Repo rate cut fails to cheer Indian markets

Repo rate cut by the Reserve Bank of India (RBI) failed to cheer Indian equity bourses on Friday, with Sensex & Nifty ending lower by over 1%. The RBI cut the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points (bps) to 5.15% from 5.40% with immediate effect. After a firm start, markets remained in green for the first half, aided with Niti Aayog CEO Amitabh Kant’s statement that there will be many more structural reforms by the government in the coming days to push economy to a high growth trajectory. He added that the government announced a series of economic boosters including capitalization of public sector banks, merging some of them, package for exports, and bringing down corporate tax rate.

However, in the second half of the session, indices turned negative to settle in red, after the RBI sharply cut its economic growth projection for this fiscal to 6.1 percent from 6.9 percent earlier, but expressed hope that the growth will recover in the second half of 2019-20. The central bank's estimates come in the wake of GDP growth sliding to a six-year low of 5 percent in the June quarter, on a massive slowdown in consumption and private sector investments. Sentiments also remained pessimistic, as India’s services sector activity contracted in September 2019. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index eased to 48.7 in September from 52.4 in August.

On the global front, European markets were trading in red, despite Russia's service sector expanded at the fastest pace in six months in September, supported by new order growth and a rebound in hiring. The survey data from IHS Markit showed that the services Purchasing Managers' Index increased to 53.6 in September from 52.1 in August. Asian markets ended lower, as Hong Kong's private sector economy continued to contract in September as trade tensions and local protests continue to hurt demand. The survey results from IHS Markit showed that the IHS Markit Hong Kong SAR Purchasing Manager's Index edged up to 41.5 in September from 40.8 in August. However, a reading below 50 indicates contraction.

Back home, power and coal sector stocks remained in watch, as the government launched a portal for transparency and better coordination among stakeholders, including Coal India, Indian Railways, power utilities and, ministries of coal and power, for coal supplies to power plants. Further, stocks related to the realty industry also remained in focus, after rating agency CRISIL in its latest report said the top 10 commercial real estate developers and operators in the country have the potential to raise as much as Rs 1.5 lakh crore through the real estate investment trust (REIT) route by monetising 184 million sqft space assuming a capitalisation rate of 8.5 per cent and stake dilution of 75 per cent.

Finally, the BSE Sensex fell 433.56 points or 1.14% to 37,673.31, while the CNX Nifty was down by 139.25 points or 1.23% to 11,174.75.

The BSE Sensex touched a high and a low of 38,403.54 and 37,633.36, respectively and there were 10 stocks advancing against 21 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index lost 0.94%, while Small cap index was down by 0.79%.

The only gaining sectoral indices on the BSE were IT up by 0.74% and TECK up by 0.32%, while Bankex down by 2.45%, Consumer Durables down by 2.10%, Capital Goods down by 1.95%, Basic Materials down by 1.83% and Industrials down by 1.69% were the top losing indices on BSE.

The top gainers on the Sensex were TCS up by 1.03%, Infosys up by 0.99%, Tech Mahindra up by 0.84%, ONGC up by 0.82% and NTPC up by 0.60%. On the flip side, Kotak Mahindra Bank down by 3.46%, ICICI Bank down by 3.17%, HDFC Bank down by 2.79%, Tata Motors down by 2.37% and Larsen & Toubro down by 2.35% were the top losers.

Meanwhile, US Secretary of Commerce Wilbur Ross said that neither Indian nor American government has stated that a trade deal will be signed in five minutes, but it does not see any structural reason which might stop both the nations to have a trade agreement ‘pretty quickly’.

Talking about US concerns over high trade deficit with India, Ross said that there was confusion about US position on the trade deficit. He said ‘We do feel that our deficit was too high and we intend both to increase total trade and reduce our trade deficit.’ He also noted that the deficit which arises mainly because of artificial and protectionist barriers that countries have thrown up which is a primary issue that the US is concerned with. He added that increasing exports from India would also help India and India has a wonderful opportunity right now to take advantage of trade tensions in the world.

Assuring that the announcement of trade deal is not holding back Indian trade or Indian relations either at the geopolitical level or leaders level or even trade and business level, Commerce Minister Piyush Goyal said ‘But we want to actually take a quantum leap in that, which is the direction in which both nations and our negotiating team are working.’ he noted that trade has to consider the past, the present, future, the political dynamics, local issues, long term issues, bilateral and multilateral commitments. He added ‘So it's a very complex story and in that complexity, we are having an absolutely wonderful engagement.’

The CNX Nifty traded in a range of 11,400.30 and 11,158.35. There were 11 stocks advancing against 39 stocks declining on the index.

The top gainers on Nifty were ONGC up by 0.98%, Wipro up by 0.93%, TCS up by 0.86%, Infosys up by 0.85% and Tech Mahindra up by 0.70%. On the flip side, Zee Entertainment down by 6.42%, Grasim Industries down by 4.21%, Ultratech Cement down by 4.03%, JSW Steel down by 3.86% and Titan down by 3.46% were the top losers.

European markets were trading mostly in red; France’s CAC decreased 6.75 points or 0.12% to 5,432.02 and Germany’s DAX shed 29.90 points or 0.25% to 11,895.35, while UK’s FTSE 100 was up by 3.11 points or 0.04% to 7,080.75.

Asian markets ended mostly lower on Friday, despite optimism that the US Federal Reserve will cut interest rates later in October. Investors remained cautious as they looked ahead to the release of US jobs data later in the day, following a number of disappointing figures this week that fanned concerns about the world's top economy. The survey from the US Institute for Supply Management (ISM) showed its non-manufacturing activity index falling to the lowest level in more than three years in September, and far below expectations. Hong Kong shares ended lower, with the media reporting that Hong Kong's government is set to ban wearing face masks at protests. Japanese shares ended higher on late bargain-hunting as investors looked ahead to the key US jobs data to be released later in the day. Meanwhile, markets in China remained closed for public holidays.