Post Session: Quick Review

Indian equity benchmarks altered between positive and negative territory and ended Friday’s trade on a pessimistic note, with Sensex and Nifty slipping below their crucial 36,300 and 10,950 levels, respectively. This was the third consecutive day of fall for the domestic markets. Key indices made a cautious start and traded with marginal losses, as traders remained on sidelines ahead of the Goods and Services Tax (GST) Council’s 30th meeting to be held on Friday to discuss multiple proposals for levying additional cess to help flood-ravaged Kerala recoup revenue losses. However, some buying crept in as traders found some solace with CRISIL Research’s report that revenues of corporates are expected to log a robust 12.1% year-on-year growth in the second quarter of FY 2019, nearly twice the 6.4% growth in the corresponding quarter of last fiscal. Traders also took some comfort with a report that the Commerce Ministry removed the value limit for exports through post but has fixed Rs 5 lakh cap in case of overseas shipments through courier services. Exporters’ body FIEO said the move gives an edge to shipments through foreign post offices over couriers.

But, markets witnessed sharp selloff in last hour of trade, as sentiments got spooked with SBI Ecowrap report stating that the Reserve Bank of India (RBI) is expected to hike its key lending rate by 25 basis points in October. According to the report, the expected rate hike might not be the last one in the current financial year. Adding some concerns, the World Trade Organization (WTO) said that escalating trade tensions and tighter credit market conditions in important markets would moderate the growth of global merchandise trade to 3.7% in 2019 from 3.9% in 2018. The multilateral trade body also said that trade volume growth should slow to 3.7% in 2019 as global GDP growth dips to 2.9%. However, domestic bourses managed to pare most of their losses in dying hour of trade as some optimism remained among the investors with Finance Minister Arun Jaitley’s statement that the ongoing trade war may have created initial instability, but will gradually open up opportunities for India as a bigger trading and manufacturing base.

On the global front, Asian markets ended mostly in green on Friday, following the overnight gains on Wall Street, with investor sentiment bolstered by the Federal Reserve's positive outlook for the U.S. economy in addition to upbeat U.S. economic data. European markets were trading in red, as Eurozone economic confidence weakened further in September. As per survey data from European Commission, the economic sentiment index dropped to 110.9 in September from 111.6 in August.

Back home, airlines stocks ended higher with report that Indian carriers are unlikely to face a significant hit from the government’s decision this week to impose a tariff on jet fuel, as imports account for less than 5% of domestic jet fuel consumption. Food processing sector stocks were in focus with report that the government will relax foreign direct investment (FDI) regulations to give a boost to the food processing sector, which has attracted $8.7 billion of investment.

The BSE Sensex ended at 36266.29, down by 57.88 points or 0.16% after trading in a range of 35985.63 and 36551.86. There were 10 stocks advancing against 21 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index fell 1.48%, while Small cap index was down by 3.27%. (Provisional)

The top gaining sectoral indices on the BSE were Oil & Gas up by 0.56%, FMCG up by 0.33%, Energy up by 0.19% and Bankex up by 0.10%, while Realty down by 5.50%, Metal down by 5.21%, Telecom down by 4.04%, Basic Materials down by 3.23% and Consumer Durables down by 2.65% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Axis Bank up by 3.06%, ONGC up by 2.19%, ITC up by 1.93%, HDFC Bank up by 1.62% and HDFC up by 1.21%. (Provisional)

On the flip side, Yes Bank down by 10.63%, Tata Steel down by 5.37%, Hero MotoCorp down by 5.29%, Bharti Airtel down by 5.22% and Vedanta down by 3.89% were the top losers. (Provisional)

Meanwhile, the ratings agency Crisil in its latest report has said that India Inc is likely to double its revenue growth in the second quarter (Q2) of fiscal year 2018-19, mainly on the back of base effect. It said corporates are set to log in a top-line growth of 12.1% in the September quarter, up from 6.4% in the corresponding period last fiscal year, as steel makers are set to clock 80 basis points (bps) higher margins. However, it added that cost pressure is clearly rising across the board.

The report stated that aggregate operating margins would be up 5-10 bps in Q2FY19, but this would be mainly on the back of the performance of steelmakers. It also said that barring steel, the number is down by around 70 bps. The rating agency based on its reading of 365 companies, which excludes banking, financial services and insurance, and oil companies, said that if cost pressures continue to rise, the gradual ascent in operating margins seen from the fourth quarter of last fiscal can reverse. Crisil further said demand recovery is expected to be driven by discretionary, consumption-led sectors like airlines, automobiles, fast-moving consumer goods (FMCG) and retail. While automobiles are expected to see an 18% sales growth, airlines should see passenger traffic rise 16% on-year. Retail, FMCG and automobiles will benefit from the low-base effect caused by the rollout of GST in July last year and makers of steel and aluminum, and coal miners will benefit from improved sales, while cement companies will be helped by higher volumes.

The rating agency also said investment-linked sectors like housing and capital goods have also been supportive because of public spending. Higher crude prices and falling rupee are also skewing the input cost math for companies. It said higher oil and fall in rupee will impact the cost structures of most sectors. Additionally, domestic prices of coal, long steel, flat steel and aluminium are expected to rise 15, 14, 17 and 12%, respectively. That would add to the cost pressure for end-use sectors. Besides, airlines, automobiles, aluminium and cement companies will be the sectors bearing the brunt of rising cost of raw materials. However, margins for steel are expected to improve significantly due to an uptick in realisations. It also said that conversely, the rupee fall will prop revenue growth for export-linked sectors, especially IT and pharma.

The CNX Nifty ended at 10934.75, down by 42.80 points or 0.39% after trading in a range of 10850.30 and 11034.10. There were 16 stocks advancing against 34 stocks declining on the index. (Provisional)

The top gainers on Nifty were Axis Bank up by 2.85%, ONGC up by 2.47%, ITC up by 1.96%, HDFC Bank up by 1.71% and Wipro up by 1.58%. (Provisional)

On the flip side, Yes Bank down by 10.70%, Indiabulls Housing Finance down by 10.67%, Hindalco down by 6.91%, Tata Steel down by 5.51% and Hero MotoCorp down by 5.31% were the top losers (Provisional)

European markets were trading in red; UK’s FTSE 100 decreased 15.36 points or 0.2% to 7,530.08, France’s CAC was down by 21.97 points or 0.4% to 5,518.44 and Germany’s DAX shed 85.77 points or 0.69% to 12,349.82.

Asian markets ended mostly in green on Friday, followed their US peers higher as news of robust US economic growth and remarks from Federal Reserve Chairman Jerome Powell that the central bank's gradual interest-rate increases are helping sustain the economic expansion bolstered investor’ optimism about the world's largest economy. Chinese shares ended higher amid expectations for stimulus and on hopes that more Chinese shares will be included in mainstream global benchmarks. Further, Japanese shares ended higher on hopes for continued corporate earnings growth. Export-oriented stocks surging as the dollar hit a nine-month high versus the yen after the release of upbeat US data, too supported Japanese shares.