Benchmarks witness bloodbath in early deals

Indian equity benchmarks made a gap down start and are trading with a cut of around a percent in early deals after the Reserve Bank of India (RBI) governor Urjit Patel’s unexpected resignation from his post on Monday. The government and the RBI have been fighting for weeks over how much autonomy the RBI should have as the administration of Prime Minister Narendra Modi seeks to reduce curbs on lending and to gain access to the RBI’s surplus reserves. The market also weighed a possible setback for the ruling Bharatiya Janata Party (BJP) in the state assembly elections. Early elections result trend for three key states - Madhya Pradesh, Rajasthan and Chhattisgarh- show a tough challenge for the ruling BJP which could disrupt the pace of economic reforms, a key worry for the markets. However, markets made small recovery as traders took some support with Commerce and Industry Minister Suresh Prabhu’s statement that the New Industrial Policy, which will replace the 27-year-old existing policy, has been sent for the Union Cabinet’s consideration. The new industrial policy aims to resolve bottlenecks arising from inadequate infrastructure, restrictive labour laws and complicated business environment.

Global cues too remained sluggish with most of the Asian counters are trading in red at this point of time as investors shrugged off a rebound on Wall Street from sharp losses, with trade and U.K. political concerns lingering. The US markets end higher on Monday as investors overcame concerns over the fate of US-China trade talks, and after U.K. Prime Minister Theresa May delayed a parliamentary vote on Brexit.

Back home, airline industry stocks reeling under pressure after rating agency ICRA assigned a negative outlook to the domestic airline industry even as it expects the passenger traffic growth to remain healthy at about 15-16% in the medium-term. Gems and jewellery related stocks lost sheen despite the Gems and Jewellery Export Promotion Council’s (GJEPC) report that the gems and jewellery exports are likely to grow by up to 5% this financial year, mainly aided by improving demand in the US market during the upcoming Christmas season.

The BSE Sensex is currently trading at 34616.93, down by 342.79 points or 0.98% after trading in a range of 34426.29 and 34698.99. There were 7 stocks advancing against 24 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index dipped 0.15%, while Small cap index was down by 0.32%.

The few gaining sectoral indices on the BSE were Power up by 0.26%, PSU up by 0.25%, Utilities up by 0.24% and FMCG was up by 0.02%, while Energy down by 1.36%, Bankex down by 1.22%, Realty down by 0.88%, Telecom down by 0.85% and Oil & Gas was down by 0.84% were the top losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 4.57%, SBI up by 1.46%, Sun Pharma up by 0.73%, Asian Paints up by 0.72% and Power Grid Corporation up by 0.36%. On the flip side, Indusind Bank down by 2.89%, HDFC Bank down by 2.19%, ICICI Bank down by 2.12%, HDFC down by 1.97% and Reliance Industries down by 1.73% were the top losers.

Meanwhile, amid Urjit Patel’s unexpected resignation as the Reserve Bank of India (RBI) governor, Moody's Investors Service has said that independence of the central bank is an important consideration in assessing a country's institutional strength and any attempt to curtail would be credit negative. It added that while the motivation for the RBI Governor's resignation is unclear, the independence of a country's central bank is an important consideration in their assessment of a sovereign's institutional strength.

The agency further said it assumes that the RBI will continue to pursue price and financial stability and implement policies towards these goals. It said ‘We would consider signs that the government attempts to curtail the central bank's independence to be credit negative. It said ‘our assessment of institutional strength ultimately focuses on the quality and policy outcomes of the institutions themselves, not on the individuals leading them.’

Urjit Patel, whose three-year term was to end in September 2019, is the first governor since 1990 to step down before his term ended. Patel cited personal reasons for his resignation. Patel's resignation came four days ahead of the December 14 meeting of the central bank that is scheduled to discuss issues of simmering differences with the government.

The CNX Nifty is currently trading at 10398.60, down by 89.85 points or 0.86% after trading in a range of 10333.85 and 10413.95. There were 19 stocks advancing against 31 stocks declining on the index.

The top gainers on Nifty were Yes Bank up by 4.23%, Indiabulls Housing up by 1.81%, Tech Mahindra up by 1.50%, SBI up by 1.35% and Asian Paints up by 0.99%. On the flip side, Indusind Bank down by 2.75%, HDFC Bank down by 2.29%, ICICI Bank down by 2.02%, HDFC down by 1.84% and Reliance Industries down by 1.83% were the top losers.

Asian markets are trading mostly in red; Nikkei 225 slipped 58.94 points or 0.28% to 21,160.56, Straits Times dropped 12.61 points or 0.41% to 3,059.83, Hang Seng dipped 29.34 points or 0.11% to 25,723.04, KOSPI shed 0.60 points or 0.03% to 2,053.19 and Jakarta Composite was up by 35.02 points or 0.57% to 6,076.34.

On the flip side, Taiwan Weighted gained 55.48 points or 0.58% to 9,703.02 and Shanghai Composite was up by 7.17 points or 0.28% to 2,591.75.