Bears maintain their grip on Dalal Street

Indian equity benchmarks extended their southward journey for third straight session with frontline gauges ending below their crucial 11,250 (Nifty) and 37,200 (Sensex) levels. Markets started the session on an optimistic note with report that the finance ministry on September 18 asked ministries to shortlist commodities and goods for import curbs by increasing customs duty, to ease the pressure on the rupee and keep the widening Current Account Deficit (CAD) on check. Besides, Finance Minister Arun Jaitley made a case for blending subsidy with investment to augment farm sector growth and make it sustainable and self-sufficient. Some support came with a report stating that Indian farmers and US manufacturers of medical devices could be among the main winners in a trade package under negotiation, as the US and India look to remove long-standing irritants to ties. Traders took note of a private report that India has deferred its plan for a second time to impose retaliatory tariff worth close to $235 million on 29 American products by 45 days to November 2.

However, markets took U-turn and entered into red terrain in last leg of trade with India Ratings’ report that though the Centre may manage to achieve the debt-to-GDP ratio target of 40% by FY23, the states achieving the 20% target looks difficult as most of them have not budgeted so far. Markets extended losses to end near intraday lows with report that SEBI has changed the fee structure for the Rs 25-trillion mutual fund (MF) industry, a decision that will hit the profits of asset management companies (AMCs) but result in savings for investors. Adding to the pessimism, a private report added that the country’s rainfall deficit in the ongoing monsoon season widened to 10%, hovering on borderline drought conditions, following below-normal showers every month - a pattern of consistent shortfall not seen since 2004. Sentiments also got hit with another report that there has been a steep decline in economic confidence in India over the past year. In 2017, 83% of individuals surveyed thought the economy was doing good. But in 2018, it was down to 56%. This decline is in contrast to the trend in most countries where public confidence was similarly pronounced in 2017 and 2018.

On the global front, European markets are trading mostly in green despite Italy’s industrial orders dropped for a second straight month in July and at the fastest pace in six months. As per data from the statistical office ISTAT, industrial orders dropped a seasonally adjusted 2.3% from the previous month, when they fell 1.5%. In May, orders grew 3.3%. Asian markets ended mostly in green, as the US-China trade conflict failed to dent investors’ confidence in the global economy.

Back home, metal stocks remained in focus, amid reports that India’s steel ministry has proposed increasing the effective import duty on some steel products to 15% from current rates ranging from 5% to 12.5%. Stocks related to sugar sector remained in sweet spot with report that the government is now expected to come out with a bailout package for sugar sector, after announcing a higher price for ethanol manufacturers.

Finally, the BSE Sensex declined 169.45 points or 0.45% to 37,121.22, while the CNX Nifty was down by 44.55 points or 0.39% to 11,234.35.

The BSE Sensex touched a high and a low of 37,530.63 and 37,062.69, respectively and there were 14 stocks advancing against 17 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index lost 0.72%, while Small cap index was down by 0.98%.

The top gaining sectoral indices on the BSE were Metal up by 1.25%, Oil & Gas up by 0.98%, PSU up by 0.41%, Basic Materials up by 0.20% and IT was up by 0.15%, while FMCG down by 1.09%, Realty down by 0.96%, Consumer Disc down by 0.82%, Consumer Durables down by 0.80% and Healthcare was down by 0.59% were the top losing indices on BSE.

The top gainers on the Sensex were Coal India up by 2.60%, ONGC up by 1.90%, Tata Steel up by 1.31%, Hero MotoCorp up by 0.99% and Sun Pharma up by 0.78%. On the flip side, Indusind Bank down by 3.03%, Maruti Suzuki down by 2.30%, HDFC Bank down by 1.58%, Yes Bank down by 1.44% and HDFC down by 1.35% were the top losers.

Meanwhile, the fair trade regulator, the Competition Commission of India (CCI) has imposed a total penalty of Rs 38.05 crore on 18 sugar mills and their two Trade Associations for rigging the bids of a joint tender floated by oil marketing companies (OMCs) for procurement of ethanol for blending with petrol. The two Trade Associations are Indian Sugar Mills Association (ISMA) and Ethanol Manufacturers Association of India (EMAI).

The regulator also issued a Cease and Desist Order against them. While imposing penalties, the Commission applied the principle of relevant turnover and based the penalties on the revenue generated by the sugar millsfrom sale of ethanol only. The penalty was imposed at 7% of the average relevant turnover of the sugar mills, while penalty at 10% of the average receipts was imposed upon the Trade Associations viz. ISMA and EMAI keeping in view the key role they played in facilitating bid rigging. 

The action was taken following a batch of informations filed by India Glycols and 5 other Informants. India Glycol alleged ISMA and EMAI for persuading the OMCs to come-out with a Joint Tender for the purpose of procuring ethanol. The said joint tendering by OMCs was alleged to be an agreement amongst horizontal players to procure ethanol from various suppliers in contravention of the competition act, causing adverse effect on competition within India in supply and distribution of ethanol.
It was also alleged that the sugar manufacturers, who had participated in the Tender of 2013, manipulated the bids by quoting similar rates and in some cases identical rates through an understanding and collective action, in violation of the competition laws.

The CNX Nifty traded in a range of 11,332.05 and 11,210.90. There were 27 stocks in green as against 23 stocks in red on the index.

The top gainers on Nifty were Coal India up by 3.04%, ONGC up by 2.81%, GAIL India up by 2.72%, BPCL up by 2.65% and Tech Mahindra up by 2.02%. On the flip side, Bajaj Finserv down by 3.33%, Bharti Airtel down by 3.17%, Zee Entertainment down by 3.11%, Bajaj Finance down by 2.78% and Indusind Bank down by 2.67% were the top losers.

All European markets were trading in green; UK’s FTSE 100 increased 4.37 points or 0.06% to 7,304.60, France’s CAC gained 14.36 points or 0.27% to 5,378.15 and Germany’s DAX was up by 31.63 points or 0.26% to 12,189.30.

Asian markets ended mostly higher on Wednesday amid hopes that China will increase economic stimulus to soften the blow of the higher US tariffs. Japanese shares ended higher as the yen slipped against its key counterparts and the Bank of Japan kept its ultra-loose monetary policy unchanged, as widely expected. Positive trade balance data also boosted sentiments. Japan posted a 444.594 billion yen trade deficit in August, the Ministry of Finance said. That beat forecasts for a shortfall of 483.2 billion yen following the 231.9 billion yen deficit in July. Exports climbed 6.6 percent on year to 6.691 trillion yen - exceeding expectations for 5.2 percent and up from 3.9 percent in the previous month. Imports jumped an annual 15.4 percent to 7.136 trillion yen versus forecasts for 14.5 percent and up from 14.6 percent a month earlier.