Markets trade in red in early deals; Nifty below 10,900 mark

Indian equity benchmarks, extending losses for third straight session, made a negative start and are trading with cut of around one-third of a percent each in early deals on Thursday. Sensex and Nifty slipped below their crucial levels of 37,000 and 10,900, respectively. Barring FMCG and Capital Goods, all other sectoral indices are trading in red on BSE. Traders were concerned with Care Ratings’ report that the ongoing economic slowdown has started hurting corporates as well, with companies reporting a sharp decline in both revenue and profit growth numbers in the June quarter. India Inc's net sales growth for the June quarter slid to 4.6% as against 13.5% for the same period last year, while the net profit growth moderated to 6.6% as compared to last year's 24.6%. adding pessimism among market participants, a private report stated that the government’s net revenue growth from direct taxes has decelerated sharply to 4.7% for April 1-August 15 this year as against a required annual growth rate of 17.3%, reflecting lower buoyancy in the wake of an overall slowdown in the economy. However, down side remained limited with report that the government is planning to boost domestic production of chemicals and petrochemicals to cut down imports and make India a manufacturing hub for the sector.

On the global front, Asian markets were trading mostly in red after a preliminary data showed that Japan's manufacturing activity shrank for a fourth consecutive month. The Jibun Bank Flash Japan Manufacturing Purchasing Managers' Index rose to a seasonally adjusted 49.5 in August from 49.4 in July. Readings below 50 signify contraction. Investors remained cautious as Federal Reserve Chairman Jerome Powell is scheduled to deliver a closely-watched speech in Jackson Hole, Wyoming, on Friday. On the other hand, the US markets had closed higher on Wednesday after minutes from Federal Reserve's July meeting offered few surprises and suggested that the central bank wanted to remain flexible in implementing policy changes.

Back home, on the sectoral front, auto stocks trading in red despite Road Transport Minister Nitin Gadkari said that the government has set no deadline to ban the production of petrol, diesel vehicles or for automobile manufacturers to switch to electric vehicles (EVs). In scrip specific development, Coffee Day Enterprises locked at the upper circuit after a report indicated that ITC could be eyeing a stake in the company. However, Oberoi Realty declined amid reports that Income Tax authorities have initiated search and seizure operations at the premises of the company (IT Activity) from 20 August 2019.

The BSE Sensex is currently trading at 36940.44, down by 119.93 points or 0.32% after trading in a range of 36885.91 and 37087.58. There were 8 stocks advancing against 23 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index declined 0.77%, while Small cap index was down by 0.78%.

The only gaining sectoral indices on the BSE were FMCG up by 0.86% and Capital Goods was up by 0.30%, while Realty down by 5.14%, Metal down by 1.59%, Consumer Durables down by 0.87%, Basic Materials down by 0.86% and Consumer Discretionary Goods & Services was down by 0.84% were the top losing indices on BSE.

The top gainers on the Sensex were ITC up by 1.55%, Tech Mahindra up by 0.54%, Larsen & Toubro up by 0.47%, Hindustan Unilever up by 0.36% and Mahindra & Mahindra up by 0.24%. On the flip side, Vedanta down by 2.43%, Bajaj Finance down by 2.10%, Yes Bank down by 1.99%, Tata Motors - DVR down by 1.32% and ONGC down by 1.32% were the top losers.

Meanwhile, amid ongoing economic slowdown, Care Ratings in its latest report stated that this slowdown has started hurting corporates as well, with companies reporting a sharp decline in both revenue and profit growth numbers in first quarter of the fiscal year 2019-20 (Q1FY20). India Inc's net sales growth for Q1 slid to 4.6% as against 13.5% for the same period last year, while the net profit growth moderated to 6.6% as compared to last year's 24.6%.

The report, which is based on an analysis of 2,976 companies reporting their quarterly numbers, said that the Q1FY20 has been marked by disappointing and weak corporate earnings indicative of the overall slowdown in various industries and the economy. In what can be termed as a silver lining, the broader economic woes do not seem to have had an impact on the orgnaised sector jobs, as the employee expenses growth continued to be stable. Employees compensation grew 10.6% as compared to the year-ago period.

Care Ratings said it can be noted that GDP growth slid to a five-year low of 5.8% for the March quarter and is widely expected to come lower for the June quarter. There have also been reports of jobless growth and a skewed nature of economic growth, where the ‘have-nots’ are being left behind. From the operating profit growth perspective, the study showed a slide down to 4.1% in June quarter as against double digit growth last year. However, the operating profit margin was stable at about 20% level.

The CNX Nifty is currently trading at 10880.35, down by 38.35 points or 0.35% after trading in a range of 10863.15 and 10908.25. There were 14 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were Britannia Industries up by 2.90%, Dr. Reddys Lab up by 1.80%, ITC up by 1.47%, UPL up by 1.42% and Larsen & Toubro up by 0.76%. On the flip side, Indiabulls Housing Finance down by 7.97%, Bajaj Finserv down by 2.87%, Vedanta down by 2.79%, Yes Bank down by 2.75% and JSW Steel down by 2.24% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 declined 0.10 points or 0.01% to 20,618.47, Hang Seng slipped 229.06 points or 0.87% to 26,040.98, KOSPI decreased 7.84 points or 0.40% to 1,956.81, Jakarta Composite slipped 22.39 points or 0.36% to 6,230.58, Shanghai Composite declined 5.29 points or 0.18% to 2,875.04. On the flip side, Straits Times gained 3.50 points or 0.11% to 3,126.07 and Taiwan Weighted was up by 1.51points or 1.51% to 10,527.31.