Post Session: Quick Review

Extending losses for the ninth straight session, Indian equity benchmarks ended first day of the week in negative terrain with losses of over a percent, amid weakness in Asian peers. A last hour sell-off in the market dragged Sensex and Nifty below their crucial 37,100 and 11,150 levels, respectively. Key bourses started off with marginal losses, as investors remain concerned with data showing that India’s industrial output declined by 0.1% in March, hitting a 21-month low, due to contraction in manufacturing, capital goods and consumer durables. However, markets soon erased losses and started trading on positive route, as sentiments turned optimistic with RBI’s data showing that the country’s foreign exchange reserves increased by $171.9 million to $418.687 billion in the week to May 3, mainly on account of a rise in foreign currency assets. In the previous week, the reserves had swelled by $4.368 billion to $418.515 billion, helped by the second dollar-rupee swap auction held on April 23. Some optimism also came in with the FICCI’s survey stating that the overall sentiment in the manufacturing sector remains positive as the proportion of respondents reporting higher output growth (around 54 percent) during the January-March 2018-19 (Q4FY19) remained the same as compared to Q3 (October-December) of 2018-19.

Though, the buying proved short-lived as markets once again dropped into red in afternoon deals, as anxiety remained among the investors with private report that even as factory output fell to a 21-month low in March, the situation may not improve in the first few months of FY20 on account of the increased likelihood of lower investment activity and uncertainties around the elections. Key indices extended their downside in late trade, as the Street remained disappointed with reports that reversing their three-month buying streak, foreign investors pulled out a net Rs 3,207 crore from the Indian capital markets in the first seven trading sessions of May amid the US-China trade tensions and uncertainty over the election results. Traders also remained wary ahead of Consumer Price Index (CPI) data for April scheduled to be released today.

On the global front, Asian markets ended in red on Monday, while European markets were trading mostly in red, as the US-China stand-off quelled hopes that the two largest economies will be able to resolve their trade dispute anytime soon. Back home, auto stocks ended lower, impacted with data released by the Society of Indian Automobile Manufacturers (SIAM) that domestic passenger vehicle (PV) sales declined 17.07 percent to 2,47,541 units in April from 2,98,504 units in the year-ago month.

The BSE Sensex ended at 37051.89, down by 411.10 points or 1.10% after trading in a range of 36999.84 and 37583.57. There were 6 stocks advancing against 25 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index fell 1.93%, while Small cap index was down by 2.29%. (Provisional)

The top losing sectoral indices on the BSE were Healthcare down by 2.97%, Power down by 2.69%, Utilities down by 2.63%, Capital Goods down by 2.53% and Industrials down by 2.45%, while there were no gainers on the BSE sectoral front. (Provisional)

The top gainers on the Sensex were HDFC up by 0.95%, Hindustan Unilever up by 0.89%, Bajaj Finance up by 0.34%, Coal India up by 0.27% and Infosys up by 0.21%. (Provisional)

On the flip side, Sun Pharma down by 6.39%, Yes Bank down by 5.49%, Tata Motors - DVR down by 4.76%, Tata Steel down by 3.88% and Indusind Bank down by 3.37% were the top losers. (Provisional)

Meanwhile, the Reserve Bank of India (RBI) research in its lasted report has said that accelerating the rate of growth of the economy and disposable incomes holds the key to higher deposit mobilisation by the banking system. It further stated that the slowdown in bank deposit growth in the recent period alongside a revival of credit demand raised concerns about a structural liquidity gap in the system, possibly amplified by substitution effects of small savings and mutual funds on bank deposits in the aftermath of demonetization.

It highlighted that outstanding deposits of scheduled commercial banks (SCBs) at Rs 1,25,726 billion as on March 31, 2019 accounted for 128.7 per cent of outstanding bank credit (lower than 132.5 per cent a year ago), reflecting the tightening of financial conditions on account of low deposit growth. Besides, it mentioned that noting that the bank deposits remain an important part of the financial savings of households and key to the financing of bank lending, deposit growth is picking up in recent months in a cyclical upturn since December 2018, which is overwhelming a trend slowdown that has been underway since October 2009.

In order to address the issue of structural liquidity gap, the RBI in recent months took several initiatives including Open Market Operations and dollar rupee swap auction. Besides,  it highlighted that the widening wedge between credit and deposit growth is triggering concerns about a structural liquidity gap in the system, which can throw sand in the wheels of the financial intermediation process through which deposits are converted into productive investments by way of lending, thereby greasing the wheels of the economy.

The CNX Nifty ended at 11138.15, down by 140.75 points or 1.25% after trading in a range of 11125.60 and 11300.20. There were 9 stocks advancing against 41 stocks declining on the index. (Provisional)

The top gainers on Nifty were Titan Co up by 1.31%, Bharti Infratel up by 1.09%, Tech Mahindra up by 1.03%, HDFC up by 0.96% and Hindustan Unilever up by 0.87%. (Provisional)

On the flip side, Eicher Motors down by 8.13%, Zee Entertainment down by 7.33%, Sun Pharma down by 5.46%, Yes Bank down by 5.37% and Indiabulls Housing Finance down by 5.37% were the top losers. (Provisional)

European markets were trading mostly in red; France’s CAC decreased 25.38 points or 0.48% to 5,302.06 and Germany’s DAX decreased 72.70 points or 0.6% to 11,987.13, while, UK’s FTSE 100 increased 5.06 points or 0.07% to 7,208.35.

Asian markets ended in red on Monday after trade talks between the United States and China ended without a resolution last week and US President Donald Trump on Sunday defended his tariff policy, saying ‘we are right where we want to be with China’. Chinese shares ended lower as investors await Beijing's next move on the trade front. Meanwhile, the Hong Kong market was closed for a holiday.