Bourses snap 3-day gaining streak

Indian equity bourses snapped 3-day gaining streak to close on lackluster note, with the Sensex and the Nifty losing around half a percent each. The start of the day was a cautious, impacted with Moody's Investors Service’s statement that the economic measures announced by Finance Minister Nirmala Sitharaman are unlikely to provide some form of confidence and improve business sentiment and consumer sentiment. Moody's, which has lowered India's gross domestic product (GDP) forecast to 6.4% for FY20, said there is significant uncertainty in terms of the growth prospects both because of domestic as well as external factors. Market participants rolled-over their positions ahead of the August Futures & Options (F&O) series expiry due on Thursday.

Weakness continued over the street in the second half of the session, on the back of mixed cues from global markets. Domestic sentiments remained pessimistic, as India Ratings and Research (Ind-Ra) revised India's gross domestic product (GDP) growth in current financial year downwards to 6.7 per cent -- marking a six-year low -- from its earlier forecast of 7.3 per cent. The agency expects FY20 to be the third consecutive year of subdued growth pushed by a slowdown in consumption demand, delayed and uneven progress of monsoon so far, decline in manufacturing growth, inability of Insolvency and Bankruptcy Code to resolve cases in a time-bound manner and rising global trade tension adversely impacting exports.

On the global front, European markets were trading in red, despite German consumer confidence is set to remain unchanged in September. The survey data from market research group GfK showed that the forward-looking consumer sentiment index held steady at 9.7 in September. Asian markets ended mixed, even though China's industrial profits recovered in July. The data from the National Bureau of Statistics showed that industrial profits increased 2.6 percent year-on-year in July, in contrast to a 3.1 percent fall in June. Nonetheless, industrial profits decreased 1.7 percent in January to July period from the same period last year. This was slower than the 2.4 percent decline seen in the first half of 2019.

Back home, banking industry stocks ended lower, as global rating agency S&P in its latest report said that the government’s Rs 70,000 crore upfront capital infusion into state-run banks would not deliver on the key objectives of higher lending and a recovering in their fortunes, amid weak credit demand from corporates and the lingering Non-Banking Financial Company (NBFC) crisis. Further, electronics industry stocks remained in watch, after secretary in the Ministry of Electronics and IT Ajay Prakash Sawhney said that the government is now working on policies to develop electronic components manufacturing base in the country and encourage exports.

Finally, the BSE Sensex lost 189.43 points or 0.50% to 37,451.84, while the CNX Nifty was down by 59.25 points or 0.53% to 11,046.10.

The BSE Sensex touched a high and a low of 37,687.82 and 37,249.19, 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 dipped 0.92%, while Small cap index was down by 0.64%.

The only gaining sectoral indices on the BSE were Realty up by 1.86%, IT up by 1.27% and TECK up by 1.06%, while Metal down by 3.40%, Auto down by 1.91%, Power down by 1.52%, PSU down by 1.33% and Basic Materials down by 1.27% were the top losing indices on BSE.

The top gainers on the Sensex were HCL Tech up by 2.61%, Infosys up by 2.18%, Tech Mahindra up by 2.10%, HDFC up by 0.51% and TCS up by 0.18%. On the flip side, Yes Bank down by 7.47%, Tata Motors - DVR down by 4.20%, Vedanta down by 4.06%, Tata Steel down by 4.02% and ONGC down by 3.62% were the top losers.

Meanwhile, credit rating agency CRISIL in its latest report has said that India’s automotive components industry is projected to log a lower 5-7 percent compounded annual growth rate (CAGR) over the fiscals 2020 and 2021 as compared to 12 percent in the previous two fiscals, on the back of the ongoing slump in the demand for vehicles. Besides, it said that the industry's topline growth is likely to recede to half in the next two fiscals, though tighter safety and emission norms for original equipment makers (OEMs) could give partial respite to the Rs 3.5 lakh crore industry.

The rating agency also revealed that capital expenditure spend will be discretionary and could be around 15 percent lower at Rs 12,000 crore in fiscals 2020 and 2021, compared with the preceding two fiscals. It also said that the upcoming safety and emission norms will boost demand for components like airbags, engine systems, exhaust management systems, and electronic and electrical parts. It noted that these new regulations alone are expected to account for 25-30 percent of the incremental demand for automotive components in the next two fiscals. It added that the growth in fiscal 2020 and 2021 would be even lower, but for the higher component intensity resulting from the regulatory changes, besides steady aftermarket sales and healthy exports.

According to the report, the production volume of the OEMs is estimated to either register a year-on-year decline or log low single-digit at best in the next two years. It also noted that higher insurance costs, lower availability of finance and low growth in rural wages is affecting off-take in fiscal 2020. Vehicle demand is also expected to be impacted by the new safety norms for passenger vehicles and two-wheelers, applicable in fiscal 2020, and the Bharat Stage (BS) VI emission norms, which would come into force from April 1, 2020, as these will drive up vehicle prices across categories. As per to Crisil, these factors are affecting new vehicle sales and in turn causing an impact on the automotive component sector, as OEMs account for 65 percent of component demand.

The CNX Nifty traded in a range of 11,129.65 and 10,987.65. There were 13 stocks advancing against 37 stocks declining on the index.

The top gainers on Nifty were HCL Tech up by 2.72%, BPCL up by 2.48%, Infosys up by 2.40%, Bharti Infratel up by 2.20% and Eicher Motors up by 1.90%. On the flip side, Yes Bank down by 7.13%, Tata Steel down by 4.29%, JSW Steel down by 3.82%, Vedanta down by 3.77% and Coal India down by 3.73% were the top losers.

European markets were trading mostly in red; France’s CAC decreased 26.29 points or 0.49% to 5,360.80 and Germany’s DAX shed 56.74 points or 0.48% to 11,673.28, while UK’s FTSE 100 was up by 25.62 points or 0.36% to 7,115.20.

Asian markets ended mixed on Wednesday amid uncertainty about the future of US-China trade relations, and on raising fears of an imminent recession following government bond yields edged back towards record lows. Meanwhile, Chinese government announced several measures to boost consumption in the country as its economy slows under the weight of its raging trade war with the US. Japanese shares ended higher, with defensive stocks rising as the downgrading of South Korea's trade status took effect. Seoul shares advanced even as Japan officially removed South Korea from a list of preferred trading partners.