Benchmarks trade below natural lines in early deals

Indian equity benchmarks made slightly negative start and soon turned volatile on Tuesday. Sensex and Nifty are trading lower in early deals, amid a fall in Infosys. There were cautiousness with Finance Minister Nirmala Sitharaman’s statement that the ongoing trade wars and protectionism have generated uncertainties and will ultimately impact the flow of capital, goods and services. Besides, regulator SEBI has put in place stricter norms for auditors, including prompt disclosures about reasons for their resignation and requirement to approach chairman of audit committee directly in case of any concerns with the management of the firm concerned. Though, downside remained capped with commerce and industry minister Piyush Goyal’s statement that in a clear sign that India and the US are close to finding common ground on their outstanding trade issues that started looking intractable. Traders took note of report that foreign portfolio investors (FPIs) have infused a net sum of Rs 5,072 crore into the Indian capital markets in October so far amid the government's efforts to revive domestic demand.

On the global front, most of the Asian markets were trading higher tracking positive cues overnight from Wall Street amid renewed optimism that the US and China will sign the first phase of a trade deal by the middle of November following comments from President Donald Trump and Chinese Vice Premier Liu He. Hopes of upbeat earnings results from major companies this week also boosted sentiment. The Japanese market is closed for a holiday.

Back home, auto stocks were in focus as automobile dealers' body Federation of Automobile Dealers Associations (FADA) said passenger vehicle retail sales in September declined 20.1 per cent to 1,57,972 units against the same period last year as the onset of festival season and never-seen-before discounts failed to lift demand. In scrip specific development, Infosys slipped as the company received anonymous whistleblower complaints alleging certain unethical practices. These have been placed before the Audit Committee as per the company's practice and will be dealt with in accordance with the company's whistleblower policy.

The BSE Sensex is currently trading at 39230.90, down by 67.48 points or 0.17% after trading in a range of 39165.59 and 39426.47. There were 22 stocks advancing against 9 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.63%, while Small cap index was up by 0.47%.

The gaining sectoral indices on the BSE were Consumer Durables up by 1.62%, Telecom up by 1.18%, Oil & Gas up by 1.16%, Energy up by 1.13%, Healthcare up by 1.08%, while IT down by 4.98%, TECK down by 4.08%, Realty down by 0.18%, Auto down by 0.08% were the losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 7.20%, Bharti Airtel up by 1.71%, Hindustan Unilever up by 1.64%, Hero MotoCorp up by 1.34% and ICICI Bank up by 1.31%. On the flip side, Infosys down by 12.89%, Tata Motors down by 3.44%, Tata Motors - DVR down by 3.26%, HCL Technologies down by 1.06% and Tech Mahindra down by 0.78% were the top losers.

Meanwhile, supporting India's recent decision to reduce corporate income tax, the International Monetary Fund (IMF) said that it has a positive impact on investment. Though, agency also said India should address continued fiscal consolidation and secure long-term stability of the fiscal conditions. IMF’s Director, Asia and Pacific Department, Changyong Rhee said ‘we believe India still has limited fiscal space so they have to be careful. We support their corporate income tax cut because it has a positive impact on investment.’ He said the economy is expected to grow at 6.1% this fiscal year, picking up to 7.0% in 2020, following a marked slowdown in the last two quarters in India. He added that the monetary policy stimulus and the announced corporate income tax cut are expected to help revive investment.

IMF’s Deputy Director, Asia and Pacific Department, Anne-Marie Gulde-Wolf said India should address the non-bank financial sector issues. She said ‘while there have been improvements that have been put in motion, including efforts to recapitalise the state banks, the issue of non-bank financial institution remains partly unresolved and regulatory equity is one of the issues that needs to be achieved.’ She added that government is aware of it. She also said ‘we also had a FSAP. So there are issues working at that and this is something that is why not yet fully achieved, but is entrained. While there are problems at this stage, increased attention to lending practices of non-bank financial institutions continue to be very important.’

She further said India overall has a fairly high level of debt and fiscal consolidation needs to be a priority. However, implementing fiscal consolidation in the context of a federal system is much more complicated. The level of fiscal structural issues and challenges are different in different states. So one of the ways in which the IMF is engaged in this question is it has a regional training institute that has started working with the individual states on strengthening fiscal management at the state level. In the context of surveillance engagement with India, she said, the IMF is increasingly placing emphasis on the need to better coordinate the fiscal state level activities and fiscal activities. But, she said it is a concern that the authorities are taking serious and are working at.

The CNX Nifty is currently trading at 11655.30, down by 6.55 points or 0.06% after trading in a range of 11639.05 and 11714.35. There were 40 stocks advancing against 10 stocks declining on the index.

The top gainers on Nifty were Yes Bank up by 7.20%, BPCL up by 2.06%, Titan Company up by 1.86%, Wipro up by 1.73% and Hindustan Unilever up by 1.47%. On the flip side, Infosys down by 13.41%, Tata Motors down by 3.58%, HCL Technologies down by 1.27%, Coal India down by 0.46% and Tech Mahindra down by 0.45% were the top losers.

Asian markets were mostly trading in green; Taiwan Weighted strengthened 54.36 points or 0.49% to 11,238.51, Hang Seng increased 40.07 points or 0.15% to 26,765.75, Straits Times advanced 24.87 points or 0.79% to 3,164.02 and KOSPI rose 24.71 points or1.2% to 2,089.55. On the flip side, Shanghai Composite declined 2.63 points or 0.09% to 2,936.99 and Jakarta Composite was down by 5.68 points or 0.09% to 6,193.31.