Benchmarks trade with caution in early deals

Indian equity benchmarks are trading with caution in early deals amid weak global cues. Traders remained little concerned with a private report that the Indian stock markets could tumble and the rupee may fall further ahead of the general elections if a contentious KYC circular issued by the stock market regulator is not scrapped soon. Traders reacted negatively to a private report highlighting that a sustained weakness in the rupee may push the Reserve Bank of India to further tighten monetary policy, perhaps as early as next month. However, losses remained capped with Fitch Ratings’ statement that the currency volatility will have only a limited impact on India’s sovereign credit profile as the country benefits from strong external finances. In a report on APAC sovereigns, Fitch said the recent sell-offs in Indian and Indonesian currency markets underline their sensitivity to shifts in global sentiment, and suggest further bouts of pressure are likely as global monetary tightening progresses.

On the global front, Asian markets are exhibiting mixed trend at this point of time on uncertainty about the future of the North American Free Trade Agreement (NAFTA) and a possible escalation of the US-China trade war. The US markets remained closed on Monday unable to give any clue to the other markets.

Back home, banking sector stocks edged lower despite India Ratings’ report that showing further traction for asset resolution, bad loans over Rs 4 trillion are expected to be resolved by 2018. In scrip specific developments, SSWL surged on reporting 14% growth in total wheel rim sales in August and M&M edged higher on launching ‘Mahindra Marazzo’.

The BSE Sensex is currently trading at 38242.40, down by 70.12 points or 0.18% after trading in a range of 38189.80 and 38518.56. There were 10 stocks advancing against 21 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index declined 0.96%, while Small cap index was down by 0.71%.

The only gaining sectoral indices on the BSE were IT up by 1.81% and TECK was up by 1.35%, while FMCG down by 1.54%, Metal down by 1.51%, Basic Materials down by 1.40%, Telecom down by 1.15% and Realty was down by 1.09% were the top losing indices on BSE.

The top gainers on the Sensex were Infosys up by 2.63%, TCS up by 1.28%, Tata Motors - DVR up by 0.90%, Wipro up by 0.53% and Mahindra & Mahindra up by 0.44%. On the flip side, Vedanta down by 2.37%, Hindustan Unilever down by 2.30%, Adani Ports down by 1.77%, Asian Paints down by 1.52% and ITC down by 1.50% were the top losers.

Meanwhile, amid sustained weakness in Indian currency, global ratings agency, Fitch Ratings in its latest report has said the currency volatility will have only a ‘limited impact’ on India’s sovereign credit profile. It added that the country’s sovereign credit profile benefits from relatively strong external finances, especially a low level of external and foreign-currency debt. Recently, Indian rupee depreciated to all time low of 71 against the US dollar.

In a report on APAC sovereigns, Fitch said the recent sell-offs in Indian and Indonesian currency markets underline their sensitivity to shifts in global sentiment and suggest further bouts of pressure are likely as global monetary tightening progresses. It also said ‘Currency volatility, however, is likely to have only a limited impact on their (India and Indonesia) sovereign profiles. India's sovereign credit profile, for example, benefits from relatively strong external finances, especially a low level of external and foreign-currency debt.’

The rating agency said the risk of currency pressures triggering a policy-induced spike in domestic borrowing costs is mitigated by the Reserve Bank of India's relatively narrow focus on its inflation objective. The agency said rising US interest rates and increasing global risk aversion towards emerging-market assets are generating capital outflows and exerting downward pressure on most Asian currencies.

Fitch further said that trade tensions between the US and China have added to market jitters and pose downside risks to growth. Nevertheless, strong fiscal and external buffers, along with flexible policy frameworks, should allow most of the region's economies to weather these challenges. Meanwhile, Fitch had retained India’s sovereign rating at ‘BBB-’ with ‘stable’ outlook in April, 2018, saying that the country’s medium-term growth potential is strong.

The CNX Nifty is currently trading at 11551.85, down by 30.50 points or 0.26% after trading in a range of 11532.05 and 11602.55. There were 11 stocks advancing against 39 stocks declining on the index.

The top gainers on Nifty were Infosys up by 2.57%, Tech Mahindra up by 1.96%, HCL Tech. up by 1.54%, TCS up by 1.44% and Wipro up by 0.89%. On the flip side, Vedanta down by 2.45%, Hindustan Unilever down by 2.31%, Hindalco down by 2.17%, UPL down by 2.10% and Indiabulls Housing down by 1.87% were the top losers.

Asian markets are trading mixed; Nikkei 225 shed 64.16 points or 0.28% to 22,643.22, Straits Times slipped 2.39 points or 0.07% to 3,204.81, Jakarta Composite decreased 35.36 points or 0.6% to 5,932.22 and Shanghai Composite was down by 1.54 points or 0.06% to 2,719.19.

On the flip side, Taiwan Weighted increased 27.33 points or 0.25% to 10,991.55, Hang Seng rose 8.67 points or 0.03% to 27,721.21 and KOSPI was up by 1.76 points or 0.08% to 2,308.79.