Benchmarks trade marginally in red in early deals

Indian equity benchmarks made a cautious start and are trading marginally in red in early deals on Tuesday amid feeble global cues. Sentiments remained downbeat with private report stating that India’s current account deficit (CAD) is expected to be widened by 0.20 per cent to 2.8 per cent of GDP for fiscal year 2018-19. The widening current account gap is one of the major concerns which is putting pressure on the rupee, which has depreciated 13 per cent against dollar this year. Sentiments also weighed down with World Bank’s report that India’s current trade in goods with its neighbouring countries in the South Asian region is a mere 30.65 per cent of the potential trade of $ 62 billion, which can be boosted if certain restrictions on the current trade, like tariffs, port restrictions and other non-tariff barriers can be eased.

On the global front, Asian markets were exhibiting mixed trend in early deals on Tuesday, as investors pondered concerns about the outlook for global trade and American politics. The US markets closed mostly lower on Monday as the US-China trade war entered a new phase when tariffs on billions of dollars of products took effect. Investors also remained on sidelines looking ahead to the Federal Reserve’s two-day monetary policy meeting.

Back home, stocks of oil marketing companies (OMCs) declined as fuel prices increased, with petrol registering a record high of Rs 90.22 a litre in Mumbai. Diesel prices too rose in the financial capital to Rs 78.69 a litre. Stocks related to public sector banks (PSBs) edged lower ahead of Finance Minister Arun Jaitley’s annual review meeting with chief executives and the top management of PSBs on September 25.

The BSE Sensex is currently trading at 36281.70, down by 23.32 points or 0.06% after trading in a range of 36064.10 and 36454.03. There were 15 stocks advancing against 16 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index lost 0.31%, while Small cap index was down by 0.80%.

The top gaining sectoral indices on the BSE were Healthcare up by 1.07%, IT up by 0.45%, TECK up by 0.17%, Consumer Durables up by 0.17% and Energy was up by 0.16%, while Telecom down by 1.58%, Realty down by 0.81%, Industrials down by 0.61%, Utilities down by 0.59% and Capital Goods was down by 0.54% were the top losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 2.67%, Sun Pharma up by 1.65%, ONGC up by 1.64%, Asian Paints up by 1.17% and Infosys up by 0.91%. On the flip side, Bharti Airtel down by 2.27%, Tata Steel down by 1.94%, Power Grid Corporation down by 1.86%, Kotak Mahindra Bank down by 1.76% and Mahindra & Mahindra down by 1.64% were the top losers.

Meanwhile, with higher fuel prices and Reserve Bank of India’s (RBI) intervention in forex market, the State Bank of India (SBI) Research in its latest report stated that the currency in circulation (CiC) has seen some slowdown in expansion since May. It added CiC increased exponentially after the note ban in November 2016 under which as many as 99.9% of them returned to the system. As per the report, CiC increased from Rs 9 trillion in January 2017 to Rs 19.5 trillion as of 14 September this year. But since the beginning of May 2018, the same has been in the range of Rs 19-19.6 trillion.

SBI Research said that one possible reason can be people may be cutting back discretionary spending with the recent spurt in fuel prices, mostly in rural areas. It also said the other factor could be to the extent RBI selling dollars directly from its foreign exchange reserves to designated dealers/banks thereby withdrawing rupee resources in return, thus reducing currency in circulation. However, it said such intervention, since taking place between banks, should not have major impact on systemic liquidity. It added that the third reason, though insignificant, could also be RBI replacing soiled notes.

The report further noted that the decline in CiC is a seasonal phenomenon but this time it seems the decline is more than just seasonal and has continued beyond August. The RBI’s weekly data for the last 10 years shows a pattern in CiC decline in the last fortnight of every July, which is partly explained by the low cash demand from the agriculture sector. The demand for currency increases after the monsoons as the harvesting begins in October followed by Rabi sowing, eventually giving rise to cash requirement. Besides, the festive season also brings along its natural demand, which gets accentuated with buying of gold, automobiles, increasing the demand for currency.

The CNX Nifty is currently trading at 10959.75, down by 7.65 points or 0.07% after trading in a range of 10882.85 and 10981.55. There were 23 stocks advancing against 27 stocks declining on the index.

The top gainers on Nifty were Yes Bank up by 3.03%, HCL Tech up by 2.05%, Lupin up by 1.71%, Sun Pharma up by 1.54% and ONGC up by 1.38%. On the flip side, Indiabulls Housing down by 5.09%, HPCL down by 2.62%, BPCL down by 2.42%, Tata Steel down by 2.14% and Zee Entertainment down by 1.98% were the top losers.

Asian markets are exhibiting mixed trend; Taiwan Weighted slipped 1.51 points or 0.01% to 10,970.90, Jakarta Composite decreased 25.94 points or 0.44% to 5,856.28 and Shanghai Composite was down by 21.15 points or 0.76% to 2,776.33. On the flip side, Nikkei 225 increased 35.34 points or 0.15% to 23,905.27 and Straits Times was up by 12.69 points or 0.39% to 3,231.85.