Bears continue to hold grip on Dalal Street

Bears continued to tighten grip on the Indian markets in the early noon session with Sensex and Nifty languishing deep in red zone and posting losses of around 450 and 120 points respectively in absence of any positive triggers and prevailing caution. Profit-booking by funds and retail investors in banking, energy and consumer durables stocks dragged the markets lower. Weakening of rupee against the dollar also dampened the domestic sentiments. Apart from blue chip stocks, mid cap and small cap indices also witnessed profit booking and were trading in red. Sentiments remained pessimistic with ICRA’s report stating that states are set to miss their fiscal consolidation targets budgeted at the beginning of the year due to factors such as funding of crop loan waivers, election-related spending and the flood relief. Some concerns also came with report stating that foreign investors pulled out a massive Rs 9,400 crore from the capital markets last fortnight on widening current account deficit due to a surge in oil prices and depreciating rupee.

On the global front, all the Asian counters were trading under pressure, amid reports that the U.S. could be imposing new tariffs on $200 billion of Chinese goods as early as this week. Hong Kong stocks were trading in red after casinos in Macau were forced to shut on Saturday with the arrival of Typhoon Mangkhut. Back home, the overall market breadth on BSE was in the favour of declines; there were 985 shares on the gaining side against 1354 shares on the losing side while 153 shares remained unchanged.  In the scrip specific development, Sterlite Technologies rose on doubling optical fibre cable solutions capacity and Wipro surged on entering into agreement with Mercury Network.

The BSE Sensex is currently trading at 37642.47, down by 448.17 points or 1.18% after trading in a range of 37597.05 and 38027.81. There were 2 stocks advancing against 29 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell 0.71%, while Small cap index was down by 0.21%.

The few gaining sectoral indices on the BSE were Realty up by 0.66%, Healthcare up by 0.10% and Metal up by 0.01%, while Bankex down by 1.32%, Energy down by 1.17%, Consumer Durables down by 1.00%, FMCG down by 0.94% and Telecom was down by 0.74% were the top losing indices on BSE.

The only gainers on the Sensex were Wipro up by 0.82% and Tata Steel up by 0.27%. On the flip side, HDFC down by 2.38%, SBI down by 1.89%, Reliance Industries down by 1.86%, ICICI Bank down by 1.58% and Axis Bank down by 1.51% were the top losers.

Meanwhile, expressing concerns, credit rating agency, ICRA in its latest report has said that states are likely to miss fiscal consolidation targets in the current financial year (FY19), on the back of various majors like funding of crop loan waivers, election-related spending and the flood relief. The states’ fiscal deficit is primarily financed by issuing state development loans (SDLs).

As per the report, gross issuance of SDLs contracted by 3.4% to Rs 1.32 trillion in April-August of FY19, on sharp decline in issuance by Uttar Pradesh, Maharashtra and Gujarat. However, excluding these three states, the remaining states have seen rise of 14.7% in total SDL issuance during the reported period. The rating agency further predicted that Rs 1.3 trillion of SDLs are scheduled to be redeemed in FY19, much higher than Rs 0.8 trillion redeemed in FY18.

ICRA said that a rise in revenue expenditure beyond the budgeted levels may lead to fiscal slippages for some states, unless their capital spending is curtailed below, or their revenue receipts are enhanced above the budgeted level for FY19. The agency also pointed that a reduction in the capital spending will lead to an unfavourable outcome and this may also impair the quality of expenditure. However, it said that higher-than-budgeted revenue, which is likely following the recent amendments related to IGST and GST compensation cess, and a back-ended pickup in headline SGST collections, will be an encouraging development.

The CNX Nifty is currently trading at 11392.60, down by 122.60 points or 1.06% after trading in a range of 11373.90 and 11464.95. There were 12 stocks advancing against 37 stocks declining on the index, while 1 stock remained unchanged.

The top gainers on Nifty were BPCL up by 2.37%, HPCL up by 1.41%, Indian Oil Corporation up by 1.03%, Zee Entertainment up by 0.82% and Tech Mahindra up by 0.80%. On the flip side, HDFC down by 2.47%, Bajaj Finance down by 2.38%, Indiabulls Housing down by 2.05%, SBI down by 1.96% and Reliance Industries down by 1.89% were the top losers.

All the Asian markets were trading in red; Hang Seng decreased 351.37 points or 1.3% to 26,935.04, KOSPI declined 16.65 points or 0.72% to 2,301.60, Taiwan Weighted dropped 39.53 points or 0.37% to 10,828.61, Jakarta Composite plunged 107.70 points or 1.85% to 5,823.58, Straits Times decreased 23.24 points or 0.74% to 3,138.18 and Shanghai Composite was down 25.31 points or 0.95% to 2,656.33.