Sensex, Nifty remain under pressure

Indian equity benchmarks remained under pressure in late afternoon session, with Sensex losing more than 70 points, despite weak opening in European markets. Heavy sell -off at Energy, TECK nad IT counters, kept the sentiments down. Anxiety spread among the street, with the credit rating agency, India Ratings’ latest report stating that the widening current account deficit (CAD), which is projected to cross 2.6% of GDP this year, coupled with the rupee plunge, is likely to increase borrowing costs for corporates and bring down the overall volume of fresh forex loans. Domestic sentiments also got hit with Credit rating agency Moody's Investors Service report that there are risks of India breaching the 3.3% fiscal deficit target for the current financial year as higher oil prices will add to short-term fiscal pressures. 

Adding some woes, the Reserve Bank of India in its annual report said that bad loans for the banking sector are likely to increase in 2018-19 from the current levels of around 11.5%.  Besides, major industry laggards like Coal India, Power Grid Corporation and Reliance Industries, also contributed to the losses in late noon deals. Some concerns also came after NITI Aayog advisor Alok Kumar said that a large number of challenges still persists in ensuring that women are able to reap the benefits of Direct Benefit Transfer (DBT). However, the broader indices managed to keep their heads in green terrain with notable gains.

On the global front, European markets were trading in green, as France's consumer confidence held steady for the second straight month in August, in line with expectations. As per survey data from the statistical office Insee, the consumer sentiment came in at 97 in August, the same reading as in the previous two months. However, UK shop prices increased for the first time in more than five years in August. The British Retail Consortium showed that shop prices edged up 0.1 percent in August, following a 0.3 percent drop in July. This broke a deflation cycle of 63 months. Asian markets were also trading in green, although underlying sentiment remained cautious as investors closely watched developments in the Sino-US trade dispute. Back home, in scrip specific development, Subex traded higher after the company has partnered with the Town of Florence, Arizona to provide security to its critical public infrastructure.

The BSE Sensex is currently trading at 38823.50, down by 73.13 points or 0.19% after trading in a range of 38800.04 and 38989.65. There were 16 stocks advancing against 15 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.79%, while Small cap index was up by 0.33%.

The top gaining sectoral indices on the BSE were Realty up by 1.97%, Metal up by 1.58%, Basic Materials up by 1.07%, PSU up by 0.92% and Oil & Gas up by 0.35%, while Energy down by 1.01%, TECK down by 0.36%, IT down by 0.30% and Telecom down by 0.20% were the top losing indices on BSE.

The top gainers on the Sensex were SBI up by 1.92%, Tata Steel up by 1.67%, ONGC up by 1.58%, Tata Motors up by 0.85% and ITC up by 0.82%. On the flip side, Coal India down by 2.77%, Power Grid Corporation down by 1.83%, Reliance Industries down by 1.57%, Yes Bank down by 1.23% and Indusind Bank down by 1.21% were the top losers.

Meanwhile, Credit rating agency, India Ratings and Research (Ind-Ra) in its latest report has said that India’s widening current account deficit (CAD) along with depreciating rupee may increase the borrowing costs of Indian firm. The ratings agency further noted that rising interest rates, weakening rupee and forward premium could also affect the ability of corporates to source debt capital from global markets.

As per the report, the corporate liquidity may also tighten further, which will reduce the financial flexibility. Besides, the report pointed that the external account challenges are exacerbated by capital outflows from the debt capital markets in light of heightened volatility in the rupee and bond markets, a gradual contraction of central banks’ balance sheets and rising interest rates in developed markets.

Ind-Ra further highlighted that the widening CAD is accompanied by an increase in capital outflows primarily from debt capital markets and added that this can further worsen the demand-supply mismatch in debt markets, thereby widening credit spreads over the near to medium term. It also said that widening CAD (with capital outflows) not only results in a hardening of benchmark yields, but also puts upward pressure on corporates’ credit spreads in the short and intermediate tenures.

The CNX Nifty is currently trading at 11712.35, down by 26.15 points or 0.22% after trading in a range of 11703.35 and 11753.20. There were 23 stocks advancing against 27 stocks declining on the index.

The top gainers on Nifty were UPL up by 3.95%, SBI up by 1.83%, Bajaj Finance up by 1.52%, Tata Steel up by 1.47% and ONGC up by 1.40%. On the flip side, Coal India down by 2.61%, Power Grid Corporation down by 2.23%, Reliance Industries down by 1.67%, Yes Bank down by 1.46% and Eicher Motors down by 1.45% were the top losers.

Asian markets were trading mostly in green; Nikkei 225 gained 34.75 points or 0.15% to 22,848.22, Taiwan Weighted zoomed 110.02 points or 0.99% to 11,099.57, KOSPI added 5.91 points or 0.26% to 2,309.03, Jakarta Composite surged 4.84 points or 0.08% to 6,047.49 and Hang Seng increased 64.82 points or 0.23% to 28,416.44. On the flip side, Straits Times decreased 5.79 points or 0.18% to 3,241.76 and Shanghai Composite was down by 8.68 points or 0.31% to 2,769.30.

European markets were trading mostly in green; France’s CAC increased 1.63 points or 0.03% to 5,486.62 and Germany’s DAX was up by 9.76 points or 0.08% to 12,537.18. On the flip side, UK’s FTSE 100 was down by 16.42 points or 0.22% to 7,600.80.