Markets pause gaining rally on Tuesday

Indian equity bourses paused gaining rally on Tuesday, with Sensex & Nifty losing around 50 and 25 points, respectively. After firm start, key indices soon turned volatile, impacted by SBI’s report stating that India's Gross Domestic Product growth is likely to slow further in the July-September quarter of this financial year to below 5 per cent amid decline in consumption, weak investments and an under-performing service sector. Adding more worries, ICRA said bank credit growth is likely to slow down sharply to 8-8.5 percent during current financial year as compared to 13.3 percent in FY19, mainly due to decline in incremental credit in the first half of FY20.

Bourses extended their losses in noon deals, after India’s services sector activity contracted for second straight month in October. The seasonally adjusted Nikkei Services Business Activity Index stood at 49.2 in October from 48.7 in September. Some concerns also came with reports that the CBI is conducting searches in 169 locations across the country in connection with 35 bank fraud cases registered by the agency involving funds of over Rs 7,000 crore. However, in last leg of the trade, indices came off their day’s low points, amid report that India is expected to see M&A deals of over $52 billion in 2019 as mergers and acquisitions in the country are expected to remain stable despite global headwinds.

On the global front, European markets were trading in green, despite the latest survey by the Organization for Economic Co-operation and Development (OECD) showed that Switzerland's economic growth pace is set to slow sharply this year, but recover next year boosted by sporting events. The growth forecast for this year was cut to 0.8 percent from 1 percent seen in June. Asian markets ended higher, after China's private sector expanded at a slightly faster pace in October. The survey data from IHS Markit showed that the Caixin composite output index rose to 52.0 in October from 51.9 in September.

Back home, NBFCs stocks remained in watch, as Reserve Bank asked the already fund-starved NBFCs to adopt better risk monitoring tools that capture the strains early on and also to maintain a liquidity buffer as per the mandated liquidity coverage ratio. Besides, stocks related to the jewellery industry also remained in focus, after the World Gold Council said gold jewellery demand in India fell to 101.6 tonnes during July to September, down 32 percent from 148.8 tonnes in the same period of last year. The demand suffered as consumer confidence fell further over concerns around the slowing economy.

Finally, the BSE Sensex lost 53.73 points or 0.13% to 40,248.23, while the CNX Nifty was down by 24.10 points or 0.20% to 11,917.20.

The BSE Sensex touched a high and a low 40,466.55 and 40,053.55, respectively and there were 15 stocks advancing against 15 stocks declining, while 1 stock remain unchanged on the index.

The broader indices ended in red; the BSE Mid cap index fell 1.13%, while Small cap index was down by 0.80%.

The only gaining sectoral indices on the BSE were Telecom up by 1.47% and FMCG up by 0.31%, while Consumer Durables down by 1.28%, Healthcare down by 1.00%, Capital Goods down by 0.97%, Metal down by 0.87% and Basic Materials down by 0.84% were the top losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 3.40%, Bajaj Finance up by 2.77%, Bharti Airtel up by 1.60%, SBI up by 1.59% and Bajaj Auto up by 1.39%. On the flip side, Indusind Bank down by 2.40%, Sun Pharma down by 2.02%, Infosys down by 1.86%, Tata Steel down by 1.26% and Mahindra & Mahindra down by 1.10% were the top losers.

Meanwhile, former RBI Deputy Governor Viral Acharya has said that the government needs to reduce its dependence on bond markets and undertake a heavy disinvestment program along with urgently implementing land, labour and agricultural reforms. He said “it may not be easy to pull back on certain announced programmes. But in that case, one has to rationalise heavy programmes that are not delivering the supposed objectives.' He added that those programmes which are maybe the least attractive politically can be wound down as soon as possible and some space needs to be freed up for others to borrow in the Indian economy.

Acharya also felt that the government must undertake a really heavy disinvestment programme ideally by selling of majority stakes so that there is some improvements in productivity being accumulated at the same time by raising government funds through equity markets rather than bond markets. He said he strongly supports creation of an independent fiscal monitor, on the lines of a congregational budgeting office, where every time a programme is announced, there is an audit within two months that looks into what are the next five year implications of financing to be met for the particular programme.

Former RBI Deputy Governor further said the reforms will help bring a new set of people into the middle class who can then push up consumption. He said “right now we are doing a lot for them through the government balance sheet but I think it would be better to give them livelihood, higher real wages, higher consuming power.” He also said “I think that will actually make the programs sustainable. Otherwise, we may get into a low-growth, low-productivity trap. That's the fear I have with India's present fiscal projections and the present fiscal dominance that's affecting almost every sector of the economy.”

The CNX Nifty traded in a range of 11,978.95 and 11,861.90. There were 23 stocks advancing against 27 stocks declining on the index.

The top gainers on Nifty were Bajaj Finance up by 3.34%, Bharti Infratel up by 3.33%, Yes Bank up by 3.25%, UPL up by 2.25% and Bharti Airtel up by 1.85%. On the flip side, Zee Entertainment down by 3.70%, Indusind Bank down by 2.30%, Ultratech Cement down by 2.21%, Sun Pharma down by 2.00% and Eicher Motors down by 1.98% were the top losers.

European markets were trading in green; UK’s FTSE 100 increased 26.58 points or 0.36% to 7,396.27, France’s CAC rose 0.02 points or 0% to 5,824.32 and Germany’s DAX was up by 16.68 points or 0.13% to 13,152.96.

Asian markets ended higher on Tuesday on hopes of an interim trade deal between the United States and China. Sentiment improved further after report showed that Trump administration officials are debating removing some existing tariffs on Chinese goods to help seal a partial deal that would pause the trade war with Beijing as early as this month. Japanese shares closed up as traders returned to their desks after a long holiday weekend. Further, Chinese shares ended higher after China's Foreign Ministry said that President Xi Jinping and US President Donald Trump have been in continuous touch through ‘various means’. On the economic front, a private survey of China’s services sector showed activity slowing to an eight month low in October. The Caixin/ Markit services Purchasing Managers’ Index for October came in at 51.1, its lowest reading since February.