Post Session: Quick Review

Indian key benchmarks ended deep in the red on Tuesday, extending losses of previous session. The markets made a cautious start to trade volatile during the session, as cautiousness spread among the investors with International Monetary Fund’s (IMF) estimates that the real effective depreciation of Indian rupees is between 6-7% compared to December 2017. It said broadly since the beginning of the year, Indian rupee has lost about 11% of its value in nominal terms vis-a-vis the US dollar. Some concerns also came with a report stating that with interest rates cycle reversing, cost of borrowing for housing finance companies (HFCs) and microfinance institutions (MFIs) is likely to increase by over 30 basis points in the current fiscal year, and by another 40-50 basis in FY20.  Separately, the indebtedness of Indian households nearly doubled in the year to March 2018, with their financial liabilities rising 80% to Rs 6.74 lakh crore.

Further, in the last leg of trade, the key indices fell sharply, on heavy sell-off amid Finance Minister Arun Jaitley blaming the depreciation of rupee to a combination of global factors, including trade war and internal policy decisions of the United States. Sentiments also got hit with credit rating agency, India Ratings and Research’s latest report that banks' credit costs are likely to remain elevated at 2%-3% during FY19-FY20, on the back of ageing of non-performing assets (NPAs), accelerated provisioning and slippages especially from non-corporate accounts. The street failed to take any sense of relief with CBDT Chairman Sushil Chandra expressing confidence in exceeding Rs 11.5 lakh crore direct tax collection target in current fiscal. In 2018-19 budget, the government had projected a 14.3 per cent rise in direct tax collections to Rs 11.5 lakh crore.

On the global front, European markets were trading mostly in green, as Eurozone inflation slowed as estimated in August. As per final data from Eurostat, harmonized inflation came in at 2% in August versus 2.1% in July. Asian markets ended mixed, after US President Donald Trump announced new tariffs on an additional $200 billion worth of Chinese imports, in a sharp escalation of the trade conflict between the world’s two biggest economies. The tariffs will be set at 10% until the year-end, but would increase to 25% from January 1. Trump also warned that he would pursue tariffs on approximately $267 billion of additional imports if China takes retaliatory action.

Back home, on the sectoral front, banking stocks ended in red, despite Finance minister Arun Jaitley’s statement that the reforms undertaken by the government in the banking sector have started to yield results and recoveries increased on bad loans that had ballooned because of disproportionate lending during the Congress-led UPA rule. Further, sugar companies stocks remained in focus, amid reports that the government may hike the minimum selling price (MSP) for over-supplied sugar mills, a week after an incentive package was announced under which it raised the price of ethanol.

The BSE Sensex ended at 37290.67, down by 294.84 points or 0.78% after trading in a range of 37242.85 and 37745.44. There were 7 stocks advancing against 24 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index fell by 1.49%, while Small cap index was down by 1.51%. (Provisional)

The lone gaining sectoral index on the BSE was FMCG up by 0.86%, while Realty down by 3.13%, PSU down by 2.43%, Power down by 2.00%, Industrials down by 1.77% and Telecom down by 1.75% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Hindustan Unilever up by 3.87%, Yes Bank up by 1.43%, Wipro up by 1.20%, ONGC up by 0.93% and ITC up by 0.23%. On the flip side, SBI down by 4.06%, Tata Motors down by 3.36%, Axis Bank down by 3.20%, Bajaj Auto down by 2.84% and Tata Motors - DVR down by 2.45% were the top losers. (Provisional)

Meanwhile, amid fall of the Indian currency in the last few months, the International Monetary Fund (IMF) has estimated that the real effective depreciation of Indian rupees is between 6% and 7% compared to December 2017. It said broadly since the beginning of the year, Indian rupee has lost about 11% of its value in nominal terms vis-a-vis the US dollar. Though, he added that the currencies of many of India’s trading partners, including those in the emerging markets, too have depreciated against the dollar.

IMF also said that contribution of the net exports to growth in the April to June quarter was again stronger than expected and the real depreciation of the rupee can be expected to reinforce this trend as India is a relatively closed economy. On the other hand, the depreciation will obviously raise the prices of imported goods such as oil and petroleum products, potentially putting an upward pressure on inflation. It noted that the Reserve Bank of India has taken the rising oil import prices into the account when it raised the policy rates in its last two meetings.

The agency further said the Indian economy is recovering strongly from the two transitory disruptions in recent years - the Goods and Services Tax (GST) and demonetisation process. Growth has been gradually accelerating in recent quarters, with strength in both consumption and investment, which have helped the economy. Besides, the IMF continues to assess the impact of demonetisation on an ongoing basis. It said as with most things, there have been pluses and there have been minuses of demonetisation.

The CNX Nifty ended at 11278.90, down by 98.85 points or 0.87% after trading in a range of 11268.95 and 11411.45. There were 10 stocks advancing against 40 stocks declining on the index. (Provisional)

The top gainers on Nifty were Hindustan Unilever up by 3.71%, Yes Bank up by 1.55%, ONGC up by 1.28%, Wipro up by 0.80% and Dr. Reddy’s Lab up by 0.61%. On the flip side, SBI down by 4.03%, Indiabulls Housing Finance down by 3.55%, HPCL down by 3.46%, Tata Motors down by 3.36% and Bajaj Auto down by 3.04% were the top losers. (Provisional)

All European markets were trading in green; UK’s FTSE 100 increased 14.33 points or 0.2% to 7,316.43, France’s CAC gained 11.70 points or 0.22% to 5,360.57 and Germany’s DAX was up by 27.64 points or 0.23% to 12,124.05.

Asian markets ended mixed on Tuesday amid US President Donald Trump ordering the imposition of tariffs on $200 billion worth of Chinese goods, as widely expected. Trump threatened duties on about $267 billion more if China hit back on the latest US action. Chinese shares ended higher as investors shrugged off the 10 percent threshold for new US tariffs on Chinese goods. Further, Japanese shares rallied as traders returned to their desks after a long holiday weekend. Also, expectations that Prime Minister Shinzo Abe will win a third term as head of his political party on Thursday, supported Japanese shares.