Benchmarks trade lower in early deals

Indian equity benchmarks made a cautious start to the F&O expiry session and are trading in red in early deals as traders remained concerned with a report that foreign investors have pulled out $280 million from the Indian markets so far this year, while domestic institutional investors (DIIs) continue to invest more aggressively and have put in a staggering $10 billion. Traders shrugged off Reserve Bank of India’s (RBI) latest annual report showing that it expects India’s economic growth rate to accelerate to 7.4% in the current financial year (FY19) on pick up in industrial activity and good monsoon. Investors failed to take any advantage with the government’s statement that demonetisation of high-value currency notes in November 2016 achieved the objectives quite substantially even as the RBI  reported most of the demonetised currency was back with the banks.

On the global front, Asian markets are trading mixed at this point of time. Traders remained hopeful that the current North American Free Trade Agreement (NAFTA) negotiations will lead to a further easing of global trade tensions. The US markets ended higher on Wednesday as investors grew more hopeful about trade talks between the US, Mexico and Canada.

Back home, banking stocks remained in focus with the RBI’s report that bad loans for the banking sector are likely to increase in 2018-19 from the current levels of around 11.5%. In scrip specific developments, Aditya Birla Capital gained on entering into partnership with Varde Partners and National Fertilizers rises on inking MoA with RFCL.

The BSE Sensex is currently trading at 38,630.36, down by 92.57 points or 0.24% after trading in a range of 38,624.23 and 38,819.06. There were 17 stocks advancing against 14 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.01%, while Small cap index was up by 0.12%.

The top gaining sectoral indices on the BSE were Telecom up by 0.76%, FMCG up by 0.73%, Utilities up by 0.55%, Power up by 0.35% and Metal was up by 0.32%, while Energy down by 1.13%, Bankex down by 0.80%, Oil & Gas down by 0.58%, PSU down by 0.26% and Realty was down by 0.24% were the top losing indices on BSE.

The top gainers on the Sensex were ITC up by 1.42%, Bharti Airtel up by 1.36%, Tata Steel up by 1.33%, Power Grid Corporation up by 0.90% and Bajaj Auto up by 0.90%. On the flip side, Axis Bank down by 1.79%, Yes Bank down by 1.69%, Reliance Industries down by 1.50%, Adani Ports down by 1.27% and SBI down by 1.03% were the top losers.

Meanwhile, with pick up in industrial activity and good monsoon, the Reserve Bank of India (RBI) in its annual report has said that it expects India’s gross domestic product (GDP) growth rate to accelerate to 7.4% in the current financial year (FY19) from 6.7% in the previous year, with risks evenly balanced. RBI also said that its monetary policy will continue to be guided by the objective of achieving the medium-term target for retail inflation of 4%, within a tolerance band of +/- 2%, while supporting growth. However, it cautioned that the country’s external sector will have to confront global headwinds, but expressed confidence that the Current Account Deficit would largely be financed by foreign direct investment.

The annual report noted that agricultural production is likely to remain strong, growth impulses in industry are strengthening (propelled by a sustained pick-up in manufacturing and mining activity), corporate are reporting robust sales growth and improvement in profitability, and services sector activity is also set to gather pace. Also, revenue-earning freight traffic of railways has picked up, driven by stepped-up movement in coal, fertiliser and cement. It said over the rest of 2018-19, the acceleration of growth that commenced in 2017-18:H2 is expected to be consolidated and built upon.

The central bank further said the up-tick in credit growth is likely to be supported by the progress being made under the aegis of the Insolvency and Bankruptcy Code (IBC) in addressing stress on balance sheets of both corporates and banks, recapitalisation of state-owned banks, and a positive outlook on the economy. The prevailing negative credit-to-GDP gap indicates that there is sufficient scope for credit absorption and expansion in bank lending on a sustained basis.

On the inflation front, RBI said it is likely to face upside risks over the rest of the year from a number of sources, warranting continuous vigil and a readiness to head off those pressures from getting generalised. Rising global commodity prices, especially of crude oil, and recent global financial market developments are firming up input cost pressures. The RBI has cautioned that global headwinds are likely to confront India’s external sector in 2018-19. Even though exports have gathered momentum in Q1FY19, the worsening global trade environment as a result of protectionist policies may impinge upon external demand. Elevated crude oil prices and the strengthening of domestic demand may push up the import bill.

The CNX Nifty is currently trading at 11660.70, down by 31.20 points or 0.27% after trading in a range of 11656.80 and 11698.80. There were 21 stocks advancing against 29 stocks declining on the index.

The top gainers on Nifty were UPL up by 1.40%, Power Grid Corporation up by 1.37%, Bharti Airtel up by 1.35%, ITC up by 1.18% and Tata Steel up by 1.18%. On the flip side, Axis Bank down by 1.86%, HPCL down by 1.84%, Indian Oil Corporation down by 1.47%, Reliance Industries down by 1.43% and Adani Ports down by 1.37% were the top losers.

Asian markets trading mixed; Taiwan Weighted decreased 13.75 points or 0.12% to 11,085.82, Straits Times declined 23.14 points or 0.72% to 3,220.78, Hang Seng dropped 173.82 points or 0.62% to 28,242.62 and Shanghai Composite was down by 22.44 points or 0.82% to 2,746.85.

On the flip side, Nikkei 225 increased 36.60 points or 0.16% to 22,884.82, Jakarta Composite gained 5.59 points or 0.09% to 6,070.74 and KOSPI was up by 1.09 points or 0.05% to 2,310.12.