Sensex, Nifty suffer massive bout of selling on Tuesday

Key Indian equity markets suffered a massive bout of selling on Tuesday, with Sensex and Nifty ending lower by around 135 and 40 points, respectively. After a negative opening, the key indices traded in negative terrain throughout the session, with India Ratings’ report warning that with populist decisions like farm loan waivers and other financial support schemes likely to gain significance in the run-up to the forthcoming next general elections, aggregate fiscal deficit of the states is expected to reach 3.2 per cent in FY20. It expects the states’ revenue account on aggregate to clock a deficit of 0.5 per cent of Gross Domestic Product (GDP) in FY20 due to a higher growth in revenue spends than revenue receipt. Domestic sentiments also got hit with a private report stating that chief executive officers (CEOs) across the globe harbour a grim outlook towards 2019 and the economy with nearly 30 percent of them projecting a decline in global economic growth. This is surprising when seen against the record jump in optimism projected by CEOs just last year. Investors took note of a report that India has moved up one position to rank 80th on the global talent competitive index, but remains a laggard among the BRICS nations.

Anxiety also remained among the investors, amid Crisil’s latest report that even as 12 large states grew faster than national GDP in FY18, the same has not translated into job creation, as GSDP expansion has come in from sectors which are less job-intensive. It said 11 states have recorded lower growth in employment-intensive sectors such as manufacturing, construction and trade, and hotels, transport and communication services, compared with the national rate. But, the markets managed to come off their intraday low points in last leg of the trade, supported by the International Monetary Fund’s (IMF) statement that India will further build its lead as the world’s fastest-growing major economy as it picks up pace next year while the global economy is forecast to slow. India’s GDP is forecast to expand 7.5% in FY20 and 7.7% in FY21, while China’s growth is seen at 6.2% in both years. Some relief also came after the Reserve Bank of India (RBI) proposed to relax norms for entry of new players in the retail payment systems with a view to give a boost to innovation and competition. The RBI has been issuing guidelines for various payment systems and grants authorisation to non-banks for setting up and operating payment systems.

On the global front, European markets were trading in red, as Dutch consumer confidence eased for a sixth month running in January to its lowest level in over four years and the fall was the worst in more than seven years. The preliminary data from the Central Bureau of Statistics showed that the consumer confidence index dropped to 1 from 9 in December. The latest reading was the lowest since February 2015, when it was at minus 1. On inflation front, Germany's producer price inflation eased to a seven-month low in December. The figures from Destatis showed that producer prices climbed 2.7 percent year-on-year in December, slower than the 3.3 percent increase seen in November. This was the lowest rate since May, when prices rose 2.5 percent. Asian markets ended in red, as the IMF cut its estimate for global growth, citing a range of triggers beyond escalating trade tensions. IMF put global growth estimate at 3.5 percent in 2019 and 3.6 percent in 2020, down 0.2 and 0.1 percentage point, respectively, from last October's forecasts.

Back home, airlines stocks ended mostly higher, after the domestic air passenger count gone up by 12.91% in the month of December 2018. According to the Directorate General of Civil Aviation (DGCA) data, domestic airlines flew 126.93 lakh passengers in December 2018, as against 112.42 lakh passengers carried in the same month of last year. However, stocks related to metal industry ended lower, despite reports that India has surged past Japan to become the second largest steel producer in the world with expansion in output backed by a sound growth in demand. According to World Steel Association, India produced 96.92 million tonnes of crude steel during the first eleven months of 2018 compared to 92. 39 million tonnes during the same period of 2017, representing a growth of 4.9 per cent. Further, sugar stocks also fell with industry body Indian Sugar Mills Association (ISMA) revising the country’s sugar output estimate downward for the second time to 30.7 million tonne (MT) for the ongoing marketing year 2018-19, owing to a diversion for ethanol making.

