Bears make strong come back on Dalal Street; Nifty slips below 11,500 mark

Bears made strong come back on Dalal Street with major indices ending the Monday’s trade with a cut of around one and a half percent, breaching their crucial 11,500 (Nifty) and 38,000 (Sensex) levels. Markets started the session on pessimistic note and never looked in recovery mood to end the session near intraday low levels. Sentiments remained dampened, as traders reacted negatively to President Donald Trump’s statement that he wants to stop the subsidies that growing economies like India and China have been receiving as he wants the US, which he considers as a developing nation, to grow faster than anybody. Sentiments also remained downbeat with the State Bank of India’s (SBI) report that with the currency losing more than 11% to the dollar this year, India will have to shell out an extra Rs 68,500 crore when repaying short-term debt in the coming months. Weakness in Indian rupee against dollar too dampened sentiments. The rupee tumbled as much as 1.2% Monday, the most in a month, to a record low of 72.5587, leading declines among Asia’s emerging-market currencies. Adding to the pessimism, Global rating agency Moody's Investors Service said that a sustained weakening of the rupee would be credit negative for its rated Indian companies. The rating agency added that it will have an adverse impact particularly on those entities that generate revenue in rupees but rely on US dollar debt to fund their operations and have significant dollar-based costs, including capital expenses.

Markets extended losses in second half of the session with a report that total liabilities of the government increased to Rs 79.8 lakh crore at end-June 2018 from Rs 77.98 lakh crore at end-March 2018. Public debt accounted for 89.3% of total outstanding liabilities at end-June 2018 with internal debt accounting for 83.0% share. Nearly 24.9% of the outstanding dated securities had a residual maturity of less than five years. Traders shrugged off the Reserve Bank of India’s (RBI) data showing that India’s current account deficit (CAD) as a percentage of GDP declined marginally to 2.4% in the April-June quarter of 2018-19 against 2.5% in the year-ago period. Market participants also paid no heed towards Economic affairs secretary Subhash Chandra Garg’s statement that the government will ensure fiscal deficit target is not breached.

On the global front, European markets were trading in green, as the euro area economy expanded as initially estimated in the second quarter. The data from Eurostat showed that gross domestic product climbed 0.4% sequentially, the same rate as seen in the first quarter and in line with preliminary estimate. Asian ended mostly in red after a report showed China’s trade surplus with the US widened to a record in August, adding to the trade tensions.

Back home, steel sector stocks exhibited mixed trend with report that India may impose anti-dumping duty of up to $185.51 per tonne for five years on certain varieties of Chinese steel with a view to guard domestic players from cheap imports of the commodity from the neighbouring country. Besides, Oil & Gas stocks ended in red, despite Oil Minister Dharmendra Pradhan’s statement that India as a stable economy should avoid any knee-jerk reaction to volatile crude oil prices, indicating no cut in taxes on fuel despite petrol breaching the Rs 80 per litre level in the Capital. Stocks related to insurance sector remained in focus after Assocham-APAS study stated that the Indian insurance industry is expected to grow to $280 billion by 2019-20 aided by the government's flagship Ayushman Bharat and increasing awareness about need for protection.

Finally, the BSE Sensex declined by 467.65 points or 1.22% to 37,922.17, while the CNX Nifty was down by 151.00 points or 1.30% to 11,438.10.

The BSE Sensex touched a high and a low of 38,354.52 and 37,882.83, respectively and there were 4 stocks advancing against 27 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index lost 1.68%, while Small cap index was down by 1.07%.

The lone gaining sectoral index on the BSE was IT up by 0.02%, while Auto down by 1.75%, Metal down by 1.74%, Energy down by 1.67%, FMCG down by 1.65% and Basic Materials was down by 1.64% were the top losing indices on BSE.

The few gainers on the Sensex were Axis Bank up by 0.99%, Wipro up by 0.26%, Yes Bank up by 0.09% and TCS up by 0.07%. On the flip side, Sun Pharma down by 3.72%, Mahindra & Mahindra down by 3.64%, Vedanta down by 3.44%, Indusind Bank down by 2.54% and SBI down by 2.35% were the top losers.

Meanwhile, concerned by almost fourfold rise in the goods and services tax (GST) compensation to States for June-July, the Finance Ministry is making a strategy to shore up GST revenues and working with states to identify issues hindering their collections. There has been a spike in the bi-monthly GST compensation paid to the states by the Centre. The Centre paid Rs 149.3 billion to compensate states for revenue loss incurred in June and July, a nearly four-fold jump compared to Rs 38.99 billion paid for the months of April and May.

The amount of compensation to be paid to each state varies every month and there is no set pattern. The reason for increased compensation also varied from state to state. For instance, in one of the cases, a state saw a huge outgo on account of VAT refund following a court verdict. One of the options being considered is stepping up anti-evasion measures with a focus on top 30 taxpayers, but added that the Centre will ensure that the fix to the problem will not be intrusive on businesses. Data analytics will be put to use to examine the profile of top 30 taxpayers to study their tax payment pre and post GST implementation.

The Finance Ministry has targeted monthly GST collections to be Rs 1 trillion for this fiscal, but the actual mop up has fallen short of the target month after month. The only exception was the month of April in which the numbers exceeded Rs 1 trillion. The collections stood at Rs 940.16 billion in May, Rs 956.1 billion in June, Rs 96.48 billion in July and Rs 93.96 billion in August. The Centre had agreed to compensate the states for revenue loss on account of GST implementation for a period of five years.

The CNX Nifty traded in a range of 11,573.00 and 11,427.30. There were 8 stocks in green as against 42 stocks in red on the index.

The top gainers on Nifty were HCL Tech up by 1.54%, Axis Bank up by 0.92%, Zee Entertainment up by 0.66%, Cipla up by 0.24% and TCS up by 0.20%. On the flip side, Bajaj Finance down by 4.98%, Indiabulls Housing Finance down by 4.23%, Bajaj Finserv down by 4.02%, Sun Pharma down by 3.99% and BPCL down by 3.61% were the top losers.

European markets were trading in green; UK’s FTSE 100 increased 24.57 points or 0.34% to 7,302.27, France’s CAC gained 27.96 points or 0.53% to 5,280.18 and Germany’s DAX was up by 52.72 points or 0.44% to 12,012.35.

Asian markets ended mostly in red on Monday amid trade worries after U.S. President Donald Trump threatened to slap tariffs on all of the Chinese goods imported into the United States. A report showed China’s trade surplus with the U.S. widened to a record in August, adding to the trade tensions. While a strong U.S. jobs report supported the dollar, oil prices rose after data showed U.S. energy companies cut two oil rigs last week. Bucking the trend, Japanese shares ended higher, as upbeat revised GDP data and a slightly weaker yen helped investors shrug off trade worries. Japan’s gross domestic product climbed an annual 3.0 percent in the second quarter of 2018. That beat forecasts for 2.6 percent and was up from the previous reading of 1.9 percent. On an annualized seasonally adjusted basis, GDP added 0.7 percent - unchanged and in line with expectations.