Weak GDP, core sector growth push markets to end flat

Weak economic data pushed the markets to end flat on Monday’s trading session. The start of the day was marvelous, aided by Niti Aayog Vice-Chairman Rajiv Kumar’s statement that 70 lakh jobs were created in the financial year 2017-18 alone. He said that growth in sales of transport vehicles, huge disbursement of Mudra loans and EPFO data show that enough opportunities for employment. Domestic sentiments were also boosted after the Indian manufacturing sector accelerated further in the month of November, buoyed by healthier inflows of new orders. As per the survey report, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) - a composite single-figure indicator of manufacturing performance - improved to 54 in November from 53.1 in October. Some support also came with Economic Affairs Secretary Subhash Chandra Garg’s statement that foreign investors have put in Rs 10,925 crore in equity and debt instruments in November. FPIs investment at Rs 4,786 crore in equity and Rs 6,139 crore in debt, together at Rs 10,925 crore, is the highest during the financial year. Meanwhile, Newly-appointed Revenue Secretary Ajay Bhushan Pandey said his focus would be to improve the tax-GDP ratio and increase compliance by making the system more taxpayer friendly.

However, in noon deals, the key indices turned volatile to end the session flat with marginal gains, impacted by reports that India’s economic growth slowed down 7.1% in July-September quarter (Q2) of current fiscal year (FY19) after touching over a two-year high of 8.2% in April-June quarter (Q1), as consumption demand moderated and farm sector displayed signs of weakness. Traders were also cautious, as Goods and Services Tax (GST) collection dropped to Rs 97,637 crore in November 2018 as compared to Rs 1 lakh crore collected previous month. Of the Rs 97,637 crore collected, central GST (CGST) collection was Rs 16,812 crore, state GST (SGST) was Rs 23,070 crore, integrated GST (IGST) was Rs 49,726 crore (including Rs 24,133 crore collected on imports) and cess was Rs 8,031 crore (including Rs 842 crore collected on imports). Adding more worries, India’s core sector output also grew at a slower pace of 4.8% in October 2018, as compared to 5% in October 2017, due to contraction in the production of crude oil, natural gas and fertilizer. Sentiments also got hit, with the Controller General of Accounts’ latest data report indicating that India’s fiscal deficit, the gap between expenditure and revenue, in the first seven months of current financial year (FY19) came in at Rs 6.24 lakh crore or 103.9% of the FY19 Budget target, on the back of lower revenue collections.

On the global front, European markets were trading in green, as Eurozone's consumer price growth slowed to its lowest level in three months in November and the core inflation unexpectedly eased. The preliminary figures from the Eurostat showed that the consumer price index rose 2% year-on-year following a 2.2% increase in October. Separately, France's consumer price inflation slowed more-than-expected in November. The preliminary data from the statistical office INSEE showed that the consumer price index rose 1.9% year-on-year following a 2.2% increase in October.  Asian markets ended in green, after the US and Chinese presidents agreed to a temporary truce in the clash between the world's two largest economies. US President Donald Trump promised to suspend new tariffs on Chinese products, meaning that no additional tariffs will be imposed after January 1. As part of the deal, China will increase its purchase of American farm produce, energy and some industrial goods so as to reduce the trade deficit between the two countries. Adding some relief, the manufacturing sector in China accelerated in November but slightly. The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) for November, ticked up to 50.2 from 50.1 in October.

Back home, metals stocks ended higher, even though India's finished steel exports fell by 23.4% to 0.596 million tonnes (MT) in October 2018. According to the Joint Plant Committee (JPC), the only institution that collects and maintains data on the Indian steel and iron sector, the country had exported 0.778 MT of finished steel during the same month a year ago. Banking sector stocks also ended in green, amid report that global rating agency Moody’s gave a stable (Baa2) outlook to India’s banking system, driven by the ongoing progress on asset quality front and better operating environment. But, stocks related to the auto industry ended lower, amid mixed sales numbers of November month. Ashok Leyland reported a fall of 9% in November 2018 sales to 13,121 units, as against 14,457 units sold in the same month of last year and Tata Motors registered a drop of 4% in its domestic sales at 50,470 units in November 2018, as against 52,464 units over last year. However, TVS Motor Company registered a growth of 27% with sales increasing from 251,965 units in November 2017 to 319,965 units in the month of November 2018.

