Bears tighten grip on Dalal Street; Nifty breaches 11,300 level

Bears tightened their grip on Dalal Street with frontline gauges extending southward journey for second straight session to settle below their crucial 11,300 (Nifty) and 37,500 (Sensex) levels. Markets made a cautious start and traded choppy for most part of day’s trade with private report suggesting India’s economic growth is expected to moderate in the second half of this financial year after a strong first quarter, owing to tighter financial conditions, high oil prices and slowing global growth. It expects real GDP growth to slow to 7-7.3% in the second half of this fiscal from 8.2% in June 2018 quarter. Adding to the pessimism, India Meteorological Department (IMD) data showed that the countrywide monsoon saw the highest rain deficiency of the season in August -- ironically the month when a large part of Kerala was submerged and many other states received excess rainfall. Traders also reacted negatively to another private report that a depreciating currency will impact the economy adversely, as India imports around 83% of its crude oil requirement. A surge in the oil import bill can widen fiscal and current account deficits.

Sharp selloff in final hour of trade mainly played spoil sports for Indian equities and dragged key gauges near intraday lows. Sentiments remained downbeat with former RBI Governor Raghuram Rajan’s statement that over optimistic bankers, slowdown in government decision making process and moderation in economic growth mainly contributed to the mounting bad loans. Caution also crept in ahead of Consumer Price Index-based (CPI) inflation and Index of Industrial Production data slated to be announced tomorrow. Traders shrugged off Asian Development Bank’s (ADB) latest report on ‘Key Indicators for Asia and the Pacific 2018’, where it has stated that share of India in the Gross Domestic Product (GDP) of Asia and Pacific region moved up to 17.3% in 2017 from 14.6% in 2000. It added that the Asia and Pacific region accounts for more than two-fifths of the share of global GDP in Purchasing Power Parity (PPP) terms.

Weak opening in European counters too dampened sentiments, as Euro zone investor confidence deteriorated unexpectedly in September. As per survey data from think tank Sentix, the investor sentiment index fell to 12.0 in September from 14.7 in August. The score was forecast to rise to 15.0. Asian markets ended in red, as investors await the US tariff announcement on $200 billion of Chinese imports in a dispute over Beijing's technology policy.

Back home, steel sector stocks ended in red despite Moody’s Investors Service’s statement that robust steel demand, especially from the domestic construction, infrastructure and automotive sectors will keep end-product prices high, even as rising costs for key inputs, coking coal and iron ore pressure profitability. Telecom sector stocks declined despite Manoj Sinha, telecom minister, confided in the public that no more telecom operators will lose out to the increasing competition in the industry. Also, he said that the concerns rising after the consolidation in the sector need to be dispelled.

Finally, the BSE Sensex declined by 509.04 points or 1.34% to 37,413.13, while the CNX Nifty was down by 150.60 points or 1.32% to 11,287.50.

The BSE Sensex touched a high and a low of 38,043.27 and 37,361.20, respectively and there were 5 stocks advancing against 26 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index lost 1.36%, while Small cap index was down by 1.37%.

The top losing sectoral indices on the BSE were Consumer Durables down by 2.47%, FMCG down by 2.25%, Telecom down by 2.20%, Realty down by 1.78% and Basic Materials was down by 1.67%, while there were no gainers on the BSE sectoral front.

The top gainers on the Sensex were Coal India up by 0.95%, NTPC up by 0.36%, Infosys up by 0.31%, Asian Paints up by 0.26% and Mahindra & Mahindra up by 0.26%. On the flip side, Tata Steel down by 3.46%, Power Grid Corporation down by 3.21%, Hero MotoCorp down by 3.06%, Tata Motors down by 3.03% and ITC down by 2.92% were the top losers.

Meanwhile, global credit rating agency, Moody’s Investors Services in its latest report has said that the ongoing free fall in the value of the rupee against the US dollar is credit negative for Indian companies especially for those which generate revenue in rupees, but rely on US dollar debt to fund their operations and have significant dollar-based costs, including capital expenses. It noted that so far in 2018, the Indian rupee has depreciated by 13 percent against the dollar.

Moody’s said that nevertheless, most rated India-based corporates have protections in place -- including natural hedges, some US dollar revenues and financial hedges to limit the negative credit implications of a potential further 10 percent weakening of the rupee to the US dollar from September 6 rate of 72.11 a dollar.

According to the report, the 24 Moody's-rated India-based corporates across the high-yield and investment grade categories, 12 generate most of their revenue in US dollars or have contracts priced in US dollars, providing a natural hedge, and thus limiting the effect a weakening in the rupee could have on their cash flows. It noted that these 24 corporates include those in the IT, oil and gas, chemicals, automobiles, commodities, steel, and real estate development sectors.

The CNX Nifty traded in a range of 11,479.40 and 11,274.00. There were 6 stocks in green as against 44 stocks in red on the index.

The top gainers on Nifty were Coal India up by 1.72%, Mahindra & Mahindra up by 1.03%, NTPC up by 0.53%, Infosys up by 0.39% and Bajaj Finserv up by 0.23%. On the flip side, Titan Company down by 4.50%, Tata Steel down by 3.94%, ITC down by 3.38%, Tata Motors down by 3.25% and Power Grid Corporation down by 3.21% were the top losers.

European markets were trading in red; UK’s FTSE 100 decreased 51.84 points or 0.72% to 7,227.46, France’s CAC was down by 13.83 points or 0.26% to 5,255.80 and Germany’s DAX shed 84.82 points or 0.71% to 11,901.52.

Asian markets ended mixed on Tuesday in the absence of any fresh developments in US-China trade tensions. Underlying sentiments remained supported somewhat after the White House said talks are underway over the possibility of a second summit between US President Donald Trump and North Korean leader Kim Jong-un. Japanese stocks ended higher, with exporters lifted by the yen’s weakening against the dollar and technology shares boosted by gains for Wall Street counterparts. However, Chinese shares ended lower as investors awaited the US tariff announcement on $200 billion of Chinese imports in a dispute over Beijing's technology policy. Meanwhile, markets in Malaysia and Indonesia were closed in observance of Awal Muharram.