Bloodbath continues on Dalal Street for third straight session

Extending southward journey for third straight day, Indian equity benchmarks witnessed bloodbath with frontline gauges ending below their crucial 34,400 (Sensex) and 10,350 (Nifty) levels. Markets started the session on pessimistic note, as traders remain concerned about Union minister Nitin Gadkari’s statement that the country is facing lot of economic crisis due to crude oil imports and need to reduce imports and increase exports. Some cautiousness also crept in with a private report that liberalising foreign borrowings for oil companies to raise to $10 billion will not have a material impact on arresting the slide of the rupee. Adding some worries, Fitch Ratings in its latest report said that the acquisitions of distressed Indian steel assets could significantly increase the leverage of the acquiring companies, which also face the risk of domestic output being displaced by a substantial increase in imports from the escalation of trade barriers.

Selling got intensified in last leg of trade to end below their respective crucial levels, after the Reserve Bank of India (RBI) kept the repo rate unchanged at 6.5%. However, the MPC changed the stance from ‘Neutral’ to ‘Calibrated Tightening’. Domestic sentiments also got hit with a private report indicating that amidst the erratic distribution of monsoon rains and with the possibilities of as many as 254 districts facing drought like situation, the total kharif cereals production likely to decline marginally by 1.71% compared to last kharif. The markets participants paid no heed towards Finance Minister Arun Jaitley’s statement that the government is determined to contain the crisis at the IL&FS at the earliest so that it does not leave any adverse impact. The street even overlooked a report that salaries in the country are projected to increase by 10% in 2019, the highest in the Asia Pacific region.

Weak opening in European counters too dampened sentiments as the German construction sector saw a loss of growth momentum in September. The data from IHS Markit revealed that the construction Purchasing Managers' Index came in at 50.2 in September, down from 51.5 in August. Asian markets ended in red as investors fret about rising bond yields globally and weigh the risks from growing US-China tensions after reports that the Chinese military embedded tiny chips into servers used by companies including Apple and Amazon.

Back home, oil and gas stocks edged lower after Finance Minister Arun Jaitley said that Oil Marketing Companies (OMCs) will absorb Re 1 per litre on fuel. There will be some buzz in the banking sector stocks with Crisil’s report that state-run lenders will narrow down their losses to Rs 500 billion in fiscal year 2018-19, from Rs 850 billion in the previous fiscal year, as the quantum of dud loans reduce. Stocks related to metal sector too edged lower with ICRA’s report that the global prices of non-ferrous metals which have witnessed a correction due to global macroeconomic concerns in the last three months is unlikely to go down further. However, IT stocks edged higher, buoyed by NASSCOM Vice Chairman Keshav R. Murugesh’s statement that the Indian IT and Business Process Management (BPM) industry is likely to see 8% growth in revenue during the financial year 2018-19 (FY19) to reach at $167 billion as against $154 billion in fiscal 2017-18.

Finally, the BSE Sensex tumbled 792.17 points or 2.25% to 34,376.99, while the CNX Nifty was down by 282.80 points or 2.67% to 10,316.45.

The BSE Sensex touched a high and a low of 35,118.54 and 34,202.22, respectively and there were 4 stocks advancing against 27 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index lost 2.70%, while Small cap index was down by 2.02%.

The few gaining sectoral indices on the BSE were IT up by 1.11%, TECK up by 0.70% and Consumer Durables was up by 0.62%, while Oil & Gas down by 12.68%, Energy down by 8.52%, PSU down by 7.06%, Utilities down by 3.58% and Metal was down by 3.45% were the top losing indices on BSE.

The top gainers on the Sensex were Infosys up by 2.19%, TCS up by 1.88%, Indusind Bank up by 1.36% and HDFC Bank up by 0.10%. On the flip side, ONGC down by 15.93%, Reliance Industries down by 6.31%, Adani Ports &Special down by 5.36%, SBI down by 4.73% and Bharti Airtel down by 4.27% were the top losers.

Meanwhile, credit ratings agency, Crisil Ratings in its latest report has said that public sector banks (PSBs) will narrow down their losses to Rs 500 billion in the financial year 2019 as compared to Rs 850 billion in the previous fiscal year, as the quantum of dud loans reduce. It pointed out that as a result of the high provisioning requirements, many state-run lenders' will continue to report losses for the third consecutive year, though the extent of this will be lesser at Rs 500 billion. 

According to the report, profits for the entire banking system are expected to start improving from the second half of this fiscal and turn positive for the whole fiscal, as most large private banks are expected to report profit. It indicated that at present, the gross non-performing asset (NPA) ratio of the PSBs is at 14.7 percent, compared with 4.7 percent for the private sector ones.

The ratings agency further said that the provisioning for bad assets is expected to stay elevated at Rs 2.8 trillion for the system, attributing it to ageing of already identified NPAs and also the money to be set aside for the second list of 26 assets to be resolved under the bankruptcy law. It added that the fresh slippages are reducing and it is troubles of the past which is leading to the elevated provisioning.

The CNX Nifty traded in a range of 10,540.65 and 10,261.90. There were 8 stocks in green as against 42 stocks in red on the index.

The top gainers on Nifty were Infosys up by 2.16%, TCS up by 1.70%, Bharti Infratel up by 1.70%, Titan Company up by 1.13% and Indusind Bank was up by 0.66%. On the flip side, HPCL down by 24.50%, BPCL down by 19.60%, Indian Oil Corporation down by 16.25%, ONGC down by 14.68% and GAIL India down by 10.30% were the top losers.

European markets were trading in red; UK’s FTSE 100 decreased 45.82 points or 0.62% to 7,372.52, France’s CAC fell 29.28 points or 0.54% to 5,381.57 and Germany’s DAX dropped 95.87 points or 0.79% to 12,148.27.

Asian markets ended lower on Friday as a surge in US Treasury yields raised concerns about the outlook for interest rates. Media reports suggesting that China secretly inserted surveillance microchips into servers used by Apple and Amazon also weighed on markets. Investors looked ahead to the US jobs report for September due later in the day for clues over the next rate hike move in December. US employment is expected to jump by about 185,000 jobs in September after increasing by 201,000 jobs in August. The jobless rate is expected to dip to 3.8 percent from 3.9 percent. Japanese shares ended lower, tracking weakness on Wall Street as rising US Treasury yields have dimmed the allure of most stocks except financial ones. Meanwhile, Chinese markets continued to remain closed for national holidays.