Bears tighten grip on Dalal Street; Sensex, Nifty down over 1% each

Bears tightened grip on Dalal Street, with both the larger peers closing with losses of more than a percent. After a cautious start of Thursday’s trading session, the markets managed to keep their heads in green terrain during early deals, supported by the Finance Ministry’s statement that the Indian economy is projected to be the fastest-growing major economy in the current and upcoming fiscal 2019-20. It also emphasized that the government has taken several steps to boost investors’ confidence. It added that the average growth of the Indian economy between 2014-15 and 2017-18 was 7.3%, fastest among the major economies in the world. Some comfort also came with the Finance Ministry’s another statement that the direct tax-to-GDP ratio of 5.98% achieved during 2017-18 fiscal is the best in the last 10 years. It was 5.57% in 2016-17 and 5.47% in 2015-16.The market participants were also got some support with the government’s decision to provide 3% interest subsidy to merchant exporters, entailing an expenditure of Rs 600 crore, to enhance liquidity with a view to boosting outbound shipments.

However, the key indices failed to hold their gains and traded lackluster for the most part of the session, as all sectoral indices collapsed barring Telecom and FMCG. Weak global cues also spooked the markets. Domestic sentiments remained pessimistic with a private report stating that global economic growth is expected to slow down in 2019, as tighter monetary policy, weaker earnings growth and political challenges confront the world's major economies. The report said that for the year ahead that it expected global economic growth to slow to 3.6% in 2019, after seeing a growth of 3.8% in 2018. Traders paid no heed towards Finance Minister Arun Jaitley’s statement that Rs 80,000 crore has been recovered by creditors in 66 cases resolved by NCLT and around Rs 70,000 crore more is likely to be realised by March-end. Investors also overlooked a report that the Reserve Bank of India (RBI) has set up the eight-member committee to suggest long-term solutions for the economic and financial sustainability of the micro, small and medium enterprises (MSME) sector.

On the global front, European markets were trading in red, as Eurozone manufacturing expanded at the weakest pace since early 2016 in December as new orders fell for a third month and business confidence eroded to a six-year low. As per results of the survey by IHS Markit, the final Eurozone Manufacturing Purchasing Managers' Index, or PMI, was 51.4, unchanged from the flash estimate, but lower than November's 51.8. The street overlooked reports that UK manufacturing sector expanded at the fastest pace in six months in December, defying expectations for a slowing, as demand strengthened as manufacturers and clients prepared for Brexit. The CIPS UK manufacturing Purchasing Managers' Index, or PMI, climbed to 54.2 from November's 53.6. Asian markets ended in red, as uncertainty about US trade policy and political wrangling in Washington over federal government funding of a border wall fueled concerns about a global economic slowdown. Brexit-related worries and Apple's profit warning, citing a weakening economy in China and lower-than-expected iPhone revenue, also spooked markets.

Back home, NBFC companies stocks remained in focused ahead of Reserve Bank Governor Shaktikanta Das’ meetings with MSME associations and representatives of NBFCs next week, while stocks related to the textile industry declined, amid report that Indian textile companies face higher trade barriers, compared to other competing countries like Bangladesh, Vietnam and Pakistan, in the US and European Union. Construction & Engineering industry stocks fell, even though ICRA gave a stable outlook to the construction sector, on the back of strong order inflow in the last couple of years and a huge pipeline of projects to be awarded in the infrastructure segment. Further, coal sector stocks remained buzzing with Minister for Coal, Piyush Goyal’s statement that the current focus of the government is on boosting production from operational coal mines, while aviation industries stocks ended lower, despite a private report stated that India may hold ‘informal talks’ with nine countries, including Saudi Arabia and China, to expand bilateral flying foreign rights during the Global Aviation Summit later this month.

Finally, the BSE Sensex lost 377.81 points or 1.05% to 35,513.71, while the CNX Nifty was down by 120.25 points or 1.11% to 10,672.25.

The BSE Sensex touched a high and a low of 35,999.66 and 35,475.57, respectively and there were 5 stocks advancing against 26 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index plunged 1.03%, while Small cap index was down by 0.58%.

The only gaining sectoral indices on the BSE were Telecom up by 0.57% and FMCG up by 0.07%, while Metal down by 2.35%, Oil & Gas down by 1.75%, Basic Materials down by 1.66%, Capital Goods down by 1.63% and Energy down by 1.52% were the top losing indices on BSE.

The top gainers on the Sensex were HCL Tech. up by 0.50%, Bajaj Auto up by 0.41%, Asian Paints up by 0.32%, Hindustan Unilever up by 0.19% and Bharti Airtel up by 0.11%. On the flip side, Mahindra & Mahindra down by 3.04%, ONGC down by 2.98%, Vedanta down by 2.64%, Tata Steel down by 2.59% and Larsen & Toubro down by 2.27% were the top losers.

Meanwhile, Former President of the industry body National Association of Software and Services Companies (NASSCOM), R Chandrashekhar has said that growth momentum is strong for information technology (IT) industry and is expected to continue in future. He stated that 2018 has been a watershed year for the Indian IT industry because in 2016 people were writing its ‘obituaries’. He further said 2017 was a difficult year for the industry and there were many challenges during that period and in 2018 headlines were all about how the IT industry has really made really big strides in digital transformation space globally, which basically shows that the shift to digital has not killed the IT industry.

On the contrary, it has made it stronger and important as a partner for its clients. Consequently, that’s very big accomplishment by the industry and shows that the growth momentum will continue into at least foreseeable future because this a trend which is going to remain there for a long time now. He asserted that it is a clear and positive sign for the industry. Also, he noted that many big IT companies in India are reporting a very strong deal pipeline and, so, the growth momentum can be expected to continue. Several companies are forming joint ventures and also acquiring companies which are important strategies to keep the growth.

On things in 2019 which could have dampening effect on the export-dependent IT industry, Chandrashekhar said if American economy slows down, it would have an impact, as also a ‘hard Brexit’. Appreciation of rupee would have impact on rupee earnings of companies. However, he stressed that one should not be unduly concerned about those factors because they don’t fundamentally affect the strength of the Indian IT industry.

The CNX Nifty traded in a range of 10,814.05 and 10,661.25. There were 08 stocks advancing against 42 stocks declining on the index.

The top gainers on Nifty were Bharti Infratel up by 3.31%, Titan up by 0.31%, HCL Technologies up by 0.28%, Asian Paints up by 0.27% and Bajaj-Auto up by 0.11%. On the flip side, Eicher Motors down by 4.22%, HPCL down by 3.47%, ONGC down by 3.43%, Indiabulls Housing Finance down by 3.36% and Indian Oil Corporation down by 3.32% were the top losers.

All the European markets are trading in red; FTSE lost 34.06 points or 0.51% to 6,700.17, CAC fell 49.21 points or 1.05% to 4,640.18 and DAX was down by 114.50 points or 1.08% to 10,465.69.

Asian shares ended mostly lower on Thursday as Apple's profit warning weighed on tech shares across Asia, most notably in Taiwan and South Korea. Apple specifically highlighted slowing Chinese growth and Sino-US trade tensions, exacerbating investors’ concerns about the health of the global economy. The news also sparked a 'flash crash' in holiday-thinned currency markets as investors rushed to less risky assets, with the Japanese yen soaring against most major currencies in a matter of seconds. Meanwhile, the Japanese market was closed for a public holiday.