Benchmarks end in red on profit booking; Nifty settles below 11,600

Indian equity benchmarks failed to sustain early gains and ended in red terrain on Monday, with Sensex and Nifty 50 index surrendering their crucial 38,400 and 11,600 levels respectively. Investor sentiment was largely battered by weak global cues, along with a weak rupee and heavy selling pressure in FMCG, banking, automobile and oil and gas stocks. Markets started the session on a positive note, as sentiments remain buoyed with  report that India’s economy grew at its fastest in over two years, propelled by double-digit growth in manufacturing and robust consumer spending, making for a strong start to the last financial year before the ruling party faces polls in 2019. Gross domestic product (GDP) expanded quicker than even the most optimistic forecast at 8.2% in the First quarter of current financial year (Q1FY19). GDP had grown 5.6% in the year earlier quarter and 7.7% in the March quarter. Traders also took encouragement with Principal Economic Adviser in the Ministry of Finance, Sanjeev Sanyal’s statement that the growth rate will be affected in next reading, but India would remain world’s fastest-growing major economy, as he countered scepticism over GDP growth rate.

However, selling in last leg of trade mainly played spoil sports for the frontline gauges and key bourses took U-turn to end lower with a cut of around a percentage point. Traders turned pessimistic on report that the Controller General of Accounts (CGA) in its latest data has showed that the country’s fiscal deficit in the first four months of current financial year (FY19) came in at Rs 5,40,257 crore or 86.5% of the FY19 Budget target. The country’s fiscal deficit for FY19 is budgeted at 3.3% of the GDP against the actual of 3.5% in FY18. Sentiments also remain dampened with data showing that India’s core sector output grew at a slower pace of 6.6% in July 2018, from 7.6% in June 2018, on the back of sharp decline in crude oil and natural gas production. Markets extended losses in dying hour of trade with report showing that growth in India's manufacturing sector unexpectedly slowed in August as domestic demand softened.

Weak trading in European counters too dampened sentiments despite Eurozone inflation moderated in August from a more than five-year high level. The flash data from Eurostat revealed that inflation eased to 2 percent from 2.1 percent in July. The annual rate was expected to remain at 2.1 percent, which was the highest since December 2012. Asian markets ended in red, as China's manufacturing activity growth slowed to a 14-month low in August on weaker new orders. The Caixin Purchasing Managers' Index fell to 50.6 in August from 50.8 in July.

Back home, sentiments on the street weakened further with  former finance minister P Chidambaram expressing scepticism over India's GDP growth prospects, saying it would ‘not be so favourable’ in third and fourth quarters, despite the GDP growing at 8.2% in the current fiscal's first quarter. He said the country's growth rate might decline in the third and fourth quarters and be the same as that reported in the last fiscal. On the sectoral front, banking stocks declined despite Union Minister Ravi Shankar Prasad’s statement that the operations of the India Post Payments Bank (IPPB) will strengthen the financial inclusion programme in India and make country’s village systems stronger. Auto stocks remained also edged lower after companies report their sales number.

Finally, the BSE Sensex declined by 332.55 points or 0.86% to 38,312.52, while the CNX Nifty was down by 98.15 points or 0.84% to 11,582.35.

The BSE Sensex touched a high and a low of 38,934.35 and 38,270.01, respectively and there were 10 stocks advancing against 21 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index lost 0.45%, while Small cap index was down by 0.17%.

The few gaining sectoral indices on the BSE were Telecom up by 0.54%, Consumer Durables up by 0.39% and Metal was up by 0.26%, while FMCG down by 2.14%, Realty down by 1.23%, Power down by 1.22%, Utilities down by 1.17% and Bankex was down by 1.15% were the top losing indices on BSE.

The top gainers on the Sensex were Wipro up by 2.49%, Tata Motors - DVR up by 1.34%, Bajaj Auto up by 0.68%, HDFC Bank up by 0.58% and Sun Pharma up by 0.57%. On the flip side, Hindustan Unilever down by 4.58%, Power Grid Corporation down by 2.92%, Axis Bank down by 2.69%, ICICI Bank down by 2.51% and ITC down by 2.01% were the top losers.

Meanwhile, amid slower gains in output and new orders, business activity in Indian manufacturing sector eased further in August 2018, for a second straight month.  As per the survey report, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) - a composite single-figure indicator of manufacturing performance -fell to 51.7 in August from 52.3 in July. Nevertheless, despite a slight deceleration, the manufacturing sector activity expanded for the thirteenth consecutive month as the PMI reading stood above the watershed 50 mark, which differentiates growth from contraction.

The report further highlighted that despite softening in August month, the output and new orders continued to extend the current period of expansion for thirteenth and twelfth month, respectively, on the back of strong underlying demand. Besides, orders from abroad rose for the tenth consecutive month during August and the rate of expansion was marked and accelerated to the strongest since February. However, job creation remained marginal and broadly similar to the previous survey period, even though firms were encouraged to raise their staffing levels during reported month.

On the inflation front, the manufacturing companies continued to face higher input costs during August, due to higher raw material costs with the weakening currency.  Although sharp, input cost inflation moderated to the weakest since May. The report further found that the firms raised their selling prices for the thirteenth consecutive month in August, in order to protect margins. Meanwhile, business optimism towards the 12- month outlook for output softened from July’s three month high.

The CNX Nifty traded in a range of 11,751.80 and 11,567.40. There were 17 stocks in green as against 33 stocks in red on the index.

The top gainers on Nifty were Dr. Reddys Lab up by 3.85%, Wipro up by 2.62%, Eicher Motors up by 2.34%, Titan Company up by 2.20% and HPCL up by 1.26%. On the flip side, Bajaj Finance down by 4.78%, Hindustan Unilever down by 4.51%, Power Grid Corporation down by 3.62%, Axis Bank down by 2.86% and ITC down by 2.61% were the top losers.

European markets were trading mostly in red; France’s CAC decreased 5.45 points or 0.1% to 5,401.40 and Germany’s DAX dipped 38.76 points or 0.31% to 12,325.30, while UK’s FTSE 100 rose 54.93 points or 0.73% to 7,487.35.

Asian equity markets ended lower on Monday as weekend US-Canada trade talks ended with no deal and data showed China's manufacturing sector recorded the weakest growth in 14 months in August. After contentious US-Canada trade talks ended on Friday with no deal to revamp the North American Free Trade Agreement (NAFTA), US President Donald Trump said that Canada ‘will be out’ of the deal unless the revised version is ‘fair’ to America. The talks would resume on Wednesday with the aim of eventually hammering out a trilateral deal. Chinese shares ended slightly lower after a private survey showed that China's manufacturing activity growth slowed in August on weaker new orders. The Caixin Purchasing Managers' Index fell to 50.6 in August from 50.8 in July. The score signaled the weakest improvement since June 2017. Production grew at the fastest pace since the start of the year. However, demand conditions softened, with total new business rising at the slowest pace for 15 months. Further, Japanese shares ended lower as renewed trade tensions helped spur safe-haven demand for the yen. Meanwhile, Japan's manufacturing growth improved slightly in August, final survey figures from IHS Markit showed. The Nikkei flash manufacturing Purchasing Managers' Index rose to 52.5 from 52.3 in July. That was in line with the flash data published on August 23.