Benchmarks start new F&O series on quiet note

Indian equity benchmarks ended the first day of new F&O expiry series on quite note, as traders remained on sidelines ahead of first quarter gross domestic product (GDP) data to be released in evening of August 31. Markets made a cautious start as sentiments remain dampened with Federation of Indian Export Organisations (FIEO) President Ganesh Kumar Gupta’s statement that exporters are facing uncertainty due to a continuous depreciation of the domestic currency as they are not able to negotiate properly prices of goods in the global markets. Sentiments also weighed down after rupee slumped to a fresh record low of 71 against the dollar for the first time ever by falling 26 paise on persistent demand for the US currency amid rising crude prices. Some concerns also came after the International Energy Agency (IEA) said crude oil prices are likely to rise further in 2018 and may remain above $75 a barrel for some time, owing to the geo-political situations across the world - including Iran sanctions and drop in Venezuela production.

However, traders pare almost all of their losses to end flat as some support came with Finance Minister Arun Jaitley’s statement that India is likely to surpass the UK to become the world’s fifth largest economy next year on growing consumption and strong economic activity. Also, some solace came with a private report that the economic growth is expected to rise to 7.6% in the April-June quarter of 2018-19 from a sub-6% figure in the year-ago period mainly due to a low-base effect. Traders got some comfort with report that India on Thursday made a strong pitch to Standard & Poor’s (S&P) for a rating upgrade, citing improving economic growth prospects, fiscal discipline, stabilization of the GST regime and broader macroeconomic stability despite elevated oil prices and a depreciating rupee. S&P has kept India’s sovereign rating unchanged at the lowest investment grade of ‘BBB-’since January 2007. Some support also came with Niti Aayog Vice-Chairman Rajiv Kumar’s statement that the government is committed to fiscal discipline and added that the Prime Minister resisted the pressure to cut down excise duty on fuel despite rising oil prices.

On the global front, European markets were trading in red, as Eurozone economic confidence deteriorated more-than-expected in August. The survey results from European Commission showed that the economic sentiment index dropped to 111.6 in August from 112.1 in July. Asian markets ended in red, despite China's official manufacturing PMI came in higher than expected in August. The manufacturing PMI stood at 51.3 in the month, beating forecasts for a score of 51.0 and up from 51.2 in July.

Back home, Cement sector’s stocks edged higher despite ICRA’s report that even with pick-up in cement demand in Q1 FY19, higher coal, pet coke prices and freight costs in the near-term are likely to put pressure on the profitability margins and debt metrics of the cement companies. Stocks related to Power sector ended in green with ICRA in its latest report stating that the all-India electricity demand rose 7.4% in July 2018 on a year-on-year (Y-o-Y) basis as per the provisional estimates of the Central Electricity Authority (CEA). However, airline sector ended mixed despite report that the aviation ministry is now working on a package to provide some relief to the financially-stressed airline sector. It will seek finance ministry’s approval for the package, though an earlier request of getting jet fuel in lower GST slab was not approved.

Finally, the BSE Sensex declined 45.03 points or 0.12% to 38,645.07, while the CNX Nifty was up by 3.70 points or 0.03% to 11,680.50.

The BSE Sensex touched a high and a low of 38,838.45 and 38,562.21, respectively and there were 17 stocks advancing against 14 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.35%, while Small cap index was up by 0.55%.

The top gaining sectoral indices on the BSE were Healthcare up by 2.18%, IT up by 1.38%, Power up by 1.28%, TECK up by 1.11% and Capital Goods was up by 1.04%, while Energy down by 1.49%, Metal down by 0.63%, Oil & Gas down by 0.28%, Bankex down by 0.16% and Auto was down by 0.16% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 2.87%, Tata Motors - DVR up by 2.63%, Power Grid Corporation up by 2.37%, Sun Pharma up by 1.99% and Bajaj Auto up by 1.65%. On the flip side, Yes Bank down by 5.11%, Reliance Industries down by 2.60%, Mahindra & Mahindra down by 1.75%, Maruti Suzuki down by 1.25% and Vedanta down by 1.13% were the top losers.

Meanwhile, highlighting the impact of the demonetisation on reduction of cash transactions, Niti Aayog Vice-Chairman Rajiv Kumar has said that the government is committed to fiscal discipline and added that the Prime Minister resisted the pressure to cut down excise duty on fuel despite rising oil prices.

Rajiv Kumar further said that the note ban has impacted the markets and market psychology and the move has encouraged digital payments. He also underlined that the objective of the note ban exercise was not to have a large number of unreturned Rs 500 and 1,000 notes but to reduce cash transactions and promote digitization.

On the inflation front, Kumar said that retail inflation, which includes fuel and food, is lower than core inflation, adding that inflation is well under control and the government is constantly on vigil on these issues. He also noted that inflationary impact of an oil price rise, or that of minor exchange rate decline is not that high, because there can be a supply response to that.

The CNX Nifty traded in a range of 11,727.65 and 11,640.10. There were 30 stocks in green as against 20 stocks in red on the index.

The top gainers on Nifty were Dr. Reddys Lab up by 4.70%, Tech Mahindra up by 4.66%, Lupin up by 4.24%, Tata Motors up by 2.93% and HCL Technologies up by 2.73%. On the flip side, Yes Bank down by 5.18%, Reliance Industries down by 2.79%, Bajaj Finserv down by 2.55%, Bajaj Finance down by 2.42% and Mahindra & Mahindra down by 1.80% were the top losers.

European markets were trading in red; France’s CAC shed 55.77 points or 1.03% to 5,422.29, Germany’s DAX declined 86.83 points or 0.70% to 12,407.41 and UK’s FTSE 100 was down by 30.90 points or 0.41% to 7,485.13.

Asian equity markets ended mostly lower on Friday after media reports suggested that US President Donald Trump is eager to push ahead with higher tariffs on Chinese exports as soon as next week. Trump's threat to pull out of the World Trade Organization and his comments that the European Union is ‘possibly almost as bad as China’ when it comes to trade, also stoked fears of a worsening trade war. Chinese stocks ended lower as renewed concerns over the US-China trade spat overshadowed positive economic data. The manufacturing sector in China continued to expand in August, and at a slightly faster rate, the latest survey from the National Bureau of Statistics showed with a PMI score of 51.3. That beat expectations for a score of 51.0 and was up from 51.2 in July. The non-manufacturing PMI came in at 54.2 also exceeding expectations for 53.7 and up from 54.0 in the previous month. Further, Japanese shares ended marginally lower as jitters over emerging market currencies persisted and a slew of economic data painted a mixed picture of the economy. Japan's industrial output dropped marginally in July and the unemployment rate rose marginally from a month earlier, while the annual core consumer inflation held steady in the month, separate reports showed. Meanwhile, Malaysian markets were closed for a national holiday.