Finally, the BSE Sensex fell 134.32 points or 0.37% to 36,444.64, while the CNX Nifty was down by 39.10 points or 0.36% to 10,922.75.

The BSE Sensex touched a high and a low of 36,650.47 and 36,282.93, respectively and there were 09 stocks advancing against 21 stocks declining, while 1 stock remain unchanged on the index.

The broader indices ended in red; the BSE Mid cap index lost 0.09%, while Small cap index was down by 0.49%.

The top gaining sectoral indices on the BSE were Healthcare up by 1.17%, Realty up by 0.91%, Consumer Durables up by 0.90%, Oil & Gas up by 0.41% and Energy up by 0.08%, while Metal down by 2.31%, Basic Materials down by 1.21%, Telecom down by 0.94%, Auto down by 0.86% and Industrials down by 0.58% were the top losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 4.95%, Kotak Mahindra Bank up by 1.92%, Bajaj Finance up by 1.07%, Hero MotoCorp up by 1.05% and Axis Bank up by 0.23%. On the flip side, Vedanta down by 3.50%, Tata Steel down by 3.13%, Mahindra & Mahindra down by 3.08%, HCL Tech. down by 2.18% and Bharti Airtel down by 2.00% were the top losers.

Meanwhile, in order to boost manufacturing and exports of footwear, the Council for Leather Exports (CLE) has urged the government to cut Goods and Services Tax (GST) rate on footwear priced above Rs 1,000 to 12 percent. At present, 5% GST rate is applicable for footwear having a retail sale price up to Rs 1000 per pair, while 18% GST rate is applicable for footwear having a retail sale price exceeding Rs 1000 per pair.

CLE Chairman P R Aqeel Ahmed said “as the sector holds huge potential both for manufacturing and exports, we need support from the government.” Talking about the refund of GST, he said CLE is organising a series of awareness and outreach programmes at all the leather clusters in the country. He noted that the refund of GST duties is happening on time and is helping both big and small exporters to further take new orders from global buyers.

Currently, exports of leather and its products stand at $6 billion. Major export destinations include Europe and the US. Earlier, the commerce minister had unveiled an incentive package of Rs 2,600 crore for the leather and footwear sector in order to boost the exports and creation of jobs in the sector.

The CNX Nifty traded in a range of 10,949.80 and 10,864.15. There were 20 stocks advancing against 30 stocks declining on the index.

The top gainers on Nifty were Sun Pharma up by 4.80%, Wipro up by 3.09%, Titan up by 1.99%, Kotak Mahindra Bank up by 1.89% and Dr. Reddy’s Lab up by 1.52%. On the flip side, Vedanta down by 3.65%, Tata Steel down by 3.26%, Mahindra & Mahindra down by 3.09%, Zee Entertainment down by 2.78% and JSW Steel down by 2.49% were the top losers.

European markets were trading in red; UK’s FTSE 100 declined 24.26 points or 0.35% to 6,946.33, France’s CAC fell 9.46 points or 0.19% to 4,858.32 and Germany’s DAX was down by 4.77 points or 0.04% to 11,131.43.

Asian markets ended mostly in red on Tuesday amid concerns about the global economic outlook after the International Monetary Fund (IMF) slashed its world economic forecast, citing a range of triggers beyond escalating trade tensions. These potential triggers include a ‘no-deal’ Brexit for the UK and a deeper-than-envisaged slowdown in China. The IMF now projects a 3.5 percent growth rate worldwide for 2019 and 3.6 percent for 2020, down 0.2 and 0.1 percentage points below its last forecasts in October. Brexit worries also lingered as British Prime Minister Theresa May offered nothing new to break the political deadlock just 10 weeks before Britain leaves the European Union. Chinese shares ended lower as investors braced for a tough start to 2019 amid weak economic outlook at home and abroad. Further, Japanese shares ended lower as the yen strengthened on worries over slowing global growth, stalled Brexit talks and the ongoing US government shutdown.