Markets finish day in red terrain

Key Indian equity indices finished Tuesday’s trading session in red terrain, with Sensex and Nifty falling 0.13% each. After a cautious start, markets managed to trade in green terrain for the most part of the session, amid reports that the government has set a target of adding 1.3 crore income tax filers in the current financial year against 1.1 crore new filers last year. Some relief also came after the Ministry of New and Renewable Energy (MNRE) issued guidelines for rollout of the Pradhan Mantri Kisan Urja Suraksha evem Utthan Mahabhiyan (PM-KUSUM) Scheme, with a central aid of Rs 34,422 crore to provide financial and water security to farmers through harnessing solar energy capacities of 25.75 gigawatt (GW) by 2022.

But, key indices slipped in red terrain in the last leg of trade to close the lackluster day on negative note. Domestic sentiments got hit, after outgoing Reserve Bank of India Deputy Governor Viral Acharya said that an increase in government borrowing runs the risk of flooding the debt market, and puts upward pressure on interest rates, making it more expensive for companies to borrow. The market participants got anxious, as the share of foreign portfolio investments (FPI) in domestic capital markets through participatory notes (P-notes) slipped to Rs 81,913 crore at June-end.

On the global front, European markets were trading in green, after Poland's unemployment rate dropped for the fourth straight month in June. The data from Statistics Poland showed that the unemployment rate fell to 5.3 percent in June from 5.4 percent in May. In the same period last year, the jobless rate stood at 5.8 percent. Asian markets ended in green, as Singapore's inflation slowed in June. As per data from the Monetary Authority of Singapore and the Ministry of Trade and Industry, the consumer price index rose 0.6 percent year-on-year in June, slower than the 0.9 percent increase in May. MAS core inflation slowed to 1.2 percent from 1.3 percent in the previous month.

Back home, realty stocks ended higher, despite reports that housing sales fell 11 per cent in April-June 2019-20 across nine major cities to nearly 72,000 units but demand is expected to rise due to additional tax sops in the Budget for affordable homes and political stability at the Centre. Stocks related to power sector also rose, on the back of report stating that the power ministry is considering a proposal to allow all generation companies (gencos) flexibility to supply electricity from any plant in their stable, a move that will reduce the cost of power for cash-strapped distribution companies (discoms) and ease the pressure to raise consumer tariffs.

Finally, the BSE Sensex lost 48.39 points or 0.13% to 37,982.74, while the CNX Nifty was down by 15.15 points or 0.13% to 11,331.05.

The BSE Sensex touched a high and a low of 38,217.81 and 37,898.90, respectively and there were 14 stocks advancing against 17 stocks declining on the index.

The broader indices ended mixed; the BSE Mid cap index fell 0.56%, while Small cap index was up by 0.38%.

The top gaining sectoral indices on the BSE were Utilities up by 1.41%, FMCG up by 1.27%, Power up by 1.18%, Realty up by 0.89%and Consumer Durables up by 0.83%, while PSU down by 0.73%, Energy down by 0.61%, Auto down by 0.52%, Healthcare down by 0.34% and Metal down by 0.32% were the top losing indices on BSE.

The top gainers on the Sensex were Power Grid up by 2.94%, Kotak Mahindra Bank up by 2.76%, Hero MotoCorp up by 2.50%, ITC up by 2.38% and Asian Paints up by 1.90%. On the flip side, SBI down by 2.49%, HDFC down by 2.24%, Bajaj Auto down by 1.57%, HDFC Bank down by 1.44% and ONGC down by 1.13% were the top losers.

Meanwhile, flagging the threats of high government debt, outgoing RBI Deputy Governor Viral Acharya has pitched for ‘reducing the ease’ with which fiscal deficit goals are shifted through the establishment of an independent fiscal council. He noted that establishing an independent fiscal council, as recommended by the Fourteenth Finance Commission and the Fiscal Responsibility and Budget Management (FRBM) Review Committee of FY17 can help India.

Acharya has stated that the government can improve adherence to the FRBM targets and reduce the ease with which goalposts are shifted to future through such a move. He also pointed out that such a council could monitor the governments’ performance on sticking to the fiscal targets and roadmap by assessing regularly the progress in fiscal consolidation or lack thereof, and providing standardised reports on the displacement of fiscal deficits into off-balance sheet borrowings.

Outgoing RBI Deputy Governor further said that the government has resorted to stretching the FRBM targets with an aim to aid the growth process in the recent years and concerns are also being raised over the off balance sheet borrowings done by the Government or entities controlled by it. He added that the government aims to cut its fiscal deficit target, which is the gap between government expenditure and revenue, to 3.3 percent of GDP in 2019-20 against 3.4% estimated earlier.

The CNX Nifty traded in a range of 11,398.15 and 11,302.80. There were 20 stocks advancing against 30 stocks declining on the index.

The top gainers on Nifty were Power Grid up by 2.89%, Kotak Mahindra Bank up by 2.74%, Hero MotoCorp up by 2.55%, ITC up by 2.48% and Asian Paints up by 1.86%. On the flip side, SBI down by 2.49%, Indiabulls Housing Finance down by 2.20%, HDFC down by 2.14%, Adani Ports & SEZ down by 1.69% and Bajaj Auto down by 1.67% were the top losers.

European markets were trading in green; UK’s FTSE 100 increased 42.94 points or 0.57% to 7,557.87, France’s CAC increased 27.28 points or 0.49% to 5,594.30 and Germany’s DAX was up by 143.71 points or 1.17% to 12,433.11.

Asian markets ended mostly higher on Tuesday amid bets that the European Central Bank and the US Federal Reserve will ease their monetary policy to support economic growth. Chinese shares ended higher after the South China Morning Post newspaper reported that a few US officials were planning to visit China next week to resume trade talks. Further, Japanese shares closed up following gains on Wall Street overnight, with focus now shifting to corporate earnings announcements and series of macroeconomic data and events this week.