Benchmarks extend previous session’s losses with gap-down opening

Indian equity benchmarks extended their southward journey with gap-down opening on Thursday amid weak global cues. Sensex and Nifty were trading below their psychological levels of 38,200 and 11,350, respectively. Losses in Metal, Basic Materials and Capital Goods stocks pulled the markets lower. Traders were concerned with report that S&P Global Ratings in its quarterly report on the Asia-Pacific region has slashed India’s Gross Domestic Product (GDP) growth projection to 6.3% for the current financial year (FY20) from 7.1% forecasted earlier, amid decline in private consumption. Some cautiousness also came in with the finance ministry’s data showing that Goods and services tax (GST) collection fell to a 19-month low of Rs 91,916 crore in September, pointing to a deepening economic slowdown. It is the second straight month when the collection has fallen below the Rs 1-trillion mark. Though, markets off their day’s low in early deals as traders took note of World Economic Forum’s (WEF) statement that India, a young economy with lot of potential, has demonstrated remarkable strength and resilience amid global slowdown.

Global cues remained subdued with all the Asian markets trading in red following the overnight sell-off on Wall Street amid rising worries about economic growth. Investors’ sentiment was further dampened amid report that following a victory at the World Trade Organization, the US plans to impose tariffs on $7.5 billion worth of goods from the European Union. The Office of the US Trade Representative said that the tariffs on European Union aircraft and agricultural products will take effect on October 18 and includes Airbus planes. Meanwhile, the latest survey from Jibun Bank revealed that the services sector in Japan continued to expand in September, albeit at a slower rate, with a PMI score of 52.8.

Back home, on the sectoral front, banking stocks were in focus with domestic ratings agency Crisil’s report said that the Indian banking system's stock of dud assets will further reduce to up to 8 per cent level by March 2020, but the NBFCs may continue to face challenges. In scrip specific developments, Yes Bank jumped over 20% after the private lender clarified in a BSE filing that the material drop in its share prices on October 01, 2019 was primarily on account of the forced sale of 10 crore equity shares (3.92% of the Bank's equity share capital) triggered by an invocation of pledge on the equity shares of a large stakeholder. However, TVS Motor Company fell after it registered sales of 3.15 lakh units in September 2019 as against sales of 4.23 lakh units in September 2018.

The BSE Sensex is currently trading at 38146.74, down by 158.67 points or 0.41% after trading in a range of 37957.56 and 38192.48. There were 12 stocks advancing against 19 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index declined 0.06%, while Small cap index was down by 0.33%.

The top gaining sectoral indices on the BSE were IT up by 0.32%, Oil & Gas up by 0.29%, Auto up by 0.18%, TECK up by 0.17% and Consumer Durables was up by 0.12%, while Metal down by 2.81%, Basic Materials down by 1.35%, Capital Goods down by 1.25%, Telecom down by 0.99% and Industrials was down by 0.63% were the top losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 20.78%, Tata Motors up by 4.46%, Tata Motors - DVR up by 3.88%, ITC up by 0.90% and HCL Technologies up by 0.67%. On the flip side, Vedanta down by 3.76%, Tata Steel down by 2.89%, Axis Bank down by 2.55%, Larsen & Toubro down by 1.65% and Kotak Mahindra Bank down by 1.45% were the top losers.

Meanwhile, S&P Global Ratings in its quarterly report on the Asia-Pacific region has slashed India’s Gross Domestic Product (GDP) growth projection to 6.3% for the current financial year (FY20) from 7.1% forecasted earlier, amid decline in private consumption. Though, it expects the Indian economy to recover in FY21 to 7%. It said ‘India's slump is deeper and more broad-based than we expected. In the March-June quarter, the economy expanded by just 5%, well below potential, which we estimate to be north of 7%. Most alarming has been the precipitous decline in private consumption growth that had been the engine of the economy in recent years - down to about 3% in the March-June quarter.’

On the government’s effort to stimulate the economy through substantial reductions in corporate taxes, S&P said it will cost the exchequer 0.7% of GDP, though the net impulse will be smaller, with the government eliminating some exemptions. The report said short-term effect on the economy would be limited until businesses felt more confident about the outlook for demand. It added that other fiscal support is more targeted and may lift demand in some segments of the economy- e.g., income transfers to farmers.

On the Reserve Bank of India's monetary policy, S&P said ‘we expect further cuts if external conditions (US rates and oil prices) provide space. Transmission will be imperfect, however, due to long-standing balance sheet constraints among public banks and stress among non-bank lenders. The negative surprises of recent quarters will continue to weigh on private domestic demand. So while some recovery is likely, growth may remain below potential for some time.’

The CNX Nifty is currently trading at 11307.05, down by 52.85 points or 0.47% after trading in a range of 11257.35 and 11323.65. There were 17 stocks advancing against 33 stocks declining on the index.

The top gainers on Nifty were Yes Bank up by 22.03%, Tata Motors up by 4.51%, Eicher Motors up by 2.01%, Zee Entertainment up by 1.82% and BPCL up by 1.34%. On the flip side, Hindalco down by 5.01%, Vedanta down by 3.60%, Tata Steel down by 2.72%, Axis Bank down by 2.45% and Coal India down by 2.45% were the top losers.

All Asian markets were trading in red; Nikkei 225 slipped 460.97 points or 2.12% to 21,317.64, Hang Seng decreased 124.18 points or 0.48% to 25,918.51, Taiwan Weighted dropped 63.29 points or 0.58% to 10,884.59, Jakarta Composite lost 32.81 points or 0.54% to 6,022.62 and Straits Times was down by 29.42 points or 0.95% to 3,074.03.