Benchmarks extend southward journey for third straight session

Extending southward journey for third straight session, Indian equity benchmarks ended the sluggish day of trade with a cut of over one third of a percent with frontline gauges breaching their crucial 11,500 (Nifty) and 38,100 (Sensex) levels. Soon after making a cautious start, markets started moving southward as sentiments remain dampened with report that the National Council of Applied Economic Research’s (NCAER) business confidence index (N-BCI) fell by 12.9% in July over April this year on a quarter-on-quarter basis on account of worsening of business sentiments across various segments. NCAER said the decline in the N-BCI on a year-on-year basis works out to be 15.9%. Some cautiousness also crept in with a private report that India’s growth rate is expected to moderate this fiscal despite a strong start in the April-June quarter largely owing to tighter financial conditions, limited fiscal headroom and upcoming elections. Adding to the pessimism, the National Stock Exchange (NSE) raised concern over potential for large-scale cyber-attacks on financial market infrastructure and called for setting up the standards to bring about the change through talent empowerment and investment in innovation. 

Markets extended southward journey and domestic bourses even went to test psychological 37,800 (Sensex) and 11,400 (Nifty) levels after India’s services sector activity fell in the month of August from July’s 21-month peak, primarily due to the weakest growth in new work. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index dropped to 51.5 in August from 54.2 in July, signaling the slowest growth in the current sequence. Besides, the Nikkei India Composite PMI Output Index which measures both manufacturing and services too fell to 51.9 in August from 54.1 in July. However, the key gauges got some support near those intraday low levels as they managed to trim some of their losses to end off day’s lows, as traders took some solace with Commerce and Industry Minister Suresh Prabhu’s statement that the proposed new industrial policy, to be released soon, would help link domestic industry with the global supply chain.

Weak opening in European markets too dampened sentiments as Eurozone producer price inflation accelerated on energy prices in July. The figures from Eurostat showed that producer prices advanced 4% year-on-year in July, following a 3.6% rise in June. Asian markets ended in red terrain, as fears of a Chinese slowdown and economic turbulence in emerging market economies sapped investors’ appetite for risk.

Back home, traders reacted negatively on the Reserve Bank of India’s (RBI) data showing that investment by Indian companies in their overseas ventures fell by more than 36% to $1.39 billion in July this year. Meanwhile, textile sector edged lower on report with ICRA stating that apparel exports are likely to remain subdued with the base effect setting in and due to uncertain government policies. India’s apparel exports are expected to fall 4% this fiscal even as they are expected to register a modest growth of 2% in the remaining eight months of the financial year.

Finally, the BSE Sensex declined by 139.61 points or 0.37% to 38,018.31, while the CNX Nifty was down by 43.35 points or 0.38% to 11,476.95.

The BSE Sensex touched a high and a low of 38,250.61 and 37,774.42, respectively and there were 16 stocks advancing against 15 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index lost 0.61%, while Small cap index was down by 0.52%.

The top gaining sectoral indices on the BSE were Metal up by 1.13%, Healthcare up by 0.66%, Basic Materials up by 0.29%, Auto up by 0.28% and Power was up by 0.10%, while Telecom down by 2.24%, Consumer Durables down by 1.85%, FMCG down by 1.10%, Capital Goods down by 1.02% and Energy was down by 0.98% were the top losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 2.93%, Vedanta up by 2.27%, Adani Ports & SEZ up by 1.53%, Wipro up by 1.44% and Sun Pharma up by 1.41%. On the flip side, Hindustan Unilever down by 2.45%, Kotak Mahindra Bank down by 1.68%, Bharti Airtel down by 1.36%, Reliance Industries down by 1.33% and Hero MotoCorp down by 1.03% were the top losers.

Meanwhile, the government will not cut excise duty on petrol and diesel to cushion consumers from spiralling prices, which touched all-time record highs, as it has limited fiscal space available to take any dent in revenue collections. With imports becoming costlier because of rupee's free fall against the US dollar, the government believes the current account deficit will overshoot the target and it cannot disturb fiscal maths by cutting excise duty on petrol and diesel.

Talking on the relentless price rise, former finance minister P Chidambaram has said that relentless rise in prices of petrol and diesel is not inevitable, because the price is built up by excessive taxes on petrol and diesel. He also said that if taxes are cut, prices will decline significantly.

Petrol and diesel prices touched fresh highs on September 04, 2018, as rupee hit record low of 71.54, making imports costlier. Petrol price in Delhi rose to a record Rs 79.31 a litre and diesel climbed to an all-time high of Rs 71.34, renewing calls for a cut in excise duty to cushion the spike. According to a price notification of state-owned fuel retailers, petrol price was hiked by 16 paise per litre and diesel by 19 paise. Fuel rates have been on fire since mid-August, rising almost every day due to a combination of a drop in rupee value and rise in crude oil rates.

The CNX Nifty traded in a range of 11,542.65 and 11,393.85. There were 25 stocks in green as against 25 stocks in red on the index.

The top gainers on Nifty were Yes Bank up by 2.99%, Tata Motors up by 2.60%, Wipro up by 2.06%, Hindalco up by 2.00% and Vedanta up by 1.76%. On the flip side, Bharti Infratel down by 4.28%, Zee Entertainment down by 3.07%, Hindustan Unilever down by 2.72%, Titan Company down by 1.77% and Kotak Mahindra Bank down by 1.64% were the top losers.

European markets were trading in red; UK’s FTSE 100 decreased 29.69 points or 0.40% to 7,428.17, France’s CAC dropped 46.36 points or 0.88% to 5,296.34 and Germany’s DAX was down by 67.54 points or 0.56% to 12,142.67.

Extending previous session losses, Asian markets ended in red terrain on Wednesday, as investors continued to fret about trade tensions and the turbulence in emerging markets, with South Africa slipping into a recession for the first time since 2009. A cautious undertone prevailed after a threat by the United States to impose tariffs on another $200 billion worth of Chinese imports as soon as a public-comment period ends on Thursday. Chinese shares ended lower, as investors dumped banking, property and resources shares amid fresh signs of anaemic growth, and ahead of a likely escalation of the Sino-US trade war. Activity in China's services sector continued to expand in August, albeit at a slower rate, the latest survey from Caixin revealed with a 10-month low PMI score of 51.5.That missed expectations for 52.6 and was down sharply from 52.8 in July. Further, Japanese shares ended lower as trade worries persisted and tourism-linked shares succumbed to selling pressure after a powerful typhoon slammed into western Japan, cutting power, overturning cars and killing at least eight people. Meanwhile, the services sector in Japan continued to expand in August, and at a faster rate, the latest survey from Nikkei revealed with a PMI score of 51.5, up from 51.3 in July.