Indian markets join global meltdown

Indian equity benchmarks joined global meltdown on Monday, with Sensex and Nifty falling more than a percent each. The start of day was slightly higher, buoyed by the Economic Advisory Council to the Prime Minister (EAC-PM’s) statement that the country’s economic growth is likely to remain in the range of 7-7.5 per cent in the next few years. It added that the growth rate can be easily increased by 1 per cent by addressing structural problems through reforms. Some support also came with Union Commerce and Industry Minister Suresh Prabhu’s statement that new policies of the government will help to increase India’s export from the current $321 billion to almost double in a few years. However, markets soon turned negative, with Moody’s Investors Service’s statement that the steps announced by the government to aid MSMEs and the measures being planned to support farmers will increase the risk of fiscal slippage and push deficit to 3.4 per cent of GDP in the current financial year. The government budgeted the fiscal deficit for the current financial year at 3.3 per cent of the gross domestic product (GDP).

The indices continued their weak run for whole day to end the session lower, tracking weak opening of European markets. Investors got cautious with reports that foreign investors have pulled out close to Rs 6,000 crore so far from the Indian stock markets in January and experts believe this trend will continue in the coming months as well. Sentiments were pessimistic also because of a private report stating that the economy is likely to lose steam and may clip at 6.6 percent in the first half of 2019 from 7.4 percent a year ago, on account of the global slowdown and the uncertainty about the outcome of the forthcoming general elections. Adding more concerns among the market participants, another private report showed that the government is set breach the fiscal deficit target yet again by 40 bps for 2018-19, and raise the target to 3.5 percent for next fiscal in the forthcoming budget that may be skewed towards the rural economy.

On the global front, European markets were trading in red, as Germany's Ifo business confidence indicator dropped at a faster-than-expected pace in January and fell below 100 for the first time since May 2016. The survey results from the Ifo Institute showed that the Ifo business climate index dropped to 99.1 from 101 in December. On the inflation front, Spain's producer price inflation slowed for a third month in a row in December. The statistical office INE reported that producer prices climbed 1.6 percent year-on-year in December, slower than the 2.9 percent increase registered in November. Asian markets ended in red, as relief on news of a deal to reopen the US government following a prolonged shutdown gave way to edginess before a key round of Sino-US trade talks.

Back home, realty stocks ended lower, impacted by credit rating agency, ICRA’s latest survey report that the imposition of the Goods and Services Tax (GST) on the joint development projects has resulted in decline in the proportion on year-on-year basis from 93 per cent in FY17 to 71 per cent in FY18, while coal industry stocks remained under pressure, amid reports that India's 2018 thermal coal imports rose at the fastest pace in four years, despite moves by Prime Minister Narendra Modi's government to cut imports in a bid to reduce its trade deficit. Further, banking sector stocks remained in focus with report that the government empowered PSU banks to request lookout circulars (LOCs) against wilful defaulters and fraudsters. The Home Ministry has also authorised the Serious Fraud Investigation Office (SFIO), a statutory corporate fraud investigation agency, to request LOCs if it feels the suspect may escape from India.

Finally, the BSE Sensex lost 368.84 points or 1.02% to 35,656.70, while the CNX Nifty was down by 119.00 points or 1.10% to 10661.55.

The BSE Sensex touched a high and a low of 36,124.26 and 35,565.15, respectively and there were 07 stocks advancing against 24 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index dipped 1.84%, while Small cap index was down by 1.99%.

The only gaining sectoral indices on the BSE were TECK up by 0.80% and IT up by 0.42%, while Basic Materials down by 2.09%, Healthcare down by 2.08%, Bankex down by 1.86%, Industrials down by 1.56% and Auto down by 1.40% were the top losing indices on BSE.

The top gainers on the Sensex were TCS up by 1.71%, Coal India up by 1.51%, Larsen & Toubro up by 1.17%, Power Grid up by 0.97% and Asian Paints up by 0.56%. On the flip side, Yes Bank down by 5.46%, Bajaj Finance down by 5.40%, ICICI Bank down by 3.82%, Indusind Bank down by 3.10% and Hero MotoCorp down by 2.55% were the top losers.

Meanwhile, the government has imposed anti-dumping duty for five years on import of Chinese chemical used in photography and manufacturing of dyes to guard domestic players from cheap imports from the neighbouring country. It is for the second time in a row that anti-dumping duty has been imposed on the import of the chemical from China. The duty was to expire in March 2019.

According to a notification of the Central Board of Indirect Taxes and Customs (CBIC), the anti-dumping duty on Meta Phenylenediamine (MPDA) imported from China will be in the range $573.92-$1,015.44 a tonne. The levy has been imposed after the Directorate General of Trade Remedies (DGTR), the investigation arm of the commerce ministry, made a recommendation for the same. DGTR was earlier known as the Directorate General of Anti-dumping and Allied Duties (DGAD). On the recommendation of DGAD, a definitive anti-dumping duty was imposed on the chemical in March 2014. Later, Aarti Industries filed an application before DGAD for review and continuation of the duty on the chemical.

Countries carry out the anti-dumping probe to determine whether the domestic industries have been hurt because of a surge in cheap imports. As a counter measure, they impose duties under the multilateral regime of the World Trade Organization. The duty is aimed at ensuring fair trading practices and creating a level-playing field for domestic producers with regard to foreign producers and exporters.

The CNX Nifty traded in a range of 10,804.45 and 10,630.95. There were 14 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were Zee Entertainment up by 15.73%, Bharti Infratel up by 2.39%, TCS up by 2.04%, Coal India up by 2.01% and Larsen & Toubro up by 1.29%. On the flip side, Adani Ports & SEZ down by 12.53%, Indiabulls Housing Finance down by 6.51%, Bajaj Finance down by 5.45%, Yes Bank down by 5.28% and Bajaj Finserv down by 4.30% were the top losers.

European markets were trading in red; UK’s FTSE 100 lost 2.91 points or 0.04% to 6,806.31, France’s CAC decreased 16.25 points or 0.33% to 4,909.57 and Germany’s DAX was down by 22.60 points or 0.2% to 11,259.19.

Asian markets ended mostly in red on Monday after US President Donald Trump announced an agreement to temporarily end the record-setting 35-day-old government shutdown without getting the $5.7 billion he had demanded from Congress for a border wall. Investors looked ahead to the next round of US-China trade talks as well as the next key Brexit debate in the House of Commons for further direction. US-China trade talks will resume in Washington this week, with markets hoping for a thaw in the escalating tensions after US Treasury Secretary Steven Mnuchin said the two countries were ‘making a lot of progress’ in trade talks. Investors also shifted their attention to the Federal Open Market Committee's (FOMC) two-day meeting starting Tuesday amid growing expectations of dovish hints from the US central bank. Chinese shares ended lower amid reports that the Trump's administration has been pressuring America's allies to bar Huawei and other Chinese tech firms from building the infrastructure needed for the implementation of the next generation 5G wireless standard. Further, Japanese shares closed down as the yen strengthened and investors braced for earnings results from major US tech companies such as Apple and Microsoft.