Markets make dull start to Diwali week; Sensex settles below 35,000 mark

The Indian equity indices failed to sparkle on first day of Diwali week, with both the Sensex and the Nifty ending Monday’s trading session with notable losses. The start of the day was cautious, affected by a private report stating that with global crude prices remaining elevated, the rupee is likely to be under pressure, and may touch the 76 levels against the US currency over the next three months. Domestic sentiments also got hit with another private report showing that overseas investors pulled out a massive Rs 38,900 crore (over $5 billion) from the capital markets in October, the steepest outflow in nearly two years, on rising crude oil prices, depreciating rupee and worsening current account deficit. With this, the total outflow from the capital markets (equity and debt together) has reached over Rs 1 lakh crore so far this year. The trade remained in negative during the day, as former RBI governor and top economist Raghuram Rajan said that cross-border capital flows have been a source of financial fragility and he underscored that countries should see how best they can benefit from cross-border flows, without incurring the costs. Separately, raising concerns over recent liquidity crisis in non-banking financial companies (NBFC), the industry chamber, Associated Chambers of Commerce and Industry of India (ASSOCHAM) has stated that the Reserve Bank of India (RBI) should provide a liquidity credit line of Rs 30,000-40,000 crore to non-banking financial companies (NBFC) as a temporary relief from tight liquidity conditions.

However, positive data of India’s services PMI helped the markets to trim some of their losses in the last leg of the trade. India’s services sector activity signaled a solid and stronger improvement in business conditions in the month of October, aided by accelerating new work along with easing inflationary pressures. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index rose to 52.2 in October from 50.9 in September. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services -- too improved to 53.0 in October from 51.6 in September. Some relief also came with Prime Minister Narendra Modi’s statement that he has announced measures for Micro, Small and Medium Enterprises (MSMEs) will add strength to the sector. He also stated that bigger markets and better opportunities for the MSMEs was a ‘win-win’ situation. Soothing some worries, a private report said that the government has generated higher-than-expected revenues from customs duties, which may help it rein in the fiscal deficit within its FY19 target of 3.3 percent of gross domestic product. Traders took note of eminent economist Arvind Panagariya’s statement that India and several other Asian countries have in the past defied the belief that protectionism is good for developing economies as these nations reaped benefits of opening up trade and lower tariffs.

On the global front, European markets were trading in green, even though the euro area manufacturing sector expanded at the slowest pace in more than two years in October. The final data from IHS Markit showed that the manufacturing Purchasing Managers' Index for Eurozone fell to a 26-month low of 52.0 from 53.2 in September. Separately, German manufacturing sector growth eased to its lowest in nearly two-and-a-half years in October as orders dropped for the first time since late-2014. As per final data from IHS Markit, the manufacturing purchasing managers' index, or PMI, dropped to 52.2 from 53.7 in September. Asian markets ended in red, amid trade concerns after White House economic adviser Larry Kudlow downplayed the potential for a quick trade deal between the US and China. Adding some more worries, China's private sector expanded at the weakest pace in more than two years in October with both services and manufacturing noting weaker performances. The survey results from IHS Markit showed that the Caixin composite output index fell to a 28-month low of 50.5 in October from 52.1 in September.

Back home, on the sectoral front, IT stocks ended higher, supported by a private report stating that India's information technology and infrastructure sectors will be central to its journey of becoming a $10-trillion economy by 2030. Stocks related to metal companies too gained, amid reports that the country’s finished steel production is projected to grow by six to eight per cent in this fiscal, aided by spike in demand from key user industries like construction, infrastructure and automobiles. Further, select stocks related to banking sector remained in focus with report that the Finance Ministry is likely to finalise the second round of capital infusion for public sector banks (PSBs) towards the end of this month taking into account the latest quarter’s performance.

Finally, the BSE Sensex lost 60.73 points or 0.17% to 34950.92, while the CNX Nifty was down by 29.00 points or 0.27% to 10524.00.

The BSE Sensex touched a high and a low of 35123.41 and 34811.60, 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 plunged 0.47%, while Small cap index was down by 0.28%.

The top gaining sectoral indices on the BSE were Realty up by 1.55%, Basic Materials up by 0.47%, Metal up by 0.15%, Bankex up by 0.12% and Energy up by 0.12%, while Power down by 1.59%, Oil & Gas down by 1.42%, Utilities down by 1.04%, Healthcare down by 0.64% and Consumer Durables down by 0.51% were the top losing indices on BSE.

The top gainers on the Sensex were SBI up by 3.45%, Axis Bank up by 2.35%, Wipro up by 1.52%, Reliance Industries up by 1.33% and Bajaj Auto up by 0.94%. On the flip side, Indusind Bank down by 3.29%, NTPC down by 2.72%, Power Grid Corporation down by 2.18%, ONGC down by 1.59% and Hero MotoCorp down by 1.54% were the top losers.

Meanwhile, Additional Principal Secretary to the Prime Minister, P K Mishra has said that the government is making utmost efforts with an integrated approach and has initiated multiple reforms to achieve the ambitious goal of doubling farmers' income by the year 2022. He also emphasized the need to analyse as to 'why the past initiatives could not accomplish the desired results' in the agriculture sector. He added that for the first time, the present government has ushered in a paradigm shift in the approach, from growth of production to increase farmers' income.

According to Mishra, some of the initiatives taken to address price and yield risks in the last four years include setting up of electronic National Agriculture Market (eNAM), upgradation of rural haats, new scheme Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA), Pradhan Mantri Fasal Bima Yojana. He noted that this is a major shift in the approach -- a clear focus on farmer and farmer welfare rather than simply production and productivity.

For this purpose, he said that a holistic strategy for the agriculture sector was visualized and informed that efforts are being made to follow this with an integrated approach by initiating multiple reforms and programmes with an overall objective of doubling farmers' income. He noted that in February 2016, Prime Minister Narendra Modi had said farmers' income would be doubled by 2022 to mark 75 years of India's independence. He said “Policymakers and practitioners need to look at how one could address the farmers' risk -- that affects his income and welfare and linking activities of non-agriculture sector. This is also an area of agriculture research.”

The CNX Nifty traded in a range of 10,558.80 and 10,477.00. There were 23 stocks advancing against 27 stocks declining on the index.

The top gainers on Nifty were SBI up by 3.77%, UPL up by 2.13%, Axis Bank up by 2.04%, Wipro up by 1.74% and HCL Tech up by 1.68 %. On the flip side, Cipla down by 7.35%, Indian Oil Corporation down by 5.16%, Indiabulls Housing Finance down by 4.35%, Indusind Bank down by 3.73% and BPCL down by 3.49% were the top losers.

European markets were trading in green; UK’s FTSE 100 added 2.22 points or 0.03% to 7,096.34, France’s CAC rose 1.10 points or 0.02% to 5,103.23 and Germany’s DAX was up by 3.82 points or 0.03% to 11,522.81.

Asian markets ended mostly lower on Monday as hopes of an imminent US-China trade deal faded and investors looked ahead to the US mid-term elections as well as the FOMC meeting for directional cues. Chinese shares ended lower despite President Xi Jinping praising globalization and China's commitment to free trade. On the data front, China's private sector expanded at the weakest pace in more than two years in October with both services and manufacturing noting weaker performances, survey results from IHS Markit showed today. The Caixin composite output index fell to a 28-month low of 50.5 from 52.1 in September. Further, Japanese shares fell sharply in thin trading as caution set in ahead of US mid-term elections.