Sensex, Nifty fall for second straight day

Indian equity bourses witnessed fall for the second straight day on Friday, with Sensex and Nifty closing lower by around 200 and 50 points respectively. Markets made a slightly higher opening of the day, as the Reserve Bank of India (RBI) in its bi-annual Financial Stability Report (FSR) stated that the financial system remains stable despite some dislocation of late. It said the proportion of commercial lenders' non-performing assets (NPAs) may fall slightly to 9% by March 2020. However, key indices soon turned negative, with a report that India’s monsoon rains were below average for the fourth straight week, with rainfall scanty over central and western parts of the country in the week ended on June 26, raising concerns about major crop production and the impact on the nation's economy.

Markets extended their losses in late afternoon deals, as Governor Shaktikanta Das called for more cooperation between the government and the Reserve Bank to help boost the sagging growth engine and to ensure systemic stability. A dip in consumption and private investment has exerted pressure on the fiscal math. Some concerns also came after the Directorate General of GST intelligence (DGGI) detected good and services tax (GST) evasion amounting to Rs 300 crore across Nagpur zone, which includes Vidarbha, Marathwada and Nasik regions of Maharashtra. Besides, industry body FICCI’s National Committee on Transport Infrastructure and the Consulting Engineers Association of India (CEAI) said that Union Ministry of Finance should re-look at its Goods and Service Tax collection regime for Consulting and service-providing sector.

On the global front, European markets were trading in green, after the UK economy expanded at a faster pace in the first quarter, as previously estimated. The latest data from the Office for National Statistics showed that gross domestic product climbed 0.5 percent sequentially, unrevised from the first estimate, and faster than the 0.2 percent growth registered in the fourth quarter. Asian markets ended in red, as Industrial production in South Korea was down a seasonally adjusted 1.7 percent on month in May, following the 1.9 percent jump in April. On a yearly basis, industrial output eased 0.2 percent after gaining 0.2 percent in the previous month.

Back home, non-banking financial companies stocks remained in focus, after the Reserve Bank of India set an average base rate of 9.18 per cent for non-banking financial companies and microfinance institutions to be charged from their customers for the quarter beginning July 1. Further, telecom sector stocks also remained in limelight, with credit rating agency Moody's Investors Service’s statement that the proposed spectrum auctions in India, which includes radiowaves for 5G technology, are likely to be held only in the second half of 2020 or later, given the stressed balance sheets of telecom operators. 

Finally, the BSE Sensex fell 191.77 points or 0.48% to 39,394.64, while the CNX Nifty was down by 52.70 points or 0.45% to 11,788.85.

The BSE Sensex touched a high and a low of 39,675.25 and 39,361.92, respectively and there were 11 stocks advancing against 20 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.30%, while Small cap index was down by 0.07%.

The top gaining sectoral indices on the BSE were Realty up by 0.58%, Consumer Durables up by 0.36%, FMCG up by 0.26%, Utilities up by 0.23% and Healthcare up by 0.06%, while Energy down by 1.52%, Metal down by 1.13%, Telecom down by 1.03%, Basic Materials down by 0.77% and Oil & Gas down by 0.67% were the top losing indices on BSE.

The top gainers on the Sensex were Bajaj Finance up by 1.05%, Axis Bank up by 0.91%, NTPC up by 0.75%, Maruti Suzuki up by 0.71% and Hindustan Unilever up by 0.70%. On the flip side, Yes Bank down by 3.29%, Indusind Bank down by 2.85%, Tata Motors - DVR down by 2.75%, Tata Motors down by 1.96% and Reliance Industries down by 1.79% were the top losers.

Meanwhile, the Reserve Bank of India (RBI) Governor Shaktikanta Das has said that the government and the central bank must work more closely to help boost the sagging growth engine and to ensure systemic stability. He noted that a dip in consumption and private investment has exerted pressure on the fiscal math. He added that concerted efforts are required to recover private investment and the government needs to continue with economic reforms.

On the optimistic side, Das said the lower inflation and the moderate outlook on the same can help lessen the constraints to the fiscal numbers. He also said that overall, the situation warrants greater cooperation internationally as well as monetary and fiscal coordination domestically to ensure systemic stability. He noted that companies in the crisis-hit non-banking finance companies need to develop on ‘prudent lines’ and focus on asset liability management. He added that the shadow banks also need to focus on their strengths, by harnessing their expertise that has helped them grow.

RBI Governor further said that the central bank is reinforcing the regulatory and supervisory framework to help them better adapt to the evolving scenario. He also said that there has been an improvement in the performance of the state-run lenders due to recapitalization with both provision coverage ratios and capital buffers showing an uptick. However, he underlined the need for PSBs to be ‘specially focusing’ on governance reforms and strengthening their balance sheets.

The CNX Nifty traded in a range of 11,871.70 and 11,775.50. There were 18 stocks advancing against 32 stocks declining on the index.

The top gainers on Nifty were GAIL India up by 1.70%, Bajaj Finserv up by 1.26%, Bajaj Finance up by 1.18%, Axis Bank up by 1.16% and Adani Ports & SEZ up by 0.91%. On the flip side, Yes Bank down by 3.47%, Indiabulls Housing Finance down by 3.26%, Bharti Infratel down by 3.09%, Coal India down by 2.37% and Indusind Bank down by 2.08% were the top losers.

European markets were trading in green; UK’s FTSE 100 increased 18.12 points or 0.24% to 7,420.45, France’s CAC increased 10.51 points or 0.19% to 5,504.12 and Germany’s DAX was up 57.92 points or 0.47% to 12,328.95.

Asian markets ended mostly lower on Friday as a cautious mood prevailed ahead of key Trump-Xi meeting at the G20 summit that began in Osaka, Japan. US President Trump and Chinese President Xi are not expected to come out of the meeting with a finalized trade deal, but investors are hoping for a temporary truce on tariffs. Chinese shares ended lower after Trump's top economic advisor, Larry Kudlow, on Thursday said that there are no preconditions set for the Trump-Xi meeting and the White House may move forward with additional tariffs, if the talks do not end in progress. Further, Japanese shares ended lower, dragged down by cyclicals as investors digested a raft of mixed data and kept an eagle eye on the G20 summit. Industrial output in Japan climbed a seasonally adjusted 2.3 percent month-on-month in May, the government said in a preliminary reading. That beat forecasts for an increase of 0.7 percent. Overall inflation in the Tokyo region rose an annual 1.1 percent in June, unchanged from the May reading, although it exceeded forecasts for 1.0 percent. The jobless rate in Japan came in at a seasonally adjusted 2.4 percent in May, in line with expectations and unchanged from the previous month.