Finally, the BSE Sensex rose 46.70 points or 0.13% to 36,241.00, while the CNX Nifty was up by 7.00 points or 0.06% to 10,883.75.

The BSE Sensex touched a high and a low of 36,446.16 and 36,099.68, respectively and there were 21 stocks advancing against 10 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.46%, while Small cap index was up by 0.46%.

The top gaining sectoral indices on the BSE were Utilities up by 2.66%, Realty up by 2.60%, Power up by 2.47%, Metal up by 2.14% and PSU up by 1.55%, while Healthcare down by 1.21%, Energy down by 0.52%, Auto down by 0.19% and Capital Goods down by 0.03% were the top losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 4.92%, Hindustan Unilever up by 4.12%, Vedanta up by 3.70%, NTPC up by 3.68% and Bharti Airtel up by 2.98%. On the flip side, Sun Pharma down by 7.52%, Mahindra & Mahindra down by 3.79%, ITC down by 1.14%, Hero MotoCorp down by 1.02% and Reliance Industries down by 1.02% were the top losers.

Meanwhile, the Controller General of Accounts (CGA) in its latest data has showed that India’s fiscal deficit, the gap between expenditure and revenue, in the first seven months of current financial year (FY19) came in at Rs 6.24 lakh crore or 103.9% of the FY19 Budget target, on the back of lower revenue collections. It noted that the fiscal deficit was 96.1 percent of the Budget Estimate (BE), at end of October 2017-18. The country’s fiscal deficit for FY19 is budgeted at 3.3% of the GDP against the actual of 3.5% in FY18.

According to the data, the revenue receipts of the government totalled Rs 7.88 lakh crore or 45.7% of the BE for 2018-19 as compared to 48.1% of BE last year. It stated that the government has budgeted to mop up Rs 17.25 lakh crore revenue during the current fiscal. It also indicated that tax revenue was 44.7% of target as compared to 51.6% achieved in the comparable period of the last year. Data further highlighted that the Centre’s total expenditure at October-end was Rs 14.56 lakh crore or 59.6% of the BE. It added that the expenditure in terms of percentage of the BE was marginally higher in the year-ago period.

The CGA has said that fiscal deficit figure shown in monthly accounts during a financial year is not necessarily an indicator of fiscal deficit for the year as it gets impacted by temporal mismatch between flow of not-debt receipts and expenditure up to that month on account of various transitional factors both on receipt and expenditure side, which may get substantially offset by the end of the financial year.

The CNX Nifty traded in a range of 10,941.20 and 10,845.35. There were 30 stocks advancing against 20 stocks declining on the index.

The top gainers on Nifty were Indiabulls Housing Finance up by 9.98%, Yes Bank up by 4.92%, Hindustan Unilever up by 4.68%, Vedanta up by 3.63% and GAIL India up by 3.50%. On the flip side, Sun Pharma down by 7.53%, HPCL down by 3.49%, Mahindra & Mahindra down by 3.47%, UPL down by 2.76% and Zee Entertainment down by 2.45% were the top losers.

European markets were trading in green; UK’s FTSE 100 added 156.88 points or 2.2% to 7,137.12, France’s CAC rose 97.70 points or 1.92% to 5,101.62 and Germany’s DAX was up by 291.22 points or 2.52% to 11,548.46.

Asian markets closed in green on Monday after US President Donald Trump and Chinese President Xi Jinping agreed to a 90-day truce on their escalating trade war. While Trump agreed to hold off on his threat to slap 25 percent tariffs on $200 billion worth of Chinese goods from January 1, Beijing agreed to buy very substantial amount of agricultural, energy, industrial and other products from the US to narrow its trade gap with the US. Japanese shares ended higher and hit a six-week high despite the dollar retreating to the mid-113 yen range on expectations of slower pace of US rate hikes and ahead of Fed Chair Jerome Powell's testimony before a congressional Joint Economic Committee due this week.