Sluggishness continues on Dalal Street in mid-morning trade

Indian equity benchmarks continued to trade sluggish in mid-morning trade with marginal losses amid weak global cues and fresh foreign fund outflow. FII sold equity worth Rs 501.11 crore, while domestic institutional investors (DIIs) purchased shares to the tune of Rs 269.22 crore. However, downside remain capped as some respite came with a global study showing that India has moved up one place to rank as the world’s 43rd most competitive economy on the back of its robust economic growth, a large labour force and its huge market size, while Singapore has toppled the US to grab the top position. Traders took note of a private report indicating that India can attract FDI to a ratio of 1.5 per cent to 2 per cent of its GDP by further improving on ease of doing business and building infrastructure.

Weakness in regional counterparts continued to dampen sentiments with most of the Asian markets were trading in red at this point of time, as investors remained cautious, awaiting new developments between Beijing and Washington amid the ongoing trade tensions. Back home, logistics stocks remained buzzing on the back of heavy volumes amid expectations of earnings improvement. Shares of oil marketing companies (OMCs) remained in focus after rating agency, Crisil in its latest report has said thinner spreads and rising under-recoveries are expected to shave the operating profit margins of oil marketing companies (OMCs) by 1.5-1.7 per cent in current financial year (FY20), even as crude prices remain elevated and volatile.

The BSE Sensex is currently trading at 39690.63, down by 59.10 points or 0.15% after trading in a range of 39625.33 and 39750.00. There were 11 stocks advancing against 20 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index declined 0.44%, while Small cap index was down by 0.31%.

The top gaining sectoral indices on the BSE were IT up by 1.04%, TECK up by 0.85%, FMCG up by 0.20%, Telecom up by 0.16% and Healthcare was up by 0.10%, while Metal down by 1.15%, PSU down by 1.09%, Auto down by 0.98%, Oil & Gas down by 0.93% and Basic Materials was down by 0.86% were the top losing indices on BSE.

The top gainers on the Sensex were TCS up by 1.73%, HCL Tech up by 1.64%, Sun Pharma up by 1.20%, Yes Bank up by 0.88% and ITC up by 0.67%. On the flip side, Vedanta down by 2.54%, ONGC down by 2.40%, Tata Motors - DVR down by 2.40%, SBI down by 2.00% and Tata Motors down by 1.83% were the top losers.

Meanwhile, rating agency, Crisil in its latest report has said thinner spreads and rising under-recoveries are expected to shave the operating profit margins of oil marketing companies (OMCs) by 1.5-1.7 per cent in current financial year (FY20), even as crude prices remain elevated and volatile. Operating margins had declined 1.6 per cent in last financial year (FY19). In FY19, profitability of OMCs was hit as their average gross refining margin (GRM) declined by a third to $5.3 per barrel from $7.9 in FY18.

For the current financial year, it said GRMs are foreseen even lower at $4- $5 per barrel, without considering inventory losses/gains, mainly due to spreads, which have been under pressure since the third quarter of last fiscal, are expected to contract afresh this fiscal, especially for motor spirit (petrol) and naphtha, because of oversupply in Asia following commissioning of new supplies. Moreover, it added the US sanctions on Iran and Venezuela, and production cuts by the Organisation of Petroleum Exporting Countries (OPEC) are expected to keep crude oil prices firm at $70 per barrel and cause high volatility.

Besides, the rating agency also predicated net profit margins coming under pressure because of higher interest costs. OMCs have had to contract 22 per cent more short-term debt last fiscal because of inadequate payments from the government, and also to service under-recoveries of the recent past. For the current fiscal, the government has budgeted Rs 37,500 crore towards subsidy for under-recovery. Add the rolled over under-recovery of last fiscal, and the total burden on the government is Rs 56,400 crore. Overall debt of OMCs surged 39 per cent to Rs 145,700 crore in FY19, which cranked up their debt-to-Ebidta ratio to 2.5 times from 1.7 times in FY18.

The CNX Nifty is currently trading at 11907.55, down by 21.20 points or 0.18% after trading in a range of 11890.35 and 11928.15. There were 18 stocks advancing against 32 stocks declining on the index.

The top gainers on Nifty were Bharti Infratel up by 2.70%, TCS up by 2.06%, GAIL India up by 1.84%, HCL Tech up by 1.82% and Wipro up by 1.52%. On the flip side, Vedanta down by 2.71%, ONGC down by 2.54%, Indian Oil Corporation down by 2.20%, Indiabulls Housing Finance down by 2.18% and UPL down by 2.09% were the top losers.

Most of the Asian markets are trading in red; NIKKEI 225 declined 264.70 points or 1.25% to 20,995.44, Straits Times shed 8.47 points or 0.27% to 3,156.85, Hang Seng dipped 71.99 points or 0.26% to 27,318.82, Taiwan Weighted dropped 26.84 points or 0.26% to 10,285.47, KOSPI tumbled 23.86 points or 1.16% to 2,024.97 and Shanghai Composite was down by 3.09 points or 0.11% to 2,906.82. On the flip side, Jakarta Composite was up by 61.93 points or 1.03% to 6,095.07.