Markets trade in red in early deals

Indian equity benchmarks have made cautious start and are trading with a cut of around one third of a percent in early deals on Wednesday amid Care Ratings’ report that the ongoing economic slowdown that India is witnessing may be because of weak investment growth. Two catalysts of investment - demand and availability of funds - have witnessed weak growth in the preceding months. Low capacity utilization in most of the industries left them with surplus capacity and this surplus has pulled down the need for any more expansion. It mentioned the problems in the financial sector involving NBFCs have affected the flow of funds and added to the worry. Broader indices, BSE Mid cap and Small cap are also trading in red. However, losses remained capped as traders found some solace with report that India's central bank recommended a slew of measures for developing a secondary market for corporate loans, including easing of regulations to allow foreign portfolio investors (FPIs) to directly purchase distressed loans from banks.

Asian markets were trading mostly in green at this point of time despite poor US economic data stoked global recession fears and further soured investor sentiment already hurt by heightened trade war concern. The US markets ended lower on Tuesday after the US launched a new round of tariffs on $112 billion in Chinese goods, with China retaliating with new levies of its own.

Back home, steel stock remained in focused with the report that India Ratings and Research (Ind-Ra) has revised its outlook on the steel sector to ‘stable-to-negative’ from ‘stable’ for the remainder of this fiscal, owing to sluggish demand growth expectation. Ind-Ra has also revised downwards its FY20 steel demand growth expectation to around 4% from the previous forecast of 7%.

The BSE Sensex is currently trading at 36460.22, down by 102.69 points or 0.28% after trading in a range of 36444.27 and 36635.87. There were 11 stocks advancing against 20 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index declined 0.58%, while Small cap index was down by 0.26%.

The top gaining sectoral indices on the BSE were Telecom up by 0.58%, TECK up by 0.48%, IT up by 0.47%, FMCG up by 0.40% and Capital Goods was up by 0.10%, while Realty down by 1.11%, Energy down by 0.97%, Healthcare down by 0.91%, Consumer Durables down by 0.89% and Basic Materials was down by 0.69% were the top losing indices on BSE.

The top gainers on the Sensex were Hero MotoCorp up by 0.69%, Infosys up by 0.66%, ITC up by 0.60%, ONGC up by 0.55% and TCS up by 0.55%. On the flip side, Sun Pharma down by 4.07%, Indusind Bank down by 3.09%, Reliance Industries down by 1.37%, Yes Bank down by 1.28% and Tata Motors down by 1.15% were the top losers.

Meanwhile, Care Ratings in its latest report has said that the ongoing economic slowdown that India is witnessing may be because of weak investment growth. Two catalysts of investment - demand and availability of funds - have witnessed weak growth in the preceding months. Low capacity utilisation in most of the industries left them with surplus capacity and this surplus has pulled down the need for any more expansion. It also mentioned that the problems in the financial sector involving Non-banking financial companies (NBFCs) have affected the flow of funds and added to the worry.

The report also underlined that current financial year (FY20) may not see any major upward shift given the fairly low Image result for Gross domestic products (GDP) growth witnessed in Q1 FY20.  Gross fixed capital formation (GFCF) rate, a measure of how much of GDP in a year has been accounted for by investment, has been rising very gradually from 28.2 per cent in FY17 to 28.6 per cent and 29.2 per cent in FY18 and FY19 respectively. However, it has declined for five successive years following FY12 when it was at 34.3%.

Investment in the corporate sector can be measured by the changes in gross fixed assets of companies. In FY19 for a set of 1405 companies, incremental GFA was Rs 4.84 lakh crore, out of which, only two companies accounted for 17.3 per cent of the total investments. Besides, the report stated that that the pace of investment would depend on how soon a healthy rural economy can be the starting point for consumption demand that will feedback to investment.

The CNX Nifty is currently trading at 10765.45, down by 32.45 points or 0.30% after trading in a range of 10760.95 and 10823.55. There were 21 stocks advancing against 29 stocks declining on the index.

The top gainers on Nifty were Britannia up by 0.93%, Bharti Infratel up by 0.89%, GAIL India up by 0.71%, Infosys up by 0.67% and Indian Oil Corporation up by 0.64%. On the flip side, Sun Pharma down by 3.99%, Indusind Bank down by 3.12%, Indiabulls Housing down by 1.54%, Titan Co down by 1.51% and Reliance Industries down by 1.44% were the top losers.

Asian markets were trading mostly in green; Straits Times strengthened 12.51 points or 0.40% to 3,103.14. Hang Seng gained 302.34 points or 1.18% to 25,830.19, Taiwan Weighted increased by 58.36 points or 0.55% to 10,616.57, Kospi advanced 2.02 points or 0.10% to 1,967.71 and Shanghai Composite soared 6.53 points or 0.22% to 2,936.68. On the flip side, Nikkei 225 decreased 5.49 points or 0.03% to 20,619.67and Jakarta Composite was down by 19.85 points or 0.32% to 6,241.74.