Repo rate cut fails to enthuse markets on Thursday

The Reserve Bank of India’s (RBI) the policy repo rate failed to enthuse Indian equity benchmarks on Thursday, as both the larger peers, Sensex and Nifty, settled the day almost flat. RBI in its sixth bi-monthly monetary policy review of 2018-19, has reduced the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 6.50% to 6.25% with immediate effect. The RBI also decided to change the monetary policy stance from calibrated tightening to neutral. The start of the day was firm, aided by Moody's Investors Service’s statement that the tax relief steps for the middle-class and direct cash transfer programme for farmers will give a fiscal stimulus of about 0.45% of Gross Domestic Product (GDP), and support growth through increased consumption over the near term, albeit at a fiscal cost. Some support also came with report that the government allowed export of bio-fuels from special economic zones (SEZs) and export-oriented units (EoUs) with certain conditions. In August 2018, the government imposed restrictions on export of bio-fuels for non-fuel purposes.

In the second half of the session, the markets turned volatile and erased all of their gains to end the trading session flat, tracking weak global markets. Anxiety spread among the traders, after RBI raised concerns that in spite of soft crude oil prices and the lagged impact of the recent depreciation of the Indian rupee on net exports, slowing global demand could pose headwinds and added that in particular, trade tensions and associated uncertainties appear to be moderating global growth. The market participants paid no heed towards reports that the commerce ministry proposed several measures such as setting up of a separate fund, single-window e-marketplace and a law to define the role of various stakeholders, as part of the draft national logistics policy. The street also overlooked a report stating that the government decided to raise additional Rs 36,000 crore through dated securities during the current financial year (FY19), with an aim to meet additional expenses. The government will borrow additional Rs 36,000 crore through two tranches of Rs 18,000 crore each during March 11-15 and March 18-22.

On the global front, European markets were trading in red, as Germany's factory orders decreased for a second straight month in December and at a faster pace, defying expectations for a modest gain. The preliminary data from the Federal Statistical Office showed that manufacturing orders decreased a calendar and seasonally adjusted 1.6% from the previous month, while they were forecast to rise 0.3%. The latest fall was the most since June, when orders shrunk 3.6%. Adding more worries, Italy's construction sector grew at the weakest pace in eight months in January. The survey results from IHS Markit showed that the IHS Markit Construction Purchasing Managers' Index or PMI fell to 51.8 in January from 52.8 in December. The weakest expansion since May 2018. Asian markets ended mixed, after US markets fell in thin trading overnight to snap a five-session winning streak. Some of the markets, including China, remained closed for the Lunar New Year holidays.

Back home, stocks related to the agri industry remained in focus, amid reports that the Cabinet Committee of Economic Affairs gave its approval for the creation of a corpus of Rs 2000 crore for Agri-Market Infrastructure Fund (AMIF) to be created with NABARD for development and up-gradation of agricultural marketing infrastructure in Gramin Agricultural Markets and Regulated Wholesale Markets. Mining and minerals sector stocks remained in limelight, after the Cabinet Committee of Economic Affairs approved the proposal for continuation of the Scheme of Exploration of Coal and Lignite with an expected expenditure of Rs 1875 crore. Further, shares related to broadcasting sector too remained in bright spot after the Telecom Regulatory Authority of India (Trai) said new broadcast tariff may actually decrease TV bills, rubbishing claims that the new broadcast tariff regime would increase bill amounts of cable TV and DTH subscribers.

Finally, the BSE Sensex fell 4.14 points or 0.01% to 36,971.09, while the CNX Nifty was up by 6.95 points or 0.06% to 11,069.40.

The BSE Sensex touched a high and a low of 37,172.18 and 36,898.80, respectively and there were 20 stocks advancing against 11 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.74%, while Small cap index was up by 0.81%.

The top gaining sectoral indices on the BSE were Telecom up by 2.48%, Auto up by 1.77%, Healthcare up by 1.47%, Consumer Disc up by 1.02% and Basic Materials up by 0.82%, while Utilities down by 0.88%, Energy down by 0.77%, Power down by 0.46%, Capital Goods down by 0.08% and Metal down by 0.03% were the top losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 4.48%, Bajaj Auto up by 3.03%, Tata Motors up by 2.64%, Tata Motors - DVR up by 2.33% and Hero MotoCorp up by 2.01%. On the flip side, Reliance Industries down by 1.50%, Power Grid down by 1.12%, HDFC down by 1.08%, Larsen & Toubro down by 0.88% and Indusind Bank down by 0.82% were the top losers.

Meanwhile, the Cabinet Committee on Economic Affairs (CCEA) has approved a proposal to implement the Central Public Sector Undertaking (CPSU) Scheme Phase-II for setting up 12,000 MW grid-connected solar photovoltaic (PV) power projects with Viability Gap Funding (VGF) support of Rs 8,580 crore for self-use or use by both central and state government entities.

With the implementation of the scheme, 12,000 MW or more of grid connected solar PV power projects would be set up by government producers in four years (2019-20 to 2022-23), thereby generating investment of about Rs 48,000 crore. The Scheme will mandate use of both SPV cells and modules manufactured domestically as per specifications and testing requirements fixed by Ministry of New & Renewable Energy (MNRE).

The proposal will provide direct employment to around 60,000 persons for about one year in pre-commissioning activities/construction phase and to around 18,000 persons for about 25 years in the operation and maintenance period. In addition, more than 1.2 lakh employment opportunities will be created for the local population by way of involvement in setting up of solar power projects and also in manufacturing of domestically produced cells and modules. 

The CNX Nifty traded in a range of 11,118.10 and 11,043.60. There were 30 stocks advancing against 20 stocks declining on the index.

The top gainers on Nifty were Zee Entertainment up by 4.56%, Sun Pharma up by 4.13%, Eicher Motors up by 3.56%, Bajaj Auto up by 3.01% and Grasim up by 2.86%. On the flip side, JSW Steel down by 2.35%, Reliance Industries down by 1.70%, Larsen & Toubro down by 1.46%, Power Grid down by 1.18% and HDFC down by 1.13% were the top losers.

European markets were trading mostly in red; France’s CAC was down by 16.54 points or 0.33% to 5,062.51 and Germany’s DAX fell 59.25 points or 0.52% to 11,265.47, while UK’s FTSE 100 was up by 3.49 points or 0.05% to 7,176.58.

Asian markets ended mixed on Thursday, as investors shrugged off US President Donald Trump's State of the Union address and looking for progress in the US-China trade dispute, ahead of crucial talks in Beijing next week. Japanese shares ended lower despite SoftBank announcing a share buyback following the company's release of strong quarterly earnings. Meanwhile, markets in Taiwan, China and Hong Kong were closed for the Lunar New Year holidays.