Markets fail to take relief from RBI’s rate cut decision

Indian equity bourses failed to take any sense of relief from the Reserve Bank of India’s (RBI) repo rate cut on Thursday, as Sensex and Nifty settled with losses of around 200 and 50 points, respectively. The RBI in its First Bi-Monthly Monetary Policy Statement, 2019-20, has cut the policy repo rate under the liquidity adjustment facility (LAF) ) by 25 basis points (bps) to 6.0% from 6.25% earlier for the second time in a row. After a cautious start, key indices remained lackluster throughout the session, amid a private report stating that Indian businesses are getting squeezed. As economic growth slows and inflation sinks they have little ability to raise prices without losing sales, and yet they are getting almost no relief from borrowing costs with lending rates remaining high. Adding more worries among traders, India’s services sector grew at slower pace, on the back of a slower expansion in new work. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index eased to 52 in March from 52.5 in February. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services -- also slipped to 52.7 in March as against 53.8 in February.

The markets extended their losses in the second half of the session to settle in red territory, after RBI Governor Shaktikanta Das said that even though the headline credit demand is growing at a healthy 14 percent, it is not broadbased while those to MSMEs have been muted so far. Das further said the RBI will continue to watch macroeconomic factors and will act timely on the same. Market participants overlooked Commerce and Industry Minister Suresh Prabhu’s statement that India's exports are expected to reach $32.38 billion in March, the highest in any month so far, on account of healthy growth in sectors such as pharmaceuticals. He said that exports would cross $331 billion mark in the 2018-19 fiscal year. The street also paid no heed towards Vice President M Venkaiah Naidu’s statement India would continue to grow at a higher economic growth rate until 2021, while citing the World Bank estimates. World Bank estimates suggest that India would continue to grow at a high rate until 2021.

On the global front, European markets were trading in red, as Germany's manufacturing orders decreased sharply in February, defying expectations for a modest increase. The preliminary figures from the Federal Statistical Office showed that factory orders dropped 4.2 percent month-on-month. January's decline was revised to 2.1 percent from 2.6 percent. Asian markets ended in green, as investors awaited developments on trade talks between the United States and China.

Back home, stocks related to the banking sector ended lower, even though the Reserve Bank of India’s (RBI) monetary policy committee (MPC), led by Governor Shaktikanta Das, decided to cut repo rate by 25 basis points (bps) to 6.0% in its First Bi-monthly Monetary Policy Statement, 2019-20, to bring interest rate to the lowest level in one year on softening inflation. Further, cement stocks remained in focus after Finance Minister Arun Jaitley said that lowering GST rate on cement next on agenda. Finance Minister also said the BJP-led NDA will continue with fiscal prudence and lower tax rates if elected back to power.

Finally, the BSE Sensex declined 192.40 points or 0.49% to 38,684.72, while the CNX Nifty was down by 45.95 points or 0.39% to 11,598.00.

The BSE Sensex touched a high and a low of 38,939.35 and 38,581.04, respectively and there were 14 stocks advancing against 17 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index lost 0.14%, while Small cap index was down by 0.32%.

The top gaining sectoral indices on the BSE were Healthcare up by 0.63%, Auto up by 0.61%, Consumer Disc up by 0.32%, Telecom up by 0.25% and Realty up by 0.18%, while IT down by 1.53%, Energy down by 1.22%, TECK down by 1.19%, Oil & Gas down by 1.03% and Bankex down by 0.67% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 2.49%, Hero MotoCorp up by 2.13%, Bharti Airtel up by 1.60%, HDFC up by 1.44% and Asian Paints up by 1.41%. On the flip side, TCS down by 3.17%, HCL Tech. down by 2.34%, Yes Bank down by 2.05%, Indusind Bank down by 1.86% and Reliance Industries down by 1.51% were the top losers.

Meanwhile, the Telecom Regulatory Authority of India (Trai) has directed operators to submit before it all tariff plans that they offer to select segments of customers at the end of every month. In October 2018, it had issued a similar order but the same was set aside by the Telecom Disputes Settlement and Appellate Tribunal (TDSAT). The new direction comes after the Supreme Court (SC) on January 21 held that 'there will be no stay on the impugned judgment (of TDSAT) except to the extent of remand'.

Following the SC order, Trai has issued the new direction to telecom operators directing them to submit before it details of rates, terms and conditions of scheme, quantum of service that customers will get, name of the plan, validity period of subscription and benefits available to the subscriber under the plan in which segment offer has been given. It has directed telecom service providers to share with it number of subscribers at the end of each month who have availed the segmented offer.

The regulator has asked telecom operators to submit declaration that the benefits of segment offers have been made available to all existing customers with the particular segment without any discrimination. In a separate direction, Trai withdrew its direction mandating telecom operators to publish tariff details along with contact details of customers care centre in newspapers. However, telecom operators will have to share tariff details across all of their retail outlets, point of sales and on their website.

The CNX Nifty traded in a range of 11,662.55 and 11,559.20. There were 23 stocks advancing against 27 stocks declining on the index.

The top gainers on Nifty were Indiabulls Housing Finance up by 3.29%, Zee Entertainment up by 3.28%, Ultratech Cement up by 2.46%, Tata Motors up by 2.46% and Bharti Airtel up by 2.00%. On the flip side, TCS down by 3.00%, HCL Tech down by 2.70%, BPCL down by 2.56%, Hindalco down by 2.52% and Yes Bank down by 1.97% were the top losers.

European markets were trading mostly in red; UK’s FTSE 100 decreased 38.85 points or 0.52% to 7,379.43 and France’s CAC fell 14.18 points or 0.26% to 5,454.73, while Germany’s DAX was up 2.18 points or 0.02% to 11,956.58.

Asian markets ended mostly in green on Thursday after recent string of gains on optimism that the US and China are closer to a trade deal that would put an end to their ongoing trade war. Chinese shares ended higher as investors looked ahead to a meeting between US President Donald Trump and Chinese Vice Premier Liu He in Washington later today. Reports showed that Beijing will cut government- related fees and service charges to reduce costs for companies and individuals from July 1. Further, Japanese shares ended marginally higher, led by carmakers and cyclical shares. Though, the upside remained capped as services and private payrolls data added to recent worries about slowing growth. Meanwhile, Taiwan’s stock market closed on Thursday for the Children’s Day holiday.