Markets trade flat in early deals; Nifty above 11,050 mark

Indian equity benchmarks made positive start, but sooner pared most of the gains and are trading flat in early deals on Tuesday. Initially traders took encouragement with Chief Economic Advisor Krishnamurthy Subramanian’s statement that the ongoing trade war between the United States of America and China will not have any impact on Indian export which is just below 2 per cent of the global trade. Investors also got some comfort as the Reserve Bank of India (RBI) decided to transfer a record Rs 1,23,414 crore of its surplus to the central government for the fiscal year 2018-19 or FY19 (July to June), and an additional Rs 52,637 crore of excess provisions as recommended by the Bimal Jalan committee on Economic Capital Framework (ECF). However, market participants turned cautious as Ficci Economic Outlook Survey stated that India's economy will grow at a median rate of 6% during the Q1FY20. Also, it pegged the annual median GDP growth forecast for 2019-20 at 6.9%, with a minimum and maximum estimate of 6.7% and 7.2%, respectively.

On the global front, all the Asian markets trading higher on Tuesday following the overnight gains on Wall Street as worries about US-China trade tensions have eased. US President Donald Trump said that top Chinese officials had called asking for the resumption of trade talks. Meanwhile, the Bank of Japan said that producer prices in Japan were up 0.1% on month in July, in line with expectations following the 0.1% decline in June. On a yearly basis, producer prices gained 0.5% - shy of expectations for an increase of 0.6% and down from 0.7% in the previous month.

Back home, in scrip specific development, Bank of Baroda rose after the Capital Raising Committee of the bank approved issuance of Basel III Compliant Additional Tier I Bonds for aggregate total issue size not exceeding Rs 1650 crore, with a base issue size of Rs 500 crore and a Green Shoe Option to retain oversubscription up to Rs 1150 crore. Pidilite Industries traded in green after entering into a joint venture with Chetana Expotential Technologies (Chetana), a Bangalore based engineering technologies company, to establish a Joint Venture Company (JV company) in India.

The BSE Sensex is currently trading at 37467.57, down by 26.55 points or 0.07% after trading in a range of 37449.69 and 37693.80. There were 23 stocks advancing against 8 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.20%, while Small cap index was up by 0.66%.

The top gaining sectoral indices on the BSE were Capital Goods up by 1.37%, Industrials up by 1.04%, PSU up by 0.96%, Basic Materials up by 0.83% and Power was up by 0.76%, while IT down by 1.36%, TECK down by 1.24%, Realty down by 0.30% and Consumer Durables was down by 0.04% were the few losing indices on BSE.

The top gainers on the Sensex were SBI up by 1.87%, Tata Motors up by 1.76%, Tata Steel up by 1.73%, Larsen & Toubro up by 1.70% and NTPC up by 1.42%. On the flip side, HCL Technologies down by 2.23%, Infosys down by 1.89%, TCS down by 1.24%, Kotak Mahindra Bank down by 1.04% and Tech Mahindra down by 0.88% were the top losers.

Meanwhile, the industry chamber, Federation of Indian Chambers of Commerce and Industry (FICCI) in its latest economic outlook survey has stated that India's economy is likely to grow at a median rate of 6% during the first quarter of the current financial year ended June 30 (Q1FY20). The country's economy grew at 8.2 per cent in April-June 2018-19. Besides, it pegged the annual median GDP growth forecast for 2019-20 at 6.9%, with a minimum and maximum estimate of 6.7% and 7.2%, respectively. The median is the middle number in a sorted, ascending or descending list of numbers which can be more descriptive of a data set than the average.

A majority of the participating economists in the survey suggested the RBI will continue its accomodative stance, with a further cut in the repo rate in the remaining part of 2019-20. They felt that the prevailing real interest rates were high. They also signalled that tardy deposit growth is haunting the banks as it is limiting their ability to lend and is preventing adequate transmission. The participants identified four key areas of improvement that would help create more jobs: cost of doing business; regulatory reforms; labour reforms and announcement of sector specific special packages. They observed that slower global growth will impact India's growth prospects going forward.

The survey participants unanimously indicated that India's potential growth rate would be between 7-7.5%, which is lower than the 8% plus potential growth rate estimated until a few years back. However, a majority of participants felt that potential GDP growth would settle at 7.5%. In order to achieve India's potential growth rate, the participants suggested boosting agriculture, strengthening micro, small and medium enterprises, undertaking factor market reforms and enhancing avenues for infrastructure financing.

The outlook of participants on inflation also remains benign. The median forecast for Wholesale Price Index (WPI) based inflation rate for 2019-20 has been pegged at 2.9%, with a minimum and maximum estimate of 2.1% and 5.7%, respectively. Besides, the median forecast for the Consumer Price Index (CPI) is 3.7% for 2019-20 with a minimum and maximum estimate of 3.4% and 4.1%, respectively. However, according to the survey, concerns remain on external front with median current account deficit forecast pegged at 2.3% of GDP for 2019-20. Merchandise exports are expected to grow by 3.6%, while imports are expected to grow by 4% during the year.

The CNX Nifty is currently trading at 11059.30, up by 1.45 points or 0.01% after trading in a range of 11049.50 and 11122.30. There were 32 stocks advancing against 17 stocks declining, while 1 stock remain unchanged on the index.

The top gainers on Nifty were Britannia Industries up by 3.69%, UPL up by 2.80%, Ultratech Cement up by 2.42%, Tata Motors up by 2.22% and Tata Steel up by 2.12%. On the flip side, HCL Technologies down by 2.22%, Infosys down by 2.17%, TCS down by 1.39%, Cipla down by 1.20% and Kotak Mahindra Bank down by 1.16% were the top losers.

All the Asian markets were trading in green; Nikkei 225 gained 240.18 points or 1.19% to 20,501.22, Straits Times strengthened 6.21 points or 0.20% to 3,071.54. Hang Seng rose 26.81 points or 0.10% to 25,707.14, Taiwan Weighted increased 48.02 points or 0.46% to 10,402.59, Kospi advanced 13.43 points or 0.70% to 1,929.74, Jakarta Composite jumped 40.28 points or 0.65% to 6,254.79 and Shanghai Composite was up by 48.05 points or 1.68% to 2,911.62.