Profit booking drags markets lower; Sensex falls around 300 points

Profit booking dragged Indian equity benchmarks in red on Thursday, with Sensex and Nifty closing below their crucial psychological levels of 38,900 and 11,700. The start of the day was fabulous, buoyed by the vote count leads that showed Narendra Modi-led NDA getting a decisive majority. In morning deals, key indices hit their record high peaks and remained positive for the most part of the session, as India Inc expressed hope that a stable government at the centre will boost growth in the country and lead to higher foreign fund inflows as trends pointed to BJP and allies returning to power with a thumping majority. Market participants also remained positive with Niti Aayog Vice Chairman Rajiv Kumar’s statement that the think tank is working on the economic agenda for the new government where the focus will be on achieving long term sustainable growth and boosting private investments in the country.

However, the market failed to hold on to their gains and settled the day in red terrain, tracking weak global markets. Anxiety spread among investors, with a private report stating that the value of merger and acquisition deals announced in April stood at $735 million (over Rs 5,100 crore), a decline of 96 per cent from the year-ago period. According to a report, in April last year, the total M&A deal value stood at $19,142 million. Traders also got cautious with another private report indicating that foreign direct investment (FDI) in India has been declining, even though recent US-China trade tensions and the increasing working population should ideally make the world's fastest-growing economy attractive for investors. This could be because of investors' pre-election nerves and also because of recent protectionist measures taken up by India.

On the global front, European markets were trading in red, after Germany's business confidence weakened for a second straight month and at a faster-than-expected pace in May. The survey results from the Ifo Institute showed that the Ifo business confidence index fell to 97.9 from 99.2 in April. Asian markets ended in red, as investors fret about the adverse effects of trade tensions on global economic growth. Besides, Hong Kong consumer price inflation rose in April after remaining steady in the previous month. The data from the Census and Statistics Department showed that the consumer price index rose 2.9 percent in April, following a 2.1 percent increase in March and February. Prices for housing increased 4.3 percent annually in April and those of miscellaneous services and food costs rose by 3.1 percent and 3.0 percent, respectively.

Back home, airlines stocks ended mixed, as the domestic air passenger count fell 4.50% in the month of April 2019. According to the Directorate General of Civil Aviation (DGCA) data, domestic airlines flew 109.95 lakh passengers in April 2019, as against 115.13 lakh passengers carried in the same month of last year. Further, stocks related to the electronics industry remained in focus, amid reports that PC shipment in India fell by 8.3 per cent in the January-March quarter of 2019 to 2.15 million units, registering a year-on-year decline for the third consecutive quarter. Besides, big commercial deals, market remained weak due to weak consumer demand, high inventory from previous quarters, and supply issues for Intel chips.

Finally, the BSE Sensex lost 298.82 points or 0.76% to 38,811.39, while the CNX Nifty was down by 80.85 points or 0.69% to 11,657.05.

The BSE Sensex touched a high and a low of 40,124.96 and 38,651.61, respectively and there were 15 stocks advancing against 16 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.15%, while Small cap index was down by 0.11%.

The top gaining sectoral indices on the BSE were Telecom up by 0.97%, Capital Goods up by 0.73%, Industrials up by 0.66%, Realty up by 0.55% and Power up by 0.47%, while FMCG down by 1.82%, Metal down by 1.57%, Consumer Durables down by 1.14%, IT down by 0.89% and TECK down by 0.51% were the top losing indices on BSE.

The top gainers on the Sensex were Indusind Bank up by 5.23%, Coal India up by 1.56%, Yes Bank up by 1.53%, Hero MotoCorp up by 1.51% and Power Grid up by 1.29%. On the flip side, Vedanta down by 5.53%, ITC down by 3.69%, HDFC Bank down by 2.94%, Tata Motors down by 2.48% and Bajaj Finance down by 2.02% were the top losers.

Meanwhile, Fitch Ratings in its latest report has stated that the debt crunch in Infrastructure Leasing and Financial Services (IL&FS) has adversely impacted growth of the Non-banking financial company (NBFC) sector in India and might lead to its consolidation. The report comes in the wake of the Reserve Bank of India's (RBI) decision to create a ‘specialised supervisory and regulatory cadre’ to strengthen supervision over commercial banks, urban cooperative banks and NBFCs.

According to the report, NBFCs are commonly referred to as the shadow banking sector. It noted that the Indian shadow banking industry's rapid growth and dependence on short-term funding sources 'bubbled over' in 2018, most evident by the default of IL&FS in September last year. It also stated that default by IL&FS translated into higher borrowing costs and reduced market access for other non-bank financial institutions, leading to domestic regulators to re-examine liquidity norms for the sector and prod banks to increase their lending to, and asset purchases from, such entities. It believes these dynamics will weigh on growth prospects for the sector and likely lead to industry consolidation.

It also said that the debt-ridden IL&FS Group is sitting on a debt of about Rs 94,000 crore. The management of the company's board has been taken over a government-appointed directors. It added that several group companies have defaulted on the payment of interest payment on loans.

The CNX Nifty traded in a range of 12,041.15 and 11,614.50. There were 23 stocks advancing against 27 stocks declining on the index.

The top gainers on Nifty were Adani Ports & SEZ up by 5.84%, Zee Entertainment up by 5.55%, Indusind Bank up by 5.20%, Grasim Industries up by 3.46% and Cipla up by 2.21%. On the flip side, Vedanta down by 5.59%, Eicher Motors down by 4.19%, ITC down by 3.80%, Hindalco down by 3.18% and Bajaj Finserv down by 2.60% were the top losers.

All European markets were trading in red; UK’s FTSE 100 lost 99.57 points or 1.36% to 7,234.62, France’s CAC fell 94.83 points or 1.76% to 5,284.15 and Germany’s DAX was down by 230.80 points or 1.9% to 11,937.94.

Asian markets ended lower on Thursday as fears that the US-China trade conflict was spiraling into a technology cold war dashed hopes of a deal before or at the G20 summit to be held next month in Japan. Chinese shares ended lower amid the stand-off between the world's two largest economies. Further, Japanese shares edged lower as tech stocks sold off heavily on reports the United States was considering sanctions on video surveillance firm Hikvision.