Bears make comeback on Dalal Street

Bears made a comeback on Dalal Street on Thursday, with Sensex and Nifty closing the day lower by around 300 & 100 points, respectively. After a negative start, key indices remained lackluster throughout the day, as Asian Development Bank (ADB) in its supplement to the Asian Development Outlook 2019 slashed India's gross domestic product (GDP) growth forecast to 7 percent for the current fiscal (FY20), from 7.2 percent projected earlier, on the back of fiscal shortfall concerns. Adding more worries, 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.

In the last leg of the trade, markets extended their losses to end near their intraday low points, tracking weak global markets. Domestic sentiments got hit 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.

On the global front, European markets were trading in red, as Switzerland's exports decreased in June amid a faster growth in imports. The data from the Federal Customs Administration showed that exports dropped by real 0.1 percent on month in June, but slower than the 0.4 percent decrease logged in May. While, growth in imports improved to 1.4 percent from 0.8 percent in May. Asian markets ended in red, after the Bank of Korea lowered its key interest rate for the first time since 2016, citing ongoing weakness in exports amid trade disputes. The Monetary Policy Board decided to cut the base rate unexpectedly by 25 basis points to 1.50 percent.

Back home, automobile industry stocks ended lower, after a private report indicated that electric vehicles could be a better alternative to fuel-based automobiles to mitigate air pollution, but the government's target to switch to e-vehicles in next 10 years is hard to achieve. Further, stocks related to the sugar industry remained in focus, as the government permitted export of 1,239 tonnes raw sugar under its tariff-rate quota (TRQ) to the US, which enables shipments to enjoy relatively low tariff. TRQ is a quota for a volume of exports that enter the US at relatively low tariffs. After the quota is reached, a higher tariff applies on additional imports.

Finally, the BSE Sensex lost 318.18 points or 0.81% to 38,897.46, while the CNX Nifty was down by 90.60 points or 0.78% to 11,596.90.

The BSE Sensex touched a high and a low of 39,204.47 and 38,861.25, respectively and there were 05 stocks advancing against 26 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 1.23%, while Small cap index was down by 1.15%.

The top losing sectoral indices on the BSE were Auto down by 2.65%, Metal down by 2.38%, PSU down by 2.17%, Energy down by 1.81% and Oil & Gas down by 1.66%, while there were no gaining sectoral indices on the BSE.

The top gainers on the Sensex were HDFC up by 2.26%, Kotak Mahindra Bank up by 0.31%, HDFC Bank up by 0.26%, Bajaj Finance up by 0.14% and ITC up by 0.05%. On the flip side, Yes Bank down by 12.85%, ONGC down by 4.24%, Tata Motors - DVR down by 4.24%, Tata Motors down by 4.20% and Mahindra & Mahindra down by 3.32% were the top losers.

Meanwhile, in a significant move, the Union cabinet has cleared seven amendments to the Insolvency and Bankruptcy Code (IBC) that will enforce a strict 330-day timeline for corporate resolution process, including litigation and other judicial processes, as well as make resolution plan binding on all stakeholders. Presently, the resolution plan for an insolvent company has to be cleared within 270 days.

The amendments are aimed at filling critical gaps in the corporate insolvency resolution framework, maximising value from the resolution process as well as save time. The IBC has been amended twice so far. As per the amendment approved by the Cabinet, the resolution plan would be binding on all stakeholders including the central government, any state government or local authority to whom a debt in respect of the payment of the dues may be owed.

Further, the Committee of Creditors (CoC) may take the decision to liquidate the corporate debtor, any time after constitution of the committee and before preparation of Information Memorandum for the resolution. With the amendments, there would be more clarity on allowing comprehensive corporate restructuring schemes such as mergers and demergers as part of the resolution plan. Within the powers of the CoC, commercial consideration would be taken into account when it comes to distribution proposed in resolution plan.

The CNX Nifty traded in a range of 11,677.15 and 11,582.40. There were 09 stocks advancing against 41 stocks declining on the index.

The top gainers on Nifty were Wipro up by 3.14%, HDFC up by 2.24%, Zee Entertainment up by 2.12%, Britannia up by 0.79% and HDFC Bank up by 0.72%. On the flip side, Yes Bank down by 12.70%, ONGC down by 4.40%, Coal India down by 4.37%, Tata Motors down by 4.11% and Maruti Suzuki India down by 3.30% were the top losers.

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 was down by 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.