Benchmarks trade lower in early deals

Indian equity benchmarks made a cautious start and are trading in red in early deals on Thursday, as traders remained on the sidelines ahead of the outcome of second Reserve Bank of India (RBI) Monetary Policy Committee meeting later in the day. The RBI is widely expected to reduce the repo rate by 25 basis points (bps), a third in a row. Market participants remained cautious with report that the India’s services sector activity increased at the slowest pace in a year in May, as disruptions arising from the elections in the earlier part of the month hampered growth of new work intakes. The seasonally adjusted Nikkei India Services Business Activity Index fell to 50.2 in May, from 51.0 in April, pointing to the slowest growth rate in the current 12-month stretch of expansion. Sentiments remained downbeat with the India Meteorological Department’s statement that the onset of monsoon is likely to be delayed by a week and it is now expected to arrive only by June 8. The normal onset date for monsoon over Kerala is June 1 which also marks the official commencement of the four-month-long rainfall season.

On the global front, Asian markets are exhibiting mixed trend at this point of time as the US and Mexico failed to reach a deal to avert proposed tariffs and investors weighed up the latest signs of fragility in the global economy. The US markets ended higher on Wednesday as investors further embraced the possibility that the Federal Reserve might cut interest rates to boost the economy.

Back home, traders also reacted negatively on the National Council of Applied Economic Research’s (NCAER) report that business confidence among Indian companies fell by 9.1% in the fourth quarter of the 2018-19 fiscal. On the sectoral front, steel industry stocks remained in focus with credit rating agency ICRA’s report that while the performance of domestic steelmakers is likely to be lower in the first quarter of the current financial year as compared the previous year due to several headwinds, the construction sector will be at the forefront of demand recovery in the second half.

The BSE Sensex is currently trading at 39985.52, down by 98.02 points or 0.24% after trading in a range of 39966.05 and 40159.26. There were 9 stocks advancing against 22 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index declined 0.59%, while Small cap index was down by 0.49%.

The few gaining sectoral indices on the BSE were Power up by 0.38%, FMCG up by 0.15% and Consumer Durables was up by 0.14%, while Oil & Gas down by 1.36%, Telecom down by 1.06%, Utilities down by 1.02%, Basic Materials down by 0.88% and PSU was down by 0.81% were the top losing indices on BSE.

The top gainers on the Sensex were Power Grid Corporation up by 2.23%, Hindustan Unilever up by 1.23%, Asian Paints up by 0.72%, Coal India up by 0.66% and NTPC up by 0.56%. On the flip side, Yes Bank down by 2.88%, SBI down by 1.94%, Indusind Bank down by 1.82%, Bharti Airtel down by 1.16% and Hero MotoCorp down by 1.08% were the top losers.

Meanwhile, the World Bank in its Global Economic Prospects report has retained its forecast of India's growth rate at 7.5% for the current financial year 2019-20 (FY20) and said growth rate is expected to remain the same for the next two fiscal years, supported by robust investment and private consumption. It said private consumption and investment will benefit from strengthening credit growth amid more accommodative monetary policy, with inflation having fallen below the Reserve Bank of India's target. It added that support from delays in planned fiscal consolidation at the central level should partially offset the effects of political uncertainty around elections.

The report said that the country’s urban consumption was supported by a pickup in credit growth, whereas rural consumption was hindered by soft agricultural prices. On the production side, robust growth was broad-based, with a slight moderation in services and agricultural activity accompanied by an acceleration in the industrial sector. Weakening agricultural production reflected subdued harvest in major crops on the back of less rainfalls.

As per the report, services activity softened mainly due to slowing trade, hotel, transport, and communication activity. The industrial sector benefited from strong manufacturing and construction with solid demand for capital goods. The slowing momentum in economic activity in late 2018 carried into the first quarter of 2019, as suggested by softening services and manufacturing Purchasing Managers' Indexes. Observing that the new Goods and Services Tax regime is still in the process of being fully established, creating some uncertainty about the projections of government revenues, it said fiscal deficits continue to exceed official targets in some countries -- India, Pakistan.

The CNX Nifty is currently trading at 11978.20, down by 43.45 points or 0.36% after trading in a range of 11971.90 and 12039.80. There were 14 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were Power Grid Corporation up by 2.18%, Hindustan Unilever up by 1.27%, Titan Company up by 1.24%, Indian Oil Corporation up by 1.00% and Eicher Motors up by 0.96%. On the flip side, GAIL India down by 8.72%, Indiabulls Housing down by 5.06%, Yes Bank down by 3.04%, Grasim Industries down by 2.23% and Ultratech Cement down by 2.23% were the top losers.

Asian markets are trading mixed; Nikkei 225 gained 41.96 points or 0.20% to 20,818.06 and Hang Seng increased 58.44 points or 0.22% to 26,953.88.

On the flip side, Straits Times shed 7.08 points or 0.23% to 3,135.29, Taiwan Weighted decreased 70.46 points or 0.67% to 10,391.16 and Shanghai Composite was down by 13.08 points or 0.46% to 2,848.34.