Post Session: Quick Review

Indian equity benchmarks ended the lackluster day of trade marginally in red on Friday, with frontline gauges swinging between red and green terrain throughout the session. Markets made a pessimistic start and traded in red, amid weak global cues after the US Federal Reserve left key interest rates, but hinted a rate hike next month. 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. Some cautiousness also came 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.

Key indices pared all their initial losses and were trading in green terrain in noon deals, on the back of a strong rebound in the domestic currency and continued decline in crude oil prices. Traders took some support from Finance Minister Arun Jaitley’s statement that demonetisation helped in tackling black money and expanding the tax base. Sentiments also remained positive with a report stating that demonetisation was a fundamental corrective without which the Indian economy would have collapsed by now just like subprime crisis in the US. Though, the buying proved short-lived as markets once again dropped into red in late afternoon deals, as anxiety remained among the investors with a private report stating that slowdown in Non-Banking Financial Companies (NBFC) disbursements could have a negative impact on growth. It also said if this situation persists there will be a negative impact on growth because credit availability is going to be that much reduced for the aggregate economy.

On the global front, Asian markets ended in red on Friday, as the Federal Reserve looked set to deliver another interest-rate hike next month, paring gains made earlier this week after U.S. midterm elections triggered a global equities rally. European markets were trading in red. Back home, Sugar stocks were in limelight with the commerce ministry’s statement that India will start exporting raw sugar to China from early next year, a move which will help to bridge the widening trade deficit with the neighbouring country. Infrastructure related stocks ended 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.

The BSE Sensex ended at 35134.19, down by 103.49 points or 0.29% after trading in a range of 35011.23 and 35287.29. There were 17 stocks advancing against 14 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index rose 0.62%, while Small cap index was up by 0.59%. (Provisional)

The top gaining sectoral indices on the BSE were Healthcare up by 1.06%, Consumer Disc up by 0.74%, Consumer Durables up by 0.58%, Oil & Gas up by 0.46% and Auto up by 0.43%, while IT down by 1.24%, TECK down by 1.15%, Metal down by 1.05%, Telecom down by 0.98% and Energy down by 0.59% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Yes Bank up by 5.76%, Asian Paints up by 3.64%, Adani Ports &SEZ up by 3.25%, Hero MotoCorp up by 2.22% and Sun Pharma up by 2.13%. (Provisional)

On the flip side, Bharti Airtel down by 2.71%, Infosys down by 2.22%, TCS down by 1.86%, Reliance Industries down by 1.56% and SBI down by 1.38% were the top losers. (Provisional)

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 ended at 10580.65, down by 17.75 points or 0.17% after trading in a range of 10544.85 and 10619.55. There were 27 stocks advancing against 23 stocks declining on the index. (Provisional)

The top gainers on Nifty were Yes Bank up by 5.67%, HPCL up by 5.16%, Adani Ports &SEZ up by 3.68%, Indiabulls Housing Finance up by 3.68% and Asian Paints up by 3.59%. (Provisional)

On the flip side, Infosys down by 2.45%, Bharti Airtel down by 2.32%, Hindalco down by 2.25%, Dr. Reddys Lab down by 2.18% and GAIL India down by 2.17% were the top losers. (Provisional)

European markets were trading in red; UK’s FTSE 100 decreased 38.60 points or 0.54% to 7,102.08, France’s CAC shed 39.46 points or 0.77% to 5,091.99 and Germany’s DAX dipped 72.96 points or 0.64% to 11,454.36.

Asian markets ended lower on Friday after the Federal Reserve reiterated its hawkish stance and the populist government in Rome flatly dismissed the EU's more pessimistic outlook for the Italian economy, deepening a rift with the European Union. Chinese shares ended lower as policymakers struggle to dispel stock market gloom with promises of tax cuts and more bank lending. Consumer prices in China rose 2.5 percent year-on-year in October, the National Bureau of Statistics said in a report. That was in line with expectations and unchanged from the September reading. The bureau also said that producer prices climbed an annual 3.3 percent - matching forecasts and slowing from 3.6 percent in the previous month. Japanese shares ended lower as dismal inflation data from China as well as lingering concerns of slowing growth pulled down shares of companies that have large exposure to China.