Lackluster trade continues on Dalal Street

Indian equity benchmarks continued to trade in red terrain in early noon session, with Sensex and Nifty trading down by 80 and 22 points respectively. Stocks from Metal, Capital Goods and Industrials counters were trading lower, while Consumer Durables, FMCG and Bankex counters were supporting the markets. Sentiments got undermined as 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. Markets further cooled off 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. However, losses remained limited with Vice-chairman of Niti Aayog Rajiv Kumar’s statement that the target of achieving an economy of $5 trillion within 2024-25 is eminently doable and the private sector would have to take the lead. Meanwhile, with rising focus on reducing dependency on carbon-based fuel for electricity generation, the government has waived off basic customs duty (BCD) for a clutch of products which are imported for nuclear power plants and allocated more funds in atomic energy research.

On the global front, Asian counterparts were trading mostly in green amid cautious trades ahead of US Federal Reserve Chairman Jerome Powell's congressional testimony later in the day for clues about the outlook for interest rates. Back on street, the bilateral trade between India and China has declined by 3.59 per cent year on year, totalling $36.87 billion in the first five months of this year, denting optimism that the total trade volume may cross $100 billion mark in 2019.

The BSE Sensex is currently trading at 38650.79, down by 80.03 points or 0.21% after trading in a range of 38595.24 and 38854.85. There were 10 stocks advancing against 21 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index lost 0.37%, while Small cap index was down by 0.09%.

The gaining sectoral indices on the BSE were Consumer Durables up by 0.61%, FMCG up by 0.15%, Bankex up by 0.11%, Consumer Discretionary up by 0.02%, while Metal down by 1.48%, Capital Goods down by 1.13%, Industrials down by 1.08%, Telecom down by 0.92% and Power was down by 0.69% were the losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 1.70%, Asian Paints up by 0.71%, ITC up by 0.55%, Infosys up by 0.54% and ICICI Bank was up by 0.54%. On the flip side, Tata Motors - DVR down by 3.28%, Tata Motors down by 2.89%, Tata Steel down by 2.64%, Vedanta down by 2.04% and Bajaj Finance was down by 1.71% 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 is currently trading at 11533.00, down by 22.90 points or 0.20% after trading in a range of 11513.20 and 11593.70. There were 19 stocks advancing against 31 stocks declining on the index.

The top gainers on Nifty were Yes Bank up by 1.75%, Titan Company up by 1.56%, Coal India up by 1.52%, Zee Entertainment up by 1.42% and Wipro was up by 1.05%. On the flip side, JSW Steel down by 3.24%, Tata Motors down by 2.92%, Tata Steel down by 2.60%, Hindalco down by 2.12% and Vedanta was down by 1.92% were the top losers.

Asian markets were trading mostly in green; KOSPI rose 12.13 points or 0.59% to 2,064.16, Taiwan Weighted strengthened 97.31 points or 0.91% to 10,800.09, Hang Seng increased 83.10 points or 0.3% to 28,199.38, Straits Times advanced 15.76 points or 0.47% to 3,345.22, Jakarta Composite soared 13.62 points or 0.21% to 6,401.94 and Nikkei 225 was up by 1.22 points or 0.01% to 21,566.37. On the flip side, Shanghai Composite was down by 3.07 points or 0.1% to 2,925.16.