Markets extend southward journey for fourth straight session

Extending southward journey for fourth straight session, Indian equity benchmarks ended the session on pessimistic note, with frontline gauges ending below their crucial 36,900 (Sensex) and 11,150 (Nifty) levels. Markets started the session on an optimistic note as sentiments remained upbeat with Prime Minister Narendra Modi’s statement that the size of Indian economy would double to $5 trillion by 2022, with manufacturing and agriculture contributing $1 trillion each. Some support also came with report that India is hopeful of resolving the issue of tariffs on steel and aluminium with the US soon and both sides are engaged in finalising a trade package. Traders also got some support with report that the Reserve Bank eased norms for companies in the manufacturing sector to raise overseas funds and allowed Indian banks to market Masala Bonds in line with the government’s measures to prop up the rupee. Traders took note of State Bank of India’s report that Indian rupee may be set to recover as oil peaks out and investors realize the currency has been sold off too heavily amid the emerging-market rout.

However, markets took U-turn and entered in red terrain in second half of the session after former Union Finance Minister P. Chidambaram blamed the government’s heavy-handed approach to the NPA problem for the sharp decline in export credit. He said despite government’s claims of taking steps to boost exports, the export credit had declined sharply to Rs 22,300 crore in June from Rs 39,000 crore in the same month in 2017. Sentiments also remain dampened as the EEPC India said that at a time when the country is grappling with the widening of the current account deficit (CAD), any move to raise import duty on steel or steel products would severely hit India’s crucial engineering exports and rather lead to further expansion of the CAD. However, markets somehow managed to end off their day’s lows amid Employment Provident Fund Organisation’s (EPFO) data report that India created 9.51 lakh new jobs in the month of July 2018. As per the report, total 9,51,423 new payrolls were created during July 2018 as against 8,57,934 created in the previous month, registering a growth of 10.90%.

On the global front, European markets were trading in green, encouraged by the better than expected retail sales report from the UK. Retail sales volume, including auto fuel, gained 0.3% month-on-month in August, slower than the 0.9% increase seen in July, but in contrast to the expected fall of 0.2%. Asian markets rallied, as easing trade tensions and solid manufacturing data from Japan helped to bolster investor confidence about the global economy.

Back home, shares of non-bank finance companies (NBFCs) took a massive beating on Friday, with DHFL and Indiabulls Housing Finance tumbling around 60% and 30% respectively in intraday trade. DHFL lost Rs 100 billion in the m-cap during the day. However, the stocks recovered partially after the management of both companies allayed investor concerns. Banking sector stocks edged lower despite rating agency Moody’s statement that the proposed merger of Bank of Baroda, Vijaya Bank and Dena Bank is credit positive because the merger would provide scale efficiencies and help improve the quality of corporate governance. Infrastructure sector related stock declined despite India Ratings and Research (Ind-Ra) maintaining a stable outlook across the infrastructure sector with the exception of coal-based thermal power, which continues with its negative outlook for the remaining part of FY19.

Finally, the BSE Sensex declined 279.62 points or 0.75% to 36,841.60, while the CNX Nifty was down by 91.25 points or 0.81% to 11,143.10.

The BSE Sensex touched a high and a low of 37,489.24 and 35,993.64, respectively and there were 13 stocks advancing against 18 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index lost 1.72%, while Small cap index was down by 3.00%.

The only gaining sectoral indices on the BSE were Oil & Gas up by 1.50% and Energy was up by 0.77%, while Realty down by 3.48%, Bankex down by 3.13%, Power down by 1.91%, Healthcare down by 1.66% and Industrials was down by 1.41% were the top losing indices on BSE.

The top gainers on the Sensex were ONGC up by 1.95%, Wipro up by 1.38%, ITC up by 1.37%, TCS up by 1.30% and Asian Paints up by 1.07%. On the flip side, Yes Bank down by 28.71%, Kotak Mahindra Bank down by 3.86%, Tata Motors - DVR down by 3.68%, Adani Ports down by 2.94% and Indusind Bank down by 2.38% were the top losers.

Meanwhile, raising concerns over declining export credit, Commerce Minister Suresh Prabhu has suggested the Finance Minister Arun Jaitley to consider loans to exporters as priority sector lending by the banks. The minister also urged for strict timelines for grant of credit including the renewal of limits.

Prabhu cited RBI data which shows outstanding export credit fell by over 40% to Rs 22,300 crore on June 22 this year from Rs 39,000 crore as on June 23 last year. Besides, the data also shows that outstanding export credit fell by over 20% to Rs 28,300 crore as on March 30 as against Rs 22,300 crore as on June 22 this year.

Commerce Minister also underlined the impacts of declining export credit on exporters and MSME units in particular and requested Arun Jaitley to kindly have suitable instructions issued to banks to restore the flow of credit to the export sector to its expected regular levels, based on the required increase over recent peak levels, to factor in export growth currently taking place.

The CNX Nifty traded in a range of 11,346.80 and 10,866.45. There were 23 stocks in green as against 27 stocks in red on the index.

The top gainers on Nifty were Bharti Infratel up by 3.01%, BPCL up by 3.00%, Indian Oil Corporation up by 2.70%, Hindalco up by 2.31% and HPCL up by 2.05%. On the flip side, Yes Bank down by 29.46%, Indiabulls Housing Finance down by 8.49%, Bajaj Finance down by 4.27%, UPL down by 3.80% and Kotak Mahindra Bank down by 3.42% were the top losers.

All European markets were trading in green; UK’s FTSE 100 jumped 70.88 points or 0.95% to 7,438.20, France’s CAC increased 38.06 points or 0.69% to 5,489.65 and Germany’s DAX was up by 68.93 points or 0.56% to 12,395.41.

Asian markets ended in green on Friday to extend recovery as investors gravitated to the view that the US-China trade row would be less harmful to global growth than first feared. Chinese shares ended higher as investors continued to bet that Beijing would increase economic stimulus to boost the economy in the face of the trade war. Further, Japanese shares closed up, with a weaker yen and upbeat manufacturing data helping underpin investors’ sentiments. The manufacturing sector in Japan continued to expand in September, and at an accelerated pace, the latest survey from Nikkei revealed with a manufacturing PMI score of 52.9, up from 52.5 in August. Another report showed that overall nationwide consumer prices in Japan rose an annual 1.3 percent in August, exceeding expectations for 1.1 percent and up from 0.9 percent in July. Meanwhile, investors turned their focus to the second round of trade talks between Japan and the US scheduled on September 24.