Markets extend decline for fifth straight day

Indian equity benchmarks extended their decline for fifth straight day on Wednesday, with Sensex and Nifty closing below their crucial psychological levels of 37,900 and 11,300, respectively. Key indices made a cautious start of the day, after the International Monetary Fund (IMF) in its World Economic Update revised downward India’s Gross Domestic Product (GDP) growth forecast by 0.3% for 2019 and 2020 to 7.0% and 7.2%, respectively, over its previous projections early this year. Weakness continued on the street amid a private report stating that the economy will not be able to achieve the official forecast of 7 percent growth in FY20, making it a second consecutive year of sub-7 percent expansion.

However, markets managed to pare some of their losses in the late leg of the trade to come off from intraday low points, after Finance minister Nirmala Sitharaman signaled that the government may extend the lower corporate tax rate of 25% to all companies, giving India Inc something to cheer about. Her July 5 budget had lowered the rate for most companies but excluded the biggest. Meanwhile, the Minister of State for Finance Anurag Singh Thakur said there is no official estimation of black money in the country, however, it has taken several concrete steps to crack down on illicit funds.

On the global front, European markets were trading mixed, as Germany's private sector grew at the slowest pace in four months in July as the downturn in manufacturing continued. The flash data from IHS Markit showed that the flash composite purchasing managers' index, or PMI fell to 51.4 in July from 52.6 in June. Asian markets ended mixed, after Japan's leading index eased more-than-estimated to the lowest level in six-and-a-half years in May. The final data from the Cabinet Office showed that the leading index, which measures the future economic activity, fell to 94.9 in May from 95.9 in April. The initial score for May was 95.2.

Back home, stocks related to IT sector remained in watch, after Indian envoy Harsh Vardhan Shringla said that the Indian IT industry is an important stakeholder in promoting business relations between India and the US as it contributes to the competitiveness of global operations of American companies and creates thousands of jobs in the US. Power industry stocks also remained in focus, as the Union Power Ministry said that state-owned power generating plants would not be covered under the new payment security mechanism which mandates offering a letter of credit by distribution companies to electricity generators.

Finally, the BSE Sensex lost 135.09 points or 0.36% to 37,847.65, while the CNX Nifty was down by 59.75 points or 0.53% to 11,271.30.

The BSE Sensex touched a high and a low of 38,102.84 and 37,708.41, respectively and there were 06 stocks advancing against 25 stocks declining on the index.
The broader indices ended in red; the BSE Mid cap index fell 1.48%, while Small cap index was down by 1.23%.

The lone gaining sectoral index on the BSE was FMCG up by 0.17%, while Metal down by 2.48%, Auto down by 1.98%, Basic Materials down by 1.91%, Oil & Gas down by 1.67% and Industrials down by 1.61% were the top losing indices on BSE.

The top gainers on the Sensex were Asian Paints up by 3.42%, Hindustan Unilever up by 2.06%, HDFC up by 1.84%, HCL Tech up by 0.95% and HDFC Bank up by 0.70%. On the flip side, Indusind Bank down by 3.87%, Tata Motors - DVR down by 3.86%, Bajaj Finance down by 3.17%, Tata Motors down by 3.17% and Tata Steel down by 3.06% were the top losers.

Meanwhile, refusing demands for rollback of import duty on the paper used for printing newspapers, Finance Minister Nirmala Sitharaman has said that 10 percent customs duty on imported newsprint was a move to provide a level playing field for domestic manufacturers. She noted that there is a capacity in this country to produce newsprint, but unfortunately, domestic newsprint manufacturers are not able to find buyers because most of the newsprint is imported.

Sitharaman has stated that in the previous few months, there has been a drastic fall in price overseas from $700 per tonne to $500 per tonne. She said that kind of fall in global newsprint prices has affected the Indian manufacturers so badly that they are not able to find takers for their product. She also pointed out that the duty would adversely impact small newspapers at a time when advertising revenue was also depleting. Therefore, she said “if we are talking of Make in India but allowing indirectly to import, it does not make sense at all. I am sure the member appreciate this point that when we are trying to make Indian industry survive this kind of onslaught, this is inevitable.

Meanwhile, the total consumption of newsprint in India is estimated at 2.5-million tonnes per annum and the manufacturing capacity of the domestic industry is only 1-million tonnes. Also, there are no domestic manufacturers of uncoated and lightweight coated paper.

The CNX Nifty traded in a range of 11,359.75 and 11,229.80. There were 12 stocks advancing against 38 stocks declining on the index.

The top gainers on Nifty were Zee Entertainment up by 4.28%, Asian Paints up by 3.44%, Hindustan Unilever up by 2.19%, HDFC up by 1.94% and HCL Tech up by 1.19%. On the flip side, UPL down by 5.45%, Adani Ports & SEZ down by 5.08%, Indiabulls Housing Finance down by 4.50%, Eicher Motors down by 3.73% and Indusind Bank down by 3.58% were the top losers.

European markets were trading mostly in red; UK’s FTSE 100 decreased 73.73 points or 0.98% to 7,483.13 and France’s CAC fell 32.46 points or 0.58% to 5,585.70, while Germany’s DAX was up by 13.58 points or 0.11% to 12,504.32.

Asian markets ended mixed on Wednesday amid fresh optimism about US-China trade talks and a batch of stronger-than-expected earnings from the US helping underpin investor sentiment. Traders awaited policy decisions from the European Central bank and the US Federal Reserve to see how much and how fast policymakers might ease policy. Chinese shares ended higher after White House economic adviser Larry Kudlow said it was a good sign that top US officials would travel to China for reviving stalled trade talks. Japanese shares closed up as investors cheered by upbeat private sector activity data. Japan's private sector activity growth improved in July driven by the service sector, flash survey data from IHS Markit showed. The Jibun Bank flash composite output index rose to 51.2 in July from 50.8 in June.