Post Session: Quick Review

Snapping a three-session gaining run, Indian equity benchmarks ended Thursday’s trade on a pessimistic note. The brutal sell-off in last hour of trade dragged the markets near day’s low, with Sensex and Nifty slipping below their crucial 38,950 and 11,600 levels, respectively. Markets started off with marginal losses, tracking feeble global cues and a weak Indian rupee. Traders remained cautious with Asian Development Bank lowering India's Gross Domestic Product (GDP) growth forecast to 7 per cent for the current year on the back of fiscal shortfall concerns. Anxiety also persisted with the India Meteorological Department’s (IMD) statement that the country’s monsoon rains were 20 per cent below average in the week ending on Wednesday, as rainfall was scanty over the central, western and southern parts of the country. It also raised concerns over the output of summer-sown crops. Monsoon rains are crucial for farm output and economic growth, as about 55 per cent of India's arable land is rain-fed, and agriculture forms about 15 per cent of a $2.5 trillion economy that is the third biggest in Asia.

Heavy selling crept in last hour of trade with the International Monetary Fund (IMF), which has warned that the US-China trade war could cost the global economy about $455 billion next year, said recent trade policy actions were weighing on global trade flows, eroding confidence, and disrupting investment. Adding to the pain, a private report stated that terminating India’s position as a beneficiary country under the Generalised System of Preference (GSP) will not only negatively impact export of goods from India to the US, but will also have adverse after-effects for American companies operating in India as their additional tax burden will grow by an additional $300 million every year.

On the global front, Asian markets ended mostly lower on Thursday, while European markets were trading in red, on signs that the US-China trade war could hurt corporate earnings, which helped underpin solid demand for safe-haven US Treasuries. Back home, the fast moving consumer goods (FMCG) stocks were in focus as a private research firm lowered its growth target for the FMCG sector. The firm has estimated growth in 2019 to be in the 9-10 percent range as against 11-12 percent estimated earlier.

The BSE Sensex ended at 38923.29, down by 292.35 points or 0.75% after trading in a range of 38861.25 and 39204.47. There were 3 stocks advancing against 28 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index fell 1.22%, while Small cap index was down by 1.18%.(Provisional)

The top losing sectoral indices on the BSE were Auto down by 2.63%, Metal down by 2.34%, PSU down by 2.15%, Energy down by 1.70% and Oil & Gas down by 1.70%, while there were no gainers on sectoral indices. (Provisional)

The top gainers on the Sensex were HDFC up by 2.24%, HDFC Bank up by 0.68% and Kotak Mahindra Bank up by 0.21%. (Provisional)

On the flip side, Yes Bank down by 12.70%, ONGC down by 4.44%, Tata Motors down by 4.14%, Tata Motors - DVR down by 3.99% and Maruti Suzuki down by 3.28% were the top losers. (Provisional)

Meanwhile, the International Monetary Fund (IMF) in its India section of the External Sector Report has said that improving business climate, easing domestic supply bottlenecks and relaxing trade related norms will help India attract foreign direct investments (FDI), improve the current account deficit (CAD) situation and contain external vulnerabilities. It also said that although progress has been made on FDI liberalisation, portfolio flows remain controlled. It said the country’s trade barriers remain significant and added that steps to contain fiscal deficit should be accompanied with measures to enhance credit availability through faster cleanup of balance sheets of banks and corporates.

CAD, which is the net of foreign exchange inflows and outflows, increased to $57.2 billion or 2.1 per cent of Gross Domestic Product (GDP) in FY19 as against 1.8 per cent in the previous year. It noted that India's low per capita income, favourable growth prospects, demographic trends, and development needs justify the CAD. The IMF suggested for gradual liberalisation of portfolio investments, while monitoring risks of portfolio flow reversals. With CAD projected to continue in the medium term, the NIIP (Net International Investment Position)-to-the GDP ratio is expected to weaken marginally. A NIIP is the difference between a country's external financial assets and liabilities.

It also said that the moderate level of foreign liabilities reflects India's gradual approach to capital account liberalisation, which has focused mostly on attracting FDI. India's external debt is moderate compared with other emerging market economies, but rollover risks remain elevated in the short term. It added that the CAD is estimated to have increased to 2.5 per cent of the GDP in fiscal year 2018-19 from 1.9 per cent of GDP in the previous year, due to higher commodity prices and strong domestic demand in the first half of the fiscal year. It also said that FDI inflows are not yet sufficient to cover protracted and large CAD. FDI in India dipped by 1 per cent to $44.4 billion in 2018-19.

The CNX Nifty ended at 11599.50, down by 88.00 points or 0.75% after trading in a range of 11582.40 and 11677.15. There were 9 stocks advancing against 41 stocks declining on the index. (Provisional)

The top gainers on Nifty were Wipro up by 3.08%, Zee Entertainment up by 2.41%, HDFC up by 2.33%, Britannia Industries up by 1.44% and HDFC Bank up by 0.95%. (Provisional)

On the flip side, Yes Bank down by 12.70%, ONGC down by 4.47%, Coal India down by 4.17%, Tata Motors down by 4.02% and Maruti Suzuki down by 3.29% were the top losers. (Provisional)

European markets were trading in red; UK’s FTSE 100 decreased 34.08 points or 0.45% to 7,501.38, France’s CAC fell 28.36 points or 0.51% to 5,543.35 and Germany’s DAX dropped 107.67 points or 0.87% to 12,233.36.

Asian markets ended mostly lower on Thursday as investors remained worried about a hit to corporate earnings from the prolonged US-China trade war and the Japan-South Korea trade dispute. Chinese shares closed down on fears over slowing growth and the impact of the trade dispute with the United States. Further, Japanese shares declined as weak exports data and disappointing US corporate earnings raised fresh worries about the impact of tariffs from the Sino-US trade war. Japanese exports fell 6.7 percent from a year earlier in June against a backdrop of slowing global growth, the Ministry of Finance said in a report. That missed forecasts for a drop of 5.4 percent following the 7.4 percent drop in the previous month. Exports to China, Japan's biggest trading partner, fell 10 percent from a year earlier, marking its sixth fall in the past seven months.