel up by 1.26%. On the flip side, Kotak Mahindra Bank down by 3.61%, Vedanta down by 2.84%, HDFC down by 2.24%, Tata Steel down by 1.57% and Wipro down by 1.34% 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 11379.45, down by 55.65 points or 0.49% after trading in a range of 11366.25 and 11449.85. There were 22 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were GAIL India up by 3.74%, Dr. Reddy’s Lab up by 2.44%, Sun Pharma up by 2.17%, Infosys up by 1.65% and Axis Bank up by 1.51%. On the flip side, Kotak Mahindra Bank down by 3.63%, Zee Entertainment down by 3.05%, Vedanta down by 2.81%, Hindalco down by 2.30% and Indiabulls Housing Finance down by 2.25% were the top losers.

Asian markets are trading in red; Nikkei 225 slipped 12.18 points or 0.05% to 22,192.04, Taiwan Weighted decreased 32.85 points or 0.31% to 10,683.90, Straits Times shed 18.75 points or 0.58% to 3,215.37, Jakarta Composite declined 32.79 points or 0.57% to 5,783.80, Hang Seng fell 223.53 points or 0.82% to 27,100.06, KOSPI dropped 18.11 points or 0.81% to 2,240.80 and Shanghai Composite was down by 17.29 points or 0.64% to 2,705.97.

European markets are trading in green; UK’s FTSE 100 surged 40.86 points or 0.54% to 7,538.73, France’s CAC increased 17.87 points or 0.34% to 5,323.09 and Germany’s DAX was up by 28.10 points or 0.23% to 12,191.11.