Bourses see deep cut amid weak micro economic data

Indian equity bourses saw deep cut on Thursday, with Sensex and Nifty closing lower by losses of over a percent. Markets made a sluggish start of the day, after the government data showed that the growth of eight core infrastructure industries fell to its lowest in more than four years in June 2019. The index of eight core industries rose 0.2% in June, down from 7.8% in same month last year, mainly due to a contraction in oil-related sectors as well as in cement production. Adding more worries among traders, the Controller General of Accounts (CGA) in its latest data showed that the government's fiscal deficit or the gap between the government's expenditure and revenue touched 61.4% of the Budget Estimate (BE) in the first quarter (April-June) of fiscal year 2019-20 (FY20).

Key indices remained under pressure throughout the day, as Global analytical firm CRISIL sliced its estimate of India's gross domestic product (GDP) growth by 20 basis points to 6.9 per cent for the current fiscal 2019-20 following a triangulation of downside risks: weak monsoon, slowing global growth and sluggish high-frequency data for the first quarter. The street paid no heed towards a report stating that India's manufacturing activity strengthened in the month of July, on the back of quicker upturn in factory orders. As per the survey report, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) - a composite single-figure indicator of manufacturing performance - surged to 52.5 in July from 52.1 in June.

On the global front, European markets were trading in green, even though the euro area manufacturing sector contracted the most since the end of 2012 in July but at a slower than initially estimated pace. The final data from IHS Markit showed that the manufacturing Purchasing Managers' Index fell to 46.5 in July from 47.6 in June. The score signaled the sharpest deterioration in operating conditions since December 2012. Asian markets ended in red, as the manufacturing sector in Indonesia fell into contraction in July. The latest survey from Markit Economics revealed with a manufacturing PMI score of 49.6. That's down from 50.6 in June, and it slips beneath the boom-or-bust line of 50 that separates expansion from contraction.

Back home, stocks related to the auto industry ended lower, on the back of weak sales data for July month. Ashok Leyland reported a fall of 28% in July 2019 sales (Domestic + Exports) to 10927 units, as against 15199 units sold in the same month of last year, while Mahindra & Mahindra (M&M) reported auto sales performance for July 2019 which stood at 40,142 vehicles, compared to 47,199 vehicles during July 2018, registering a fall of 15%. Further, IT industry stocks remained in focus, as Indian IT majors like TCS, HCL and Infosys have raised concerns regarding market access issues and non-tariff barriers in China with Commerce and Industry Minister Piyush Goyal, as they are creating hurdles for them to set up business in that country.

Finally, the BSE Sensex fell 462.80 points or 1.23% to 37,018.32, while the CNX Nifty was down by 138.00 points or 1.24% to 10,980.00.

The BSE Sensex touched a high and a low of 37,387.18 and 36,694.18, respectively and there were 07 stocks advancing against 24 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index lost 0.86%, while Small cap index was down by 1.10%.

The only gaining sectoral indices on the BSE were Energy up by 0.51%, Consumer Durables up by 0.21% and Utilities up by 0.05%, while Metal down by 3.37%, Basic Materials down by 2.49%, Telecom down by 2.35%, TECK down by 2.07% and IT down by 1.92% were the top losing indices on BSE.

The top gainers on the Sensex were Maruti Suzuki up by 1.86%, Power Grid up by 1.45%, Reliance Industries up by 1.25%, Bajaj Auto up by 0.92% and Hero MotoCorp up by 0.59%. On the flip side, Vedanta down by 5.55%, Tata Motors down by 4.50%, SBI down by 4.47%, Bharti Airtel down by 4.10% and Tata Motors - DVR down by 3.76% were the top losers.

Meanwhile, stressing the importance of innovation, Petroleum Minister Dharmendra Pradhan has said that it is a crucial factor which will boost growth and help to achieve target of making India a $5 trillion economy by 2024-25.

Pradhan has said that India will become the largest consumer of fossil fuel in the next 15 years, so there is need to reduce India’s crude oil import bill. He added that the country’s crude oil import bill is pegged at Rs 6 lakh crore per annum. He also stated that India produces approximately 600MT of non-fossilised biomass through farm waste, which if converted to energy can help usher prosperity in rural economy, and promote a sustainable energy future.

In order to support the Niti Aayog's Atal Community Innovation Centre (ACIC) programme, the minister said he will direct oil and steel public sector undertakings (PSUs) to contribute their corporate social responsibility (CSR) money to the programme. He noted that ACIC will encourage students, researchers and other individuals/group of individuals to ideate and design novel solutions. He also said “the scheme will also connect innovative thinkers to our market and mainstream economy.”

The CNX Nifty traded in a range of 11,076.75 and 10,881.00. There were 11 stocks advancing against 38 stocks declining, while 1 stock remain unchanged on the index.

The top gainers on Nifty were Maruti Suzuki up by 2.13%, Wipro up by 2.11%, Bharti Infratel up by 1.93%, Power Grid up by 1.83% and Reliance up by 1.67%. On the flip side, Vedanta down by 5.61%, JSW Steel down by 5.01%, SBI down by 4.70%, Tata Motors down by 4.35% and Hindalco down by 4.17% were the top losers.

European markets were trading in green; UK’s FTSE 100 increased 15.09 points or 0.2% to 7,601.87, France’s CAC rose 40.02 points or 0.73% to 5,558.92 and Germany’s DAX was up by 42.46 points or 0.35% to 12,231.50.

Asian markets ended mostly lower on Thursday as Fed Chairman Jerome Powell dampened hopes of further rate cuts later this year and top American and Chinese negotiators finished talks with little progress toward ending a trade war. Chinese shares closed down as a private survey showed Chinese factory activity contracted in July and China's central bank kept its main policy rates on hold. The People's Bank of China refrained from daily open market operations, saying that banking system liquidity was ‘reasonably ample’. Further, Seoul shares ended lower as relations between Japan and South Korea appear to be at a stalemate over export restrictions. Meanwhile, Japanese shares ended little changed with a positive bias as investors awaited manufacturing and employment data from the US for additional cues about future rate cuts. The manufacturing sector in Japan continued to contract, albeit at a slightly slower rate, the latest survey from Jibon revealed with a manufacturing PMI score of 49.4. That's up fractionally from 49.3 in June.