Benchmarks trade lower amid weakness in Asian peers

Indian equity benchmarks made slightly positive start but sooner drifted into negative territory and trading below their crucial 11,250 (Nifty) and 37,900 (Sensex) levels in early deals on Monday, amid weakness in Asian peers. Traders turned cautious with the latest depositories data showing that reversing their five-month buying trend, overseas investors have pressed the exit button in July and pulled out a net Rs 3,758 crore from the Indian capital markets on account of multiple headwinds, including the super-rich tax announced in Budget 2019-20. Foreign portfolio investors (FPIs) pulled out a net sum of Rs 14,382.59 from equities during July 1-26, but invested Rs 10,624.15 crore in the debt segment, taking the total net outflow to Rs 3,758.44 crore. Some cautiousness also crept in with a report stating that midway into earnings season, it is clear that India Inc’s P&L account remains under pressure. Revenue growth is so sluggish that even a modest increase in costs has not helped companies protect their margins. Investors overlooked report that India's chief economic advisor to the Union finance minister Krishnamurthy Subramanian exuded confidence in the economy swelling to a $5-trillion giant by 2025, saying the high target is definitely achievable.

On the global front, Asian markets were trading lower at this point of time as traders remained cautious on report that US-China trade talks set to resume this week amid low expectations for a major breakthrough. Markets anxiously counted down to a likely cut in US interest rates this week with much riding on whether or not the Federal Reserve signals yet more are in the pipeline. Besides, data on the weekend showed profits earned by China's industrial firms contracted in June, fuelling concerns that the bruising trade war will drag on economic growth.

Back home, on the sectoral front, Auto stocks were in focus as the high-powered GST Council decided to reduce the tax rate on electric vehicles (EVs) to 5% from the existing 12%, a move aimed at accelerating the adoption of eco-friendly mobility solutions. In scrip specific development, ICICI Bank gained around 4% on reporting a standalone net profit of Rs 1,908 crore in the June quarter of FY20, against a loss of Rs 120 crore in the same period last year, owing to higher net interest income (NII) and lower provisions. However, Bajaj Auto slipped over 4% on reporting 2.84% fall in its consolidated net profit at Rs 1,012.17 crore for the quarter ended June 30, 2019 as compared to Rs 1,041.78 crore for the same quarter in the previous year.

The BSE Sensex is currently trading at 37814.70, down by 68.09 points or 0.18% after trading in a range of 37793.26 and 38043.22. There were 7 stocks advancing against 24 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index declined 0.61%, while Small cap index was down by 0.34%.

The few gaining sectoral indices on the BSE were IT up by 1.03%, TECK up by 0.66% and Bankex was up by 0.39%, while Auto down by 2.36%, Metal down by 2.05%, Telecom down by 1.54%, Basic Materials down by 1.27% and Consumer Discretionary Goods & Services was down by 1.16% were the top losing indices on BSE.

The top gainers on the Sensex were ICICI Bank up by 3.61%, HCL Technologies up by 1.55%, TCS up by 1.34%, Tech Mahindra up by 1.07% and Infosys up by 0.93%. On the flip side, Bajaj Auto down by 4.41%, Hero MotoCorp down by 3.21%, Vedanta down by 2.93%, Maruti Suzuki down by 2.73% and Tata Motors - DVR down by 2.61% were the top losers.

Meanwhile, expressing confidence over India’s economy swelling to a $5-trillion giant by 2025, Chief economic advisor to the Union finance minister Krishnamurthy Subramanian has said that this high target is ‘definitely achievable’. The statement comes amidst continuously falling growth numbers and the gathering clouds over the global economy with many warning that the world is headed to a far deeper recession than what it went through in 2008 spawned by the sub-prime crisis in the US. It also comes on the heels of plunging corporate sales and profits, and deepening crisis in the shadow banking space.

He also said that there is ambition involved in it. He said this target is definitely achievable, backing his confidence with the theory of motivation which states that if a goal is stretched by just 10-15 per cent on the higher side that creates a sweet spot and that private investment and behavioural economics will drive the economy forward. He added that if the target is too small then there will be no motivation to achieve it, and if it is too high then also people may quit.

Subramanian said the GDP grew to $1 trillion during the first 55 years of Independence. But during the past five years, between 2014 and 2019, it grew from $1.7 trillion to $2.7 trillion. And India is on course to be a $3 trillion economy now. He added that to hit the $5 trillion target, the economy should grow 8 per cent in real terms in each of the next five years. He also said that investment, especially private investments, which has been missing for almost a decade now and unlikely to revive anytime soon with falling demand and liquidity crisis--will be the key to achieve 8 per cent growth.

The CNX Nifty is currently trading at 11240.05, down by 44.25 points or 0.39% after trading in a range of 11239.00 and 11310.95. There were 9 stocks advancing against 41 stocks declining on the index.

The top gainers on Nifty were ICICI Bank up by 3.44%, HCL Technologies up by 1.55%, TCS up by 1.22%, Infosys up by 0.93% and Tech Mahindra up by 0.92%. On the flip side, Indiabulls Housing Finance down by 6.62%, Bajaj Auto down by 4.25%, Vedanta down by 3.29%, Hero MotoCorp down by 3.24% and JSW Steel down by 3.06% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 declined 84.78 points or 0.39% to 21,573.37, Straits Times shed 21.38 points or 0.64% to 3,342.38. Hang Seng slipped 340.91 points or 1.20% to 28,056.83, Kospi tumbled 29.72 points or 1.44% to 2,036.54, Jakarta Composite decreased 20.40 points or 0.32% to 6,304.84 and Shanghai Composite was down by 4.04 points or 0.14% to 2,940. On the flip side, Taiwan Weighted was up by 3.11 points or 0.03% to 10,895.09.