Markets remain under bears' grip

Indian equity markets remained under the grip of bears on Monday, with Sensex & Nifty closing lower by over 250 & 50 points, respectively. The markets made a weak start of the day, impacted by the commerce ministry’s data report showing that India's exports dropped by 6.05 per cent to $26.13 billion in August compared to the year-ago month. Imports too declined by 13.45 per cent to $39.58 billion, narrowing trade deficit to $13.45 billion in August. Anxiety also remained among traders, amid SBI report stating that the contemporary issue for macroeconomists is to exclusively focus on assuring adequate aggregate demand as the current slowdown cannot be tackled by monetary policy in isolation.

Weak trade persisted on the street in the second half of the trading session, as investments through participatory notes (P-notes) in the Indian capital market stood at Rs 79,088 crore in August-end, registering the third consecutive month-on-month decline. Investments through P-notes has been declining since June, while the month of May had registered an increase over the previous month. Market participants took a note of report that India’s Wholesale price index (WPI) inflation remained unchanged at 1.08% in the month of August 2019, as compared to July 2019 and 4.62% during the corresponding month of the previous year.

On the global front, European markets were trading in red, as Finland's economic growth slowed in July. The data from Statistics Finland revealed that output of the national economy grew 1.7 percent year-on-year in July, slower than the revised 2.5 percent increase logged in June. Asian markets ended mostly in red, after China's industrial production grew at the weakest pace in 17-and-a-half years in August and the retail sales expansion slowed unexpectedly, while the government signaled that it will be hard to maintain growth above 6 percent, as the economy tries to cope with weakening global demand and the adverse effects of a trade war with the United States.

Back home, the realty sector stocks ended lower, as India's apex realtors group CREDAI said it is disappointed with the government's measures to support the sector, as it did not address the key demands such as tax rebate and lower interest rate for home buyers and developers. Further, stocks related to the automobile industry also fell, after credit rating agency, Care Ratings in its latest report revised its outlook for overall automobile sales (excluding tractors) to 5-7 percent for the current financial year (FY20), on the back of factors like higher vehicle prices, financing issues and higher insurance cost among others.

Finally, the BSE Sensex lost 261.68 points or 0.70% to 37,123.31, while the CNX Nifty was down by 72.40 points or 0.65% to 11,003.50.

The BSE Sensex touched a high and a low of 37,302.06 and 37,028.94, respectively and there were 06 stocks advancing against 25 stocks declining on the index.

The broader indices ended mixed; the BSE Mid cap index fell 0.27%, while Small cap index was up by 0.64%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.22%, FMCG up by 0.63%, Healthcare up by 0.37%, IT up by 0.16% and Telecom up by 0.12%, while Oil & Gas down by 1.61%, Energy down by 1.33%, PSU down by 1.24%, Bankex down by 0.87% and Realty down by 0.84% were the top losing indices on BSE.

The top gainers on the Sensex were Tech Mahindra up by 1.41%, ONGC up by 1.40%, Sun Pharma up by 0.80%, Hindustan Unilever up by 0.60% and Bharti Airtel up by 0.36%. On the flip side, Mahindra & Mahindra down by 2.55%, SBI down by 2.42%, Yes Bank down by 2.19%, Asian Paints down by 1.91% and HDFC down by 1.89% were the top losers.

Meanwhile, with an aim to boost dwindling outward shipments, the government has relaxed Priority Sector Lending (PSL) norms to provide additional export credit of up to Rs 68,000 crore and announced a Rs 50,000 crore scheme to reimburse taxes and duties paid by exporters. In addition, it said the insurance cover under the Export Credit Insurance Scheme (ECIS) has been enhanced, which will provide banks more comfort to give loans to exporters, especially those in the MSME sector. The expanded ECIS will offer higher insurance cover to banks lending working capital for exports, and premium incidence for MSMEs will be moderated suitably. The government expects the initiative to cost about Rs 1,700 crore per annum.

Finance Minister Nirmala Sitharaman has said exporters need handholding and the steps will give them additional advantage at a time when the rupee has depreciated against the US dollar. She said scheme for Remission of Duties or Taxes on Export Product (RoDTEP) will replace MEIS (Merchandise Exports from India Scheme) and expanded to all segments in addition to textiles. The RoDTEP scheme will be implemented from January 01, 2020.

Textiles and all other sectors which currently enjoy incentives up to 2% over MEIS will transit into RoDTEP from January 01. She added that in effect, RoDTEP will more than adequately incentivise exporters than existing schemes put together. The move assumes significance as MEIS was not in compliance with global trade rules. The US has already filed a complaint against this and similar other export promotion schemes being given by India in the WTO. Under the World Trade Organisation (WTO) rules, certain duties like state taxes on power, oil, water, and education cess are allowed to be refunded.

Sitharaman has announced another important measure so that exporters can exploit duty benefits under free trade agreements (FTAs) India has entered into with different countries. For the purpose, FTA Utilisation Mission, headed by a senior officer in the Department of Commerce, will be set up. The government also said there would effective monitoring of export financing by the Department of Commerce, and a fully automated electronic refund route will be set up for input tax credit (ITC) in GST to help exporters.

The CNX Nifty traded in a range of 11,052.70 and 10,968.20. There were 14 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were Titan up by 2.15%, Britannia up by 1.80%, Tech Mahindra up by 1.34%, ONGC up by 1.28% and Coal India up by 1.19%. On the flip side, BPCL down by 7.28%, Mahindra & Mahindra down by 2.78%, SBI down by 2.52%, UPL down by 2.45% and Indiabulls Housing Finance down by 2.39% were the top losers.

European markets were trading in red; UK’s FTSE 100 decreased 9.64 points or 0.13% to 7,357.82, France’s CAC fell 38.47 points or 0.68% to 5,616.99 and Germany’s DAX was down by 87.46 points or 0.7% to 12,381.07.

Asian markets ended mostly lower on Monday after the release of weak data from China. Chinese industrial output growth unexpectedly weakened to 4.4% in August from the same period a year earlier, the slowest pace since February 2002 and down from 4.8% in July, while retail sales and investment figures also disappointed amid rising trade pressure and softening domestic demand. Further, oil prices soared following multiple drone attacks over the weekend on Saudi Arabia's crude oil production facilities. Chinese shares ended mostly flat as trading resumed following a three-day holiday weekend. Though, Seoul stocks advanced as investor anxiety about the US-Chinese tariff war eased and investors remained focused on the upcoming Federal meeting for directional cues. Meanwhile, markets in Japan and Malaysia were closed for public holidays.