Benchmarks continue to trade with negative bias

Indian equity benchmarks continued to trade lower in early noon session, tracking Asian peers as the US-China trade tariff war concerns weighed down sentiments. Weak broader indices along with heavy sell off Telecom, Realty and Capital Goods counters dragged the markets low points. Some cautiousness prevailed in the markets with former Chief Economic Advisor Arvind Subramanian’s statement that country’s growth has been overestimated by nearly 2.5 per cent under both UPA and NDA rule. The actual growth is likely to be lower, at nearly 4.5 per cent, down from 7 per cent between 2011-12 and 2016-17. Selling further crept in as there is expectation that retail inflation is likely accelerated to a seven-month high in May on rising food prices. Retail inflation and industrial production data for May and April, respectively, due to be released later in the day.

On the global front, Asian markets were trading mostly in red as the White House took a tough line on a trade deal with China, just as investors were bracing for the latest batch of economic data from the Asian giant. Back on street, in scrip specific developments, share of Yes Bank tumbled as Global rating agency Moody's has placed Yes Bank's ratings under review for a possible downgrade citing its high exposure to the struggling NBFC and realty sectors. However, shares of Blue Star edged up on launching a premium and differentiated range of residential water purifiers comprising 34 models across various price points.

The BSE Sensex is currently trading at 39700.20, down by 250.26 points or 0.63% after trading in a range of 39653.59 and 39982.10. There were 7 stocks advancing against 24 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index lost 0.44%, while Small cap index was down by 0.24%.

The few gaining sectoral indices on the BSE were Metal up by 1.11%, Oil & Gas up by 0.25%, Basic Materials up by 0.17% and Energy was up by 0.16%, while Telecom down by 1.12%, Realty down by 1.04%, Capital Goods down by 0.91%, Bankex down by 0.90% and IT was down by 0.89% were the losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 2.60%, Vedanta up by 1.92%, Sun Pharma up by 1.72%, ONGC up by 1.09% and Tata Motors was up by 0.41%. On the flip side, Yes Bank down by 2.98%, Kotak Mahindra Bank down by 1.95%, Bajaj Auto down by 1.56%, Bajaj Finance down by 1.45% and Hero MotoCorp was down by 1.26% were the top losers.

Meanwhile, the rating agency ICRA in its latest report has said that the IT services sector in India is likely to grow by 6-8 percent in US dollar terms during 2019-20 (FY20). It noted that country’s IT companies may also see salary bills and lower margins due to increased onsite hiring as they tackle stricter visa scrutiny and reduction in H1-B visa approvals. It added that the profitability of IT companies has remained flattish at 22.5 percent in 2018-19 despite currency benefits as well as use of operating levers.

According to the report, increasing compliance and evidence requirements are adding to cost pressures, and along with lower H-1B visa issuance, Indian companies have ramped up onshore hiring in the US. It pointed out that this will culminate into approximately 10 percent reduction in H1-B visa approvals for regular applicants. It added that this will lead to higher onsite hiring which is associated with higher wage bills and lower margins.

ICRA has stated that the overall margins are projected to decline to 21.5 percent in 2019-20 from 22.5 percent in 2018-19 for ICRA sample companies. It noted that despite the pressure on growth and margins, the credit profile of Indian IT services companies is expected to remain stable, supported by its ability to sustain free cash flows. It added that the credit profile is also buoyed by net cash position with significant liquidity in the form of surplus investments generated out of past cash flows despite healthy dividend payout and share buybacks.

The CNX Nifty is currently trading at 11889.95, down by 75.65 points or 0.63% after trading in a range of 11876.85 and 11962.45. There were 14 stocks advancing against 35 stocks declining, while 1 stock remain unchanged on the index.

The top gainers on Nifty were Tata Steel up by 2.67%, Vedanta up by 1.89%, Sun Pharma up by 1.67%, GAIL India up by 1.65% and ONGC was up by 0.95%. On the flip side, Indiabulls Housing down by 6.86%, Yes Bank down by 3.15%, Bharti Infratel down by 2.03%, Kotak Mahindra Bank down by 1.97% and Bajaj Finance was down by 1.63% were the top losers.

Asian markets were trading mostly in red, Shanghai Composite declined 18.31 points or 0.63% to 2,907.41, KOSPI fell 3.04 points or 0.14% to 2,108.77, Nikkei 225 slipped 47.90 points or 0.23% to 21,156.38, Hang Seng decreased 473.38 points or 1.7% to 27,315.96 and Jakarta Composite was down by 35.30 points or 0.56% to 6,270.69.

On the flip side, Taiwan Weighted strengthened 9.39 points or 0.09% to 10,617.15 and Straits Times was up by 2.66 points or 0.08% to 3,212.24.