Post Session: Quick Review

Key Indian equity benchmarks ended Thursday’s session lower ahead of Futures and Options (F&O) derivative expiry for September series due today. After a cautious start, the key indices managed to keep their heads above neutral line during early morning deals, aided by the United Nations Conference on Trade and Development’s (UNCTAD) latest report forecasting that Indian economy is likely to grow 7% in calendar year 2018 as compared to 6.2% in 2017. It also added that growing demand for exports has led to a moderate recovery in industrial production. Adding some comfort, Finance Minister Arun Jaitley has said that India has large avenues of growth to sustain a gross domestic product (GDP) rise of 7-8 percent for two decades, unlike any other country in the world.  Some support also came with Federation of Indian Export Organisations (FIEO) President G K Gupta’s statement that higher tariffs coupled with the depreciating rupee will provide double protection to domestic industry and enable it to compete with imports. Besides, he added that it will give a push to Indian manufacturing as well.

However, the markets failed to hold gains and entered into negative terrain, on the back of selling in most of the sectors along with weak cues from global markets. The street got cautious with a private report stating that the Reserve Bank of India (RBI) is likely to raise interest rates in early October, despite relatively tame inflation, to prop up a retreating rupee. Some concerns also came after Moody's investor service expecting US sanctions on Iran to be credit negative for Indian refiners with the estimated total decline in earnings for the Indian refiners to be about $400-$500 million. The move is also expected to increase refiners' exposure to oil price volatility. Adding some anxiety, United Nations’ trade report stated that the world economy remains on a shaky ground a decade after the 2008 financial crisis as the global economic growth is spasmodic and many economies are operating below potential. The trade remained sluggish even though the RBI eased mandatory cash requirement rules for banks and assured jittery markets it would provide durable liquidity amid growing worries of a potential credit crunch in the economy.

On the global front, European markets were trading in red; after France's consumer confidence weakened to the lowest level in more than two years in September. As per survey results from the statistical office Insee, the consumer sentiment index fell to 94 in September from revised 96 in August. This was the lowest since April 2016. The score was forecast to remain unchanged at August's initially estimated value of 97. Separately, UK retailers reported a slower pace of growth in sales volumes in September and expect it to remain so again next month. The latest Distributive Trades Survey from the Confederation of British Industry showed that the retail sales balance fell to 23 percent in September from 29 percent in August. Retailers forecast sales growth to slow slightly next month, with the balance easing to 19 percent. Further, Asian markets ended in red, as investors reacted to the US Federal Reserve's decision to hike interest rate by 25 basis points. The Fed cited citing realized and expected labor market conditions and inflation as the reasons for the rate decision.

Back home, on the sectoral front, stocks related to tyre companies ended lower, despite government raising the import tariffs on 19 non-essential items, including radial car tyres, to reduce the country's widening current account deficit and tackle the rupee slide. Banking stocks too ended in red terrain, even though the Finance Ministry said that it would examine the capital demands raised by public sector banks including Punjab National Bank and Central Bank. Further, consumer durable stocks remained in focused, amid reports that hike in custom duty to 10 per cent on compressors, used for air conditioners and refrigerators, can be a set back and may have an impact on the coming festive season sales.

The BSE Sensex ended at 36324.17, down by 218.10 points or 0.60% after trading in a range of 36238.23 and 36711.62. There were 13 stocks advancing against 18 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index fell by 2.19%, while Small cap index was down by 1.97%. (Provisional)

The only gaining sectoral indices on the BSE were IT up by 0.77% and TECK up by 0.65%, while Realty down by 2.79%, Capital Goods down by 1.99%, Auto down by 1.86%, Industrials down by 1.80% and Healthcare down by 1.66% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were TCS up by 2.16%, Asian Paints up by 0.97%, Power Grid Corporation up by 0.93%, Infosys up by 0.88% and Hindustan Unilever up by 0.70%. On the flip side, Yes Bank down by 9.14%, Tata Motors - DVR down by 3.69%, Maruti Suzuki down by 3.68%, Tata Motors down by 3.32% and Axis Bank down by 2.79% were the top losers. (Provisional)

Meanwhile, the United Nations Conference on Trade and Development (UNCTAD) in its latest report has forecasted that Indian economy is likely to grow 7% in calendar year 2018 as compared to 6.2% in 2017. It added that growing demand for exports has led to a moderate recovery in industrial production. Even though, the effects of demonetization are still evident in private consumption trends within the economy.

The body in its Trade and Development Report said that the resulting increase in capacity utilization in manufacturing along with a recapitalization of public banks has enabled a rise in investment for the first time in several years. But, at the same time, a disconcerting feature is the deceleration of growth in the primary sectors. The service sector is expanding with trade, hotels, transport and communication leading the way. As per the report, a lending spree by the banking system during the high growth years has led to the accumulation of large volumes of bad debt or non-performing assets in the balance sheets of leading banks. This, besides threatening financial stability, is curbing credit expansion and is likely to adversely affect investment and growth.

On the Indian currency, the UNCTAD said the Indian rupee is under pressure on foreign exchange markets. Over the first five months of 2018 the currency had depreciated by more than 7.5% relative to the dollar. Depreciation relative to other major currencies like the British pound, the euro and the yen, has been much less. Yet, the fall vis-a-vis the dollar is of significance, especially since much of the trade and foreign debt of India is denominated in dollars. A leading determinant of the depreciation is the rise in the current account deficit on the balance of payments of India intensified by the sharp rise in the international price of oil.

The CNX Nifty ended at 10977.55, down by 76.25 points or 0.69% after trading in a range of 10953.35 and 11089.45. There were 20 stocks advancing against 30 stocks declining on the index. (Provisional)

The top gainers on Nifty were Bharti Infratel up by 2.43%, TCS up by 2.18%, Coal India up by 1.36%, Ultratech Cement up by 1.30% and Infosys up by 0.97%. On the flip side, Yes Bank down by 9.16%, Indiabulls Housing Finance down by 6.01%, Bajaj Finance down by 4.81%, Bajaj Finserv down by 3.75% and Maruti Suzuki down by 3.69% were the top losers. (Provisional)

European markets were trading mostly in red; France’s CAC decreased 7.78 points or 0.14% to 5,504.95 and Germany’s DAX lost 24.03 points or 0.19% to 12,361.86. On the flip side, UK’s FTSE 100 was up by 13.44 points or 0.18% to 7,524.93.

Asian markets ended mostly in lower on Thursday as the United States Federal Reserve Chairman Jerome Powell's comments on inflation after the central bank decided to increase interest rates. The Federal Reserve raised interest rates by 25 basis points and hinted at another rate hike this year and a few more in 2019. Meanwhile, China stocks ended lower after data showed industrial profit growth in China continuing to slow in August and after the Federal Reserve lifted rates, while news of A-share inclusion in FTSE Russell indexes failed to boost sentiments. Japanese market closed down as investors opted withdrawing profit off the table following recent gains and as weak cues from Wall Street overnight.