Markets fail to hold record high levels; end lower of profit booking

Indian equity markets witnessed sharp fall to end Wednesday’s session near their intraday low points, with Sensex and Nifty settling below their crucial psychological levels of 38,900 and 11,650, respectively. After a fabulous start, the markets remained bullish for the most part of the session, aided by Asian Development Bank’s (ADB) flagship report that India's Gross domestic product (GDP) growth is set to pick up at 7.2 percent in 2019, on the back of strengthening consumption. It also said that the country’s economy is also expected to clock a growth rate of 7.3 percent in 2020 as policy rates are cut and farmers receive income support, bolstering domestic demand. Market participants were seen taking encouragement with a report that India’s exports are likely to register an all-time high of $330 billion in FY19, amid slowing global merchandise trade growth. Besides, March exports are expected to be above $30 billion, buoyed by strong performances by engineering and pharmaceuticals sectors.

But, in the last leg of the trade, key indices lost the momentum to close the session in red terrain, on the back of below normal monsoon forecast. Private weather forecaster Skymet said India’s monsoon rains were seen below normal this year. According to Skymet Weather, monsoon in 2019 was likely to be ‘below normal’ to the tune of 93 per cent of the long period average (LPA) of 887 mm for the fourth-month period from June to September. Adding more worries on the street, International Monetary Fund (IMF) Managing Director Christine Lagarde said that global growth has lost momentum amid rising trade tensions and tighter financial conditions, but pauses in rate hikes will help boost activity in the second half of 2019. Traders also got cautious with a private report that the Central Board of Direct Taxes (CBDT) collected Rs 1,117,416.5 crore (11.17 lakh crore) in total direct taxes in FY 2018-19, a shortfall of around Rs 83,000 crore or 7.4 percent of the Rs 12 lakh crore collection target.

On the global front, European markets were trading in green, as Eurozone retail sales grew for a second consecutive month and at a faster-than-expected pace in February. The preliminary data from Eurostat showed that retail sales rose 0.4 percent month-on-month in February, surpassing the street’s expectations for 0.10 percent growth. Besides, Spain's service sector grew at the fastest pace in over a year, driven by strong domestic demand and employment growth. The survey data from IHS Markit showed that the purchasing managers' index, or PMI, for the services sector rose to 56.8 from 54.5 in February. Asian markets ended higher, after media reports suggested the US and China have ironed out most of their differences in trade negotiations. They are drawing closer to a final trade agreement with final discussion centered on how to implement and enforce an agreement.

Back home, stocks related to the baking sector ended lower, impacted by credit rating agency, ICRA Vice President & Sector Head - Financial Sector Ratings, Anil Gupta’s statement that the quashing of RBI's 180-day period resolution or NCLT mechanism of NPA recovery by the Supreme Court can lead to negative impact for the banks if the loans are not resolved.  Further, telecom sector stocks remained in focus, amid reports that Cellular Operators Association of India (COAI), an industry body representing telecom companies, has sought implementation of the National Digital Communications Policy 2018 from the new government. The policy approved by the Cabinet in September last year aims to attract $100 billion investment and create 4 million jobs in the sector by 2022.

Finally, the BSE Sensex declined 179.53 points or 0.46% to 38,877.12, while the CNX Nifty was down by 69.25 points or 0.59% to 11,643.95.

The BSE Sensex touched a high and a low of 39,270.14 and 38,826.56, 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 lost 0.77%, while Small cap index was down by 0.87%.

The top losing sectoral indices on the BSE were Oil & Gas down by 2.06%, PSU down by 1.62%, Telecom down by 1.58%, Energy down by 1.41% and Capital Goods down by 1.38%, while there were no gaining sectoral indices on the BSE.

The top gainers on the Sensex were Maruti Suzuki up by 2.78%, HCL Tech. up by 1.48%, HDFC up by 1.02%, Tata Steel up by 0.81% and Hero MotoCorp up by 0.50%. On the flip side, SBI down by 2.40%, Yes Bank down by 2.37%, Larsen & Toubro down by 2.11%, Bharti Airtel down by 2.11% and Tata Motors - DVR down by 1.78% were the top losers.

Meanwhile, the European Union (EU) has dragged India into World Trade Organisation’s (WTO) dispute settlement mechanism over imposition of import duties on certain Information and Communication Technology (ICT) product, alleging breach of global trade norms. The EU is challenging the introduction of import duties of between 7.5 and 20 percent for a wide range of ICT products, such as mobile phones and components, as well as integrated circuits.

EU has requested consultations with the Indian government under WTO rules governing the settlement of disputes with regard to the tariff treatment that the country accords to certain goods in the ICT sector. EU said that despite its (India) earlier legally binding commitment in the WTO not to charge any duties on these products, India has been applying duties ranging from 7.5 percent to 20 percent. It also said that these import duties are therefore in clear breach by India of WTO rules. It indicated that the levies affect EU exports worth Euro 600 million per year. It added that technological innovation keeps companies competitive in the global market and supports hundreds of thousands of high value jobs across Europe.

In October 2018, India hiked the import duty on certain communication items, including base station and digital line systems, to 20 percent, in efforts to check widening current account deficit (CAD) by curbing imports. Seeking consultation is the first step of dispute settlement process as per WTO rules. If the consultations requested with both India do not result in a satisfactory solution, the EU can request that the WTO set up a panel in the case to rule on the issue raised.

The CNX Nifty traded in a range of 11,761.00 and 11,629.15. There were 11 stocks advancing against 39 stocks declining on the index.

The top gainers on Nifty were Indiabulls Housing Finance up by 3.51%, Maruti Suzuki up by 2.92%, Bajaj Finserv up by 1.72%, HCL Tech. up by 1.09% and Tata Steel up by 0.73%. On the flip side, BPCL down by 4.60%, Zee Entertainment down by 3.90%, Indian Oil Corporation down by 2.97%, GAIL India down by 2.54% and SBI down by 2.40% were the top losers.

European markets were trading in green; UK’s FTSE 100 increased 0.44 points or 0.01% to 7,391.56, France’s CAC rose 39.11 points or 0.72% to 5,462.58 and Germany’s DAX added 159.05 points or 1.35% to 11,913.84.

Asian markets ended in green on Wednesday as optimism about US-China trade talks helped investors shrug off concerns surrounding Brexit. Some support came in after reports that the US and China have resolved most of the outstanding issues and are drawing closer to a final trade agreement. Robert Lighthizer, US trade representative, Liu He, China's vice-premier, and Steven Mnuchin, US Treasury secretary, are scheduled to resume talks today. Chinese shares ended up, more than one-year high, with sentiment aided by signs of economic recovery and progress in trade talks.