Last hour sell-off pulls markets lower

Last hour sell-off pulled Indian equity benchmarks lower on Friday, with both the larger peers, the Sensex and the Nifty ending the session lower by over 150 and 50 points, respectively. The markets made a fabulous start of the day, aided by apex exporters’ body, Federation of Indian Export Organisations (FIEO) stating that the tariff war between the US and China is benefitting India as its exports to the neighbouring country have increased by about 32 per cent during the June-November 2018 period to $8.46 billion. Exports to China had stood at $6.37 billion in June-November 2017. Growth in exports to China is beneficial for India as it has huge trade deficit with the neighbouring country. Adding some optimism, Vice President M Venkaiah Naidu said that the country's Goods and Services Tax would usher in long term gains despite initial problems and claimed that the world would take a cue from the GST experiment.

However, key indices failed to hold the momentum and ended the session in negative terrain, despite positive cues from global markets. Domestic sentiments got hit after Global rating agency Moody’s said that the government policies to support the incomes of small enterprises and low-income households ahead of Lok Sabha elections will make fiscal consolidation harder. It further said that the fiscal deficit may touch 3.4 per cent of gross domestic product (GDP) for year ending March 2019, breach the target of 3.3 per cent. Adding some anxiety, United Nations head Antonio Guterres said that trade tensions impacting the world economy were essentially a ‘political problem’ and warned that a fragmented response to global challenges was a recipe for disaster. The street overlooked reports that India has emerged as one of the world's most-dynamic economies, developing at a great pace and keeping at the forefront of technology and social innovation.

On the global front, European markets were trading in green, after the European Central Bank left its key interest rates and forward guidance unchanged, in the first policy session since the end of its four-year long EUR 2.6 trillion asset purchase programme in December, as several risks including the persistent slowing of the economy, global trade tensions and the Brexit chaos cloud the outlook for Eurozone growth. Traders shrugged off reports that Eurozone private sector expanded at the weakest pace in five-and-a-half years at the start of the year, led by weaker pace of growth in both manufacturing and services. The flash Composite PMI dropped to 66-month low of 50.7 from 51.1 in December. The flash manufacturing PMI fell to a 50-month low of 50.5 while the services PMI eased to a 65-month low of 50.8.  Asian markets ended in green, after US Treasury Secretary Steven Mnuchin said the United States and China were making a lot of progress in talks and he looked forward to discussions with Chinese Vice Premier Liu He next week, with currency issues also on the agenda.

Back home, metals stocks ended lower even though rating agency ICRA’s forecast that domestic steelmakers are likely to put Rs 75,000 crore to Rs 80,000 crore in capital expenditure or capex between FY19 and FY21. The report is bullish on the profitability of steel companies this fiscal, saying it will improve the FY18 figures on the back of superior performance during April-September period of FY19. Banking stocks also fell, despite reports that Piyush Goyal, who has been given an additional charge of the finance ministry in the absence of Arun Jaitley, is scheduled to meet chiefs of the state-owned banks on January 28 to review financial performance of the banks. Further, stocks related to the agri sector remained in focus with Minister of State for Agriculture Parshottam Rupala’s statement that the government will soon announce a package for farmers to boost their income, amid speculations that the Centre is considering various measures to address distress in the farm sector.

Finally, the BSE Sensex lost 169.56 points or 0.47% to 36,025.54, while the CNX Nifty was down by 69.25 points or 0.64% to 10,780.55.

The BSE Sensex touched a high and a low of 36,474.48 and 35,953.15, respectively and there were 10 stocks advancing against 21 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 1.20%, while Small cap index was down by 1.58%.

The top gaining sectoral indices on the BSE were Telecom up by 1.74%, IT up by 0.20%, Oil & Gas up by 0.18%, Consumer Durables up by 0.07% and Energy up by 0.07%, while Realty down by 4.09%, Auto down by 3.14%, Consumer Disc down by 3.14%, Basic Materials down by 2.07% and Industrials down by 1.23% were the top losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 2.71%, HCL Tech. up by 2.54%, Bharti Airtel up by 1.81%, TCS up by 0.91% and Vedanta up by 0.88%. On the flip side, Maruti Suzuki down by 7.40%, Hero MotoCorp down by 4.23%, Tata Motors - DVR down by 2.48%, ICICI Bank down by 2.16% and Asian Paints down by 2.00% were the top losers.

Meanwhile, World Trade Organization’s (WTO) chief Roberto Azevedo has warned that the global trading system and the WTO are heading for the ‘dark ages’ if urgent steps are not taken. Therefore, he said that the world needs a global multilateral agreement for e-commerce. He also emphasized that the multilateral trading system created after the Second World War has never seen challenges this big.

However, Azevedo argued that the multilateral trading system is viable. He said “we are working to make it even more viable. I don't think a stagnant multilateral system is viable, it has to evolve and respond to the global reality and a world that is changing faster than it ever has before.” He added that this has not been happening so far.

WTO chief said “it's unacceptable that an organisation like the WTO in 2018 was not talking about e-commerce or the digital economy. It's the core of the global evolution today. That's when the reform conversation began.” He also said “the system needs to be updated, modernized, and that's the challenges that we have now. Either the system is updated, or it will lose relevance and disappear. It will be supplanted by other mechanisms. This is a challenge for the global community, not the WTO.”

The CNX Nifty traded in a range of 10,931.70 and 10,756.45. There were 18 stocks advancing against 32 stocks declining on the index.

The top gainers on Nifty were Bharti Infratel up by 6.46%, HCL Tech. up by 3.02%, Yes Bank up by 2.11%, Cipla up by 1.54% and Bharti Airtel up by 1.28%. On the flip side, Zee Entertainment down by 30.92%, Maruti Suzuki down by 8.11%, Ultratech Cement down by 6.93%, Hero MotoCorp down by 4.27% and Indiabulls Housing Finance down by 3.82% were the top losers.

European markets were trading in green; UK’s FTSE 100 gained 16.66 points or 0.24% to 6,835.61, France’s CAC rose 33.23 points or 0.68% to 4,905.19 and Germany’s DAX was up 135.74 points or 1.22% to 11,265.92.

Asian markets ended higher on Friday after US Treasury Secretary Steven Mnuchin said the United States and China were ‘making a lot of progress’ in talks and he looked forward to discussions with Chinese Vice Premier Liu He next week, with currency issues also on the agenda. Separately, US Commerce Secretary Wilbur Ross said that the US is ‘miles and miles’ from a trade deal with China but there is a fair chance they will get a deal. Japanese shares ended higher as chip-related firms tracked their US peers higher following well-received earnings out of the semiconductor sector. Further, Chinese shares closed higher, helped by strength in banking shares, after regulators unveiled measures to help lenders replenish capital, but lingering worries over Sino-US trade talks and economic health capped gains. China will allow insurance firms to invest in tier-2 capital bonds and perpetual bonds issued by banks, and set up a central bank bills swap to improve the liquidity of banks’ perpetual bonds. The move will make banking shares more attractive to investors.