Benchmarks trade lower amid Moody's cuts India's credit rating outlook

Indian equity benchmarks made pessimistic start and are trading with cut of over quarter a percent each in early deals on Friday after Moody's Investors Service cut India's credit rating outlook to negative from stable, citing a growing debt burden and the government's struggle to narrow the budget deficit. It said the country’s economic growth will remain ‘materially lower than in the past’. The rating agency affirmed the Baa2 foreign-currency and local-currency long-term issuer ratings. Some cautiousness also came with the ICRA’s report that the government's Rs 25,000-crore fund to complete about 1,500 stalled affordable and mid-income housing projects is not adequate. Selling was witnessed in Telecom, Energy and Power stocks. Market participants overlooked the Reserve Bank of India (RBI) data showing that the non-food credit growth in the banking system stood at 8.79% year-on-year (y-o-y) for the fortnight ended November 7, the highest in the last three fortnights, following the lending outreach programmes by public-sector banks (PSBs).

Global cues also remained sluggish, with most of the Asian markets trading lower despite the overnight gains on Wall Street amid renewed optimism about a US-China trade deal. Besides, Japan will release preliminary September figures for its leading and coincident indexes, household spending and labor cash earnings later in the day. Back home, aviation stocks were in focus with global airlines body IATA’s statement that India's air traffic increased by just 1.6 per cent in September compared to 4.5 per cent in August this year and it said the pace of growth has slowed significantly throughout 2019 due to weaker economic activity and Jet Airways bankruptcy. In scrip specific development, Sun Pharma came under pressure despