Local equities pare some early gains

Local equity markets after an optimistic start have pared some of their gains in the morning trade with benchmarks trading higher by over half a percent. Buying was witnessed in Metal, FMCG and Basic Materials stocks. ONGC, Infosys and Vedanta were the prime gainers among heavy-weights, pushing the Sensex 0.70% higher. Some cautiousness came in as India Ratings and Research (Ind-Ra) slashed the country’s gross domestic product (GDP) forecast for current fiscal year (FY20) to 6.1% for the second time in two months. Recently, the rating agency had revised its GDP growth estimate to 6.7% in August from of 7.3% in forecasted earlier. However, market participates took some encouragement from a report that strengthening bilateral cooperation in trade facilitation and creation of favourable condition for expanding two-way commerce can help in reducing the trade imbalance with India. Some support also came in with Union finance minister Nirmala Sitharaman’s statement that the government will set up a group of secretaries (GoS) under the ministry of finance to study the shortcomings of the Multi-State-Cooperatives.

On the global front, Asian markets were trading higher, tracking positive statements coming from the White House on progress in US-China talks. Back on the street, on the sectoral front, shares of Aviation companies were trading lower as International Air Transport Association (IATA) in its latest data showed that India slipped to the fourth place in domestic air passenger traffic in August 2019 with passenger volume rising 3.7% in the month over the period year-ago, reflecting the deepening crisis in the economy spawned by slumping consumer demand.

The BSE Sensex is currently trading at 38145.31, up by 264.91 points or 0.70% after trading in a range of 37961.08 and 38345.41. There were 24 stocks advancing against 7 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index advanced 0.03%, while Small cap index was up by 0.25%.

The top gaining sectoral indices on the BSE were Metal up by 2.18%, Basic Materials up by 1.08%, FMCG up by 0.84%, Power up by 0.75% and PSU was up by 0.65%, while Healthcare down by 0.45%, Consumer Durables down by 0.15% and Telecom was down by 0.01% were the few losing indices on BSE.

The top gainers on the Sensex were ONGC up by 3.11%, Infosys up by 2.91%, Vedanta up by 2.87%, Tata Steel up by 2.38% and Power Grid was up by 2.16%. On the flip side, Yes Bank down by 4.52%, TCS down by 2.71%, IndusInd Bank down by 1.70%, Sun Pharma down by 0.81% and Tech Mahindra was down by 0.81% were the top losers.

Meanwhile, Crisil Research in its report has estimated a sharp drop in demand across consumption segments pulled down corporate revenue by 3% in the second quarter of current financial year (Q2FY20). This is the first time in 14 quarters -- three and a half years -- that revenues have fallen in a quarter. It is largely on the back of a sharp drop in demand across consumption segments - excluding that of banking, financial services, insurance and oil companies. In the previous four quarters, i.e. between Q2FY19 and Q1FY20, aggregate revenue had grown 11-12% on an average.

The estimate is based on an analysis of 430 companies, which account for 65% of the market capitalisation, excluding financial services and oil firms, of the National Stock Exchange. CRISIL Research, Senior Director, Prasad Koparkar said, Automobiles, one of the key sectors driven by consumption spending, continues to reel under a demand slowdown. Aggregate revenue of listed automobile players is estimated to have dropped around 25% in the second quarter. In a rub-off, the revenue of automotive component makers is estimated to have fallen 14-16% amid production cuts.

Construction-linked sectors are expected to log an overall decline of 5% on-year in revenue in the second quarter. This is on account of 15% on-year decline in steel products, mainly due to declining realisations, as flat steel prices dropped 14%. Cement players, though, will likely log a 5-6% rise in revenue despite a drop in volumes, given higher realisations. On the industrial side, revenue of petrochemical companies is expected to fall 23-25% due to lower petrochemical realisations amid a fall in feedstock naphtha prices (25% on-year decline) following lower crude oil prices. For companies in power sector, aggregate revenue growth is estimated to have logged a slower pace of 3-4% against an average of 10% in the previous four quarters due to a slowdown in power demand across regions.

The CNX Nifty is currently trading at 11305.65, up by 71.10 points or 0.63% after trading in a range of 11256.70 and 11362.90. There were 33 stocks advancing against 17 stocks declining on the index.

The top gainers on Nifty were Vedanta up by 3.33%, ONGC up by 3.07%, Hindalco up by 2.99%, Infosys up by 2.87% and Coal India was up by 2.25%. On the flip side, Yes Bank down by 5.13%, Zee Entertainment down by 2.69%, TCS down by 2.68%, IndusInd Bank down by 1.89% and Cipla was down by 1.22% were the top losers.

Asian markets were trading in green, Hang Seng increased 609.88 points or 2.37% to 26,317.81, Nikkei 225 surged 251.07 points or 1.16% to 21,803.05, Jakarta Composite soared 61.77 points or 1.03% to 6,085.41, KOSPI rose 21.57 points or 1.06% to 2,049.72, Straits Times advanced 21.09 points or 0.68% to 3,110.57 and Shanghai Composite was up by 12.97 points or 0.44% to 2,960.68.