Indian equities add losses amid weak global cues

Adding losses, Indian equity benchmarks continued to trade under selling pressure in afternoon session, as selling momentum in the equities persisted. Sentiment on the street weakened further with the economic research wing of SBI stating that it is erroneous to come to a conclusion of heightened economic activity using the jump in currency in circulation (CIC). It estimated that cash in the economy at Rs 20.4 lakh crore, stressing the rural economy continues to be depressed. It pointed out to data from leading indicators, including passenger car sales, commercial vehicle sales and two wheeler sales, among others, which shows a dip in activity, to point out that the higher CIC does not suggest a jump in economic activity. Besides, muted earnings by some bluechip companies along with sliding rupee against dollar also served to keep underlying sentiment cautious. Investors even overlooked Chief Economic Adviser K V Subramanian’s statement the economic growth is likely to accelerate to 7.5% in 2019-20, from 7.2% projected for the current fiscal. The nominal rate we are expecting is 11.5% and inflation of about 4%.

On the global front, Asian markets were trading in red, tracking a weak Wall Street session as traders awaited the conclusion of U.S.-China talks in Beijing. Back home, the BSE Sensex is currently trading at 35531.39, down by 344.83 points or 0.96% after trading in a range of 35510.97 and 36022.57. There were 5 stocks advancing against 26 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell 1.69%, while Small cap index was down by 0.91%.

The top gaining sectoral indices on the BSE were Utilities up by 2.00%, Power up by 1.82%, Oil & Gas up by 0.73%, PSU up by 0.55% and Telecom up by 0.53%, while Healthcare down by 3.49%, Metal down by 2.46%, Basic Materials down by 2.26%, Auto down by 1.93% and Consumer Discretionary Goods & Services down by 1.44% were the losing indices on BSE.

The top gainers on the Sensex were NTPC up by 3.56%, Power Grid up by 3.52%, ONGC up by 3.41%, Coal India up by 1.52% and Larsen & Toubro up by 0.72%. On the flip side, Sun Pharma down by 4.95%, Tata Motors - DVR down by 3.75%, Tata Steel down by 3.59%, Tata Motors down by 3.41% and Vedanta down by 3.33% were the top losers.

Meanwhile, the economic research wing of State Bank of India (SBI) has said that jump in currency in circulation (CIC) cannot be taken as a leading indicator of heightened economic activity, specifically the narrative of large cash usage in informal economy. It also claimed that the higher CIC is because of a change in demand for cash more than two years after re-monetization and added that money supply has been restored to full level now.

It estimated cash in Indian economy at Rs 20.4 lakh crore, stressing the rural economy continues to be depressed. It pointed out to data from leading indicators, including passenger car sales, commercial vehicle sales and two wheeler sales, among others, which shows a dip in activity, to point out that the higher CIC does not suggest a jump in economic activity. Elaborating on the same, it said there is a trend towards using currency notes of lower denomination as the re-monetisation is going through and also pointed out that the printing of Rs 2000 notes, introduced post demonetisation in November 2016, has been stopped by the RBI.

It  explained ‘this means to sustain a transaction of same amount now, more currency notes are required/volume of currency notes goes up and thus by default the value of CIC also goes up as more and more small notes are printed to at least ensure we are not reneging on economic activity’.  Besides, It said ‘we are in a state of 'paradox' at present, where the CIC has expanded but the income velocity of money has shown a sharp plunge.’

The CNX Nifty is currently trading at 10635.75, down by 110.30 points or 1.03% after trading in a range of 10620.40 and 10785.75. There were 11 stocks advancing against 39 stocks declining on the index.

The top gainers on Nifty were Power Grid up by 3.46%, Bharti Infratel up by 3.43%, ONGC up by 3.25%, NTPC up by 3.24% and BPCL up by 3.07%. On the flip side, Dr. Reddys Lab down by 8.00%, Sun Pharma down by 5.13%, JSW Steel down by 4.26%, Hindalco down by 3.62% and Tata Steel down by 3.57% were the top losers.

All Asian markets were trading in red; Hang Seng decreased 560.03 points or 1.97% to 27,872.02, Jakarta Composite dropped 21.68 points or 0.34% to 6,398.34, Nikkei 225 slipped 239.08 points or 1.13% to 20,900.63, Taiwan Weighted dropped 24.23 points or 0.24% to 10,064.78, Shanghai Composite declined 36.06 points or 1.33% to 2,683.64, Straits Times trembled 18.26 points or 0.56% to 3,234.90 and KOSPI fell 29.76 points or 1.34% to 2,196.09.