Markets see further fall on Wednesday

Indian equity indices saw a further fall on Wednesday’s trading session, with the Sensex and the Nifty closing below their crucial psychological levels of 38,600 and 11,500, respectively. After a cautious start, the markets traded in negative terrain during the whole day, affected with Moody’s Investors Service’s statement that weak growth prospects for India will complicate the government's fiscal consolidation efforts, weighing on the sovereign's credit quality. Sentiments also remained downbeat, after CRISIL in its earnings preview stated that India Inc will see the slowest quarterly revenue growth in two years, which will more than halve to 6 percent from 14-15 percent, due to a deceleration in consumption and lower realisations.

Bears held their tight grip on the markets in the second half of the trading session, amid weak cues from European markets. Market participants got anxious, amid a private report showing that India's retail inflation is likely reached an eight-month high in June on rising food prices, but stayed under the Reserve Bank of India's medium-term target of 4% for an eleventh straight month. Investors paid no heed towards the latest finance ministry data report which showed that deposits in bank accounts opened under Jan Dhan scheme, launched about five years ago by the Modi-government, have crossed the Rs 1 lakh crore mark.

On the global front, European markets were trading in red, after Finland's industrial production fell at the fastest pace in thirteen months in May. The figures from Statistics Finland showed that industrial production declined a seasonally adjusted 2.8 percent month-on-month in May, reversing a 2.6 percent rise in April. This was the worst drop since April last year, when output fell 5.0 percent. Asian markets ended in green, as consumer prices in China remained steady at 2.7 percent on year in June. On a monthly basis, consumer prices were down 0.1 percent following the flat reading a month earlier.

Back home, the automobile industry stocks ended lower, as data released by the Society of Indian Automobile Manufacturers (SIAM) showed that domestic passenger vehicle (PV) sales declined by 17.54 per cent to 2,25,732 units in June from 2,73,748 units in the year-ago period. Further, stocks related to the power industry too ended in red terrain, with a private report  stating that imposition of auction ceiling prices and delays in commissioning of awarded projects have lowered near-term growth outlook of wind power sector in India.

Finally, the BSE Sensex fell 173.78 points or 0.45% to 38,557.04, while the CNX Nifty was down by 57.00 points or 0.49% to 11,498.90.

The BSE Sensex touched a high and a low of 38,854.85 and 38,474.66, respectively and there were 09 stocks advancing against 22 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index declined 0.75%, while Small cap index was down by 0.75%.

The top losing sectoral indices on the BSE were Capital Goods down by 1.65%, Realty down by 1.52%, Industrials down by 1.51%, Metal down by 1.22% and Auto down by 1.07%, while there were no gaining sectoral indices on the BSE.

The top gainers on the Sensex were Yes Bank up by 1.81%, Sun Pharma up by 1.44%, Kotak Mahindra Bank up by 0.85%, ICICI Bank up by 0.75% and HDFC Bank up by 0.46%. On the flip side, Bajaj Finance down by 4.91%, Tata Steel down by 2.94%, Tata Motors down by 2.79%, Axis Bank down by 2.25% and Tata Motors - DVR down by 2.14% were the top losers.

Meanwhile, India Ratings and Research (Ind-Ra) in its latest report has cautioned that telecom companies’ credit profiles will remain under pressure in the medium term because of high competitive intensity, elevated debt levels and continued reliance on capital infusion for servicing loans and capital expenditure (capex). It also said that while the green shoots are visible in the telecom sector, meaningful recovery will take time.

According to the report, revenue recovery may continue going ahead, albeit at a slower pace, as the proportion of high average revenue per user (ARPU) subscribers in the data and broadband categories continues to be low at 40-44 percent and 30 percent, respectively, of overall subscriber base. After a steadily fall over the past two-and-a-half years, data tariffs rose 11-17 percent during October 2018-February 2019, but has been stable since then. It added that likely recovery in profitability, if any, may not be enough to resolve credit concerns such as high leverage, elevated capex, sustained negative free cash flow and the need for asset monetisation.

Ind-Ra further said while near-term liquidity issues have been addressed through capital infusion and asset monetisation, the business model is unlikely to become attractive unless players record a substantial improvement in profitability. It noted that incremental spending by operators to acquire spectrum along with investments in 5G technology could further stretch their balance sheets and derail the recovery process. However, it said the auction may not garner adequate interest as telcos are still optimising their existing spectrum; moreover, spectrum pricing continues to be matter of concern, and 5G technology has still not been finalized.

The CNX Nifty traded in a range of 11,593.70 and 11,475.65. There were 14 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were Yes Bank up by 2.08%, Coal India up by 1.70%, Sun Pharma up by 1.05%, ICICI Bank up by 0.75% and Kotak Mahindra Bank up by 0.52%. On the flip side, Bajaj Finance down by 5.11%, Indiabulls Housing Finance down by 4.28 %, Bajaj Finserv down by 3.10%, Tata Steel down by 3.05% and BPCL down by 2.85% were the top losers.

European markets were trading in red; UK’s FTSE 100 decreased 17.03 points or 0.23% to 7,519.44, France’s CAC dropped 7.36 points or 0.13% to 5,564.74 and Germany’s DAX shed 59.10 points or 0.48% to 12,377.45.

Asian markets ended mostly higher on Wednesday in cautious trade as investors awaited Federal Reserve Chairman Jerome Powell's congressional testimony later in the day for clues about whether the US central bank will meet dovish expectations in light of strong US jobs data released last week. Powell is due to testify before the House Financial Services Committee later today and before the Senate Banking Committee on Thursday. Seoul shares ended higher as chipmakers climbed amid bets on production cuts in the wake of curbs on the export of key materials from Japan. South Korea's president said that Japan's export curbs on key materials used by South Korean technology firms could be prolonged and his government would increase spending to reduce reliance on Japanese components. Though, Chinese shares ended lower as flat producer price inflation fuelled concerns about domestic growth, and a flood of initial public offerings targeting Shanghai's new tech board diverted funds from the rest of the market.