Benchmarks trade lower in early deals

Indian equity benchmarks made a pessimistic start and are trading in red in early deals as traders were concerned about Moody’s Investors Service’s statement that Indian economy will expand 7.4% in 2018, but the growth will slow down to 7.3% in the next year as domestic demand tapers on higher borrowing cost due to rising interest rates. It said the greatest downside risk to India's growth prospects stem from concerns about its financial sector. Market participants also remained cautious with a private report stating that unemployment rate in the country rose to 6.9% in October - the highest in two years. The estimated number of people employed during October 2018 was 397 million. This was 2.4% lower than the rate in October 2017. Meanwhile, the finance ministry said that GST refund of Rs 82,775 crore to exporters has been cleared as on October 31, which is 93.8% of the total such claims with the tax authorities. The ministry said Rs 5,400 crore worth GST refund is still pending with the government and that is being expeditiously processed.

Global cues too remained dismal with all the Asian markets trading in red at this point of time after the Federal Reserve held rates on Thursday, with a dollar rally cooling off in morning trading. The US markets ended mostly lower on Thursday as the Federal Reserve kept interest rates unchanged in an unanimous decision and signaled that it would continue to tighten monetary policy at a gradual pace.

Back home, infrastructure related stocks edged lower despite report that the Reserve Bank has liberalised the norms governing foreign borrowings for infrastructure creation in consultation with the Government. As per the notification, the minimum average maturity requirement for ECBs (external commercial borrowings) in the infrastructure space raised by eligible borrowers has been reduced to three years from earlier five years. In scrip specific developments, Welspun Enterprises surged on receiving LoA from PWD and Strides Pharma Science surged with arm entering into agreement with SUDA Pharma.

The BSE Sensex is currently trading at 35088.77, down by 148.91 points or 0.42% after trading in a range of 35011.23 and 35278.91. There were 14 stocks advancing against 17 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.35%, while Small cap index was up by 0.14%.

The top gaining sectoral indices on the BSE were Healthcare up by 0.51%, Utilities up by 0.36%, Oil & Gas up by 0.23%, PSU up by 0.22% and Power up by 0.20%, while Metal down by 0.98%, IT down by 0.88%, TECK down by 0.87%, Telecom down by 0.79% and Energy down by 0.34% were the top losing indices on BSE.

The top gainers on the Sensex were Adani Ports & SEZ up by 2.17%, Yes Bank up by 2.08%, Sun Pharma up by 1.70%, Power Grid Corporation up by 1.56% and Hero MotoCorp up by 1.50%. On the flip side, Bharti Airtel down by 3.09%, Wipro down by 2.01%, Tata Steel down by 1.80%, Infosys down by 1.39% and ITC down by 1.20% were the top losers.

Meanwhile, warning of a credit squeeze for non-banking financial entities, global rating agency Moody’s Investors Service in its latest report has forecasted that India’s economic growth will slow down to 7.3% in 2019 and 2020 from 7.4% in 2018, as domestic demand tapers on higher borrowing cost due to rising interest rates. It said the greatest downside risk to India's growth prospects stem from concerns about its financial sector.

The report titled ‘Global Macro Outlook 2019-20' stated that the economy grew 7.9% in the first half (January-June) of 2018, which reflects post demonetisation base effect. Moody’s said factors that will limit the pace of the Indian economy's growth over the next few years includes borrowing costs which have already increased on higher interest rates. It also expects the Reserve Bank will continue to steadily raise the benchmark rate through 2019, which will further dampen domestic demand.

The rating agency said the impact of higher global oil prices compounded by sharp rupee depreciation raises the cost of households' consumption basket, and will weigh on households' capacity for other expenditures. It added that borrowing costs have already risen because of tightening monetary policy. It said, in the short term while measures to stabilise the financial sector are put in place, credit growth is likely to slow. It also said downside risks from a prolonged liquidity squeeze for non-bank financial institutions, which could lead to a sharper slowdown in their credit provision, remain.

On the global economic front, Moody's said global economic growth will slow in 2019 and 2020 to a little under 2.9% from an estimated 3.3% in 2018 and 2017. The US-based agency expects trade and geopolitical frictions between the US and China to persist for some time. It added that this will weigh on the global trade growth and will reshape trade flows and supply chains.

The CNX Nifty is currently trading at 10576.60, down by 21.80 points or 0.21% after trading in a range of 10544.85 and 10614.70. There were 27 stocks advancing against 23 stocks declining on the index.

The top gainers on Nifty were Adani Ports & SEZ up by 2.85%, HPCL up by 2.83%, Yes Bank up by 2.76%, Hero MotoCorp up by 1.88% and Sun Pharma up by 1.79%. On the flip side, Bharti Airtel down by 2.94%, JSW Steel down by 2.18%, Wipro down by 1.98%, Hindalco down by 1.56% and Tata Steel down by 1.51% were the top losers.

All the Asian markets are trading in red; Nikkei 225 decreased 194.05 points or 0.87% to 22,292.87, Taiwan Weighted declined 130.25 points or 1.33% to 9,815.06, Straits Times dropped 24.02 points or 0.78% to 3,069.22, Jakarta Composite shed 86.69 points or 1.47% to 5,890.12, Hang Seng tumbled 626.57 points or 2.45% to 25,601.15, KOSPI slipped 5.73 points or 0.27% to 2,086.90 and Shanghai Composite was down by 34.11 points or 1.31% to 2,601.52.