Bourses give up gains to end in red

Key Indian equity benchmarks gave up their gains on Wednesday to end the trading session in negative territory. The start of the day was jubilant, taking support with the Reserve Bank of India (RBI) stating that it would infuse Rs 12,500 crore into the system through open market operations. The decision on OMO is based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward. Traders took encouragement with a report that consumer market is expected to grow at 12 percent annually over the next decade and touch Rs 335 lakh crore. The consumer market was around Rs 110 lakh crore in 2018, clipping past 13 percent annually in the past decade when it stood at Rs 31 lakh crore in 2008. Some comfort also came with Corporate Affairs Secretary Injeti Srinivas’ statement that the government would soon take effective steps to discourage people from making frivolous bids under the Insolvency and Bankruptcy Code (IBC). He noted that the IBC mainly seeks to address the issue of stressed assets in a time-bound manner.

However, the indices turned negative in afternoon deals to close lower, affected by the Controller General of Accounts’ (CGA) latest data showing that the central government’s fiscal deficit has widened and touched 121.5% of the full-year revised target of Rs 6.34 lakh crore at the end of January. The fiscal deficit, or the gap between the government's expenditure and revenue, stood at Rs 7.70 lakh crore during April-January of the current financial year ending March. Sentiments also got worsened after the government detected Rs 20,000 crore worth GST evasion so far this fiscal and will take more steps to check frauds and increase compliance. Adding worries among the traders, the Vice President of India, M. Venkaiah Naidu expressed concern over the recent incidents of indiscretion, mismanagement and greed that ruined many business organisations and individual reputation as he stressed up on the need to incorporate business ethics and values as an important and integral element of management education.

On the global front, European markets were trading in red, as Austria's manufacturing growth slowed in February to its lowest level in over three years, driven by a sharp fall in new export orders and slower growth in output and employment. The survey data from IHS Markit showed that the headline UniCredit Bank Austria Manufacturing purchasing managers' index, or PMI, fell to 51.8 in February from 52.7 in January.  Adding concerns, Eurozone economic sentiment deteriorated for a sixth consecutive month and at a faster than expected pace in February. The survey results from the European Commission showed that the economic sentiment indicator fell to 105.3 from 106.2 in January. The industrial confidence index dropped to -0.2 from 0.7. Asian markets ended mixed, as caution prevailed ahead of a crucial meeting between US President Donald Trump and North Korean leader Kim Jong Un in Vietnam.

Back home, most of the realty companies stocks ended higher, with credit rating agency Moody's latest report showing that the reduction in GST is credit positive for India's property developers because the reduction in tax will boost demand and increase sales of properties under construction. Banking sector stocks remained in focus with the RBI stating that Allahabad Bank, Corporation Bank and Dhanlaxmi Bank have been taken out of the Prompt Corrective Action (PCA) framework. Bank of India (BoI), Bank of Maharashtra (BoM) and Oriental Bank of Commerce (OBC) were taken out of PCA framework on January 31 after infusion of capital in these banks. Power industry stocks also remained in limelight, as Power Minister R K Singh stated that India will achieve 100 per cent household electrification by March 31 as envisaged in the Saubhagya scheme and the next goal is to achieve round the clock power supply to all households.

Finally, the BSE Sensex lost 68.28 points or 0.19% to 35,905.43, while the CNX Nifty was down by 28.65 points or 0.26% to 10,806.65.

The BSE Sensex touched a high and a low of 36,371.11 and 35,735.33, respectively and there were 16 stocks advancing against 15 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.40%, while Small cap index was up by 0.17%.

The top gaining sectoral indices on the BSE were Capital Goods up by 1.13%, Industrials up by 0.49%, Basic Materials up by 0.48%, Healthcare up by 0.31% and Auto up by 0.31%, while Consumer Durables down by 0.70%, Power down by 0.45%, Bankex down by 0.44%, Telecom down by 0.43% and Metal down by 0.42% were the top losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 2.43%, Bajaj Auto up by 2.09%, Larsen & Toubro up by 1.49%, Sun Pharma up by 1.39% and Axis Bank up by 1.09%. On the flip side, Tata Motors - DVR down by 3.03%, Tata Motors down by 3.01%, Vedanta down by 2.92%, Hindustan Unilever down by 1.77% and Kotak Mahindra Bank down by 1.61% were the top losers.

Meanwhile, in order to curb excessive salary payout practices, the Reserve Bank of India (RBI) has proposed that at least 50 per cent of compensation of senior officials of private and foreign banks, including whole time directors and chief executive officers, ‘should be variable’. The RBI has also proposed that variable pay of CEO and whole-time directors, among other key personnel, should be capped at 200 percent of fixed pay. Earlier, variable pay was capped at 70 percent of fixed pay but did not include Employee Stock Option Plan (ESOP).

Apart from CEOs and whole-time directors, the proposed changes in compensation would be applicable for material risk takers and control function staff. It has also been suggested that ESOPs should be included as a component of variable pay. Further, it added that in case of divergence, no proposal for increase in variable pay (for the assessment year) should be entertained. In January 2012, the RBI had issued the compensation guidelines for implementation by private sector and foreign banks from the financial year 2012-13. These (2012) guidelines are being reviewed, with an objective to better align with FSB (Financial Stability Board) Principles and Implementation Standards, based on experience and evolving international best practices.

High pay packets and excessive risk-taking ways in the banking industry have been under the scanner ever since the global financial crisis of 2008. Employees were too often rewarded for increasing short-term profit without adequate recognition of the risks and long-term consequences for their organisations.

The CNX Nifty traded in a range of 10,939.70 and 10,751.20. There were 20 stocks advancing against 30 stocks declining on the index.

The top gainers on Nifty were Bharti Airtel up by 2.66%, Ultratech Cement up by 2.15%, LT up by 1.51%, Bajaj Auto up by 1.46% and Sun Pharma up by 1.29%. On the flip side, Bharti Infratel down by 3.73%, Vedanta down by 3.30%, Wipro down by 3.28%, Tata Motors down by 3.23% and Hindustan Unilever down by 2.07% were the top losers.

European markets were trading in red; UK’s FTSE 100 fell 53.22 points or 0.74% to 7,097.90, France’s CAC dropped 19.87 points or 0.38% to 5,218.85 and Germany’s DAX was down by 89.22 points or 0.77% to 11,451.57.

Asian markets ended mixed on Wednesday as investors welcomed dovish comments on monetary policy from the US Federal Reserve and eagerly looked forward to the second summit between US President Donald Trump and North Korean leader Kim Jong Un in Vietnam later in the day. Chinese shares ended higher after Fed Chair Powell reiterated the US central bank would stay patient on monetary policy in the face of a slowing economy. Further, Japanese shares ended higher as gains in the defensive sector offset profit taking in China-related stocks. Meanwhile, Taiwan shares was marginally lower after a government report showed Taiwan's industrial production fell for a second straight month in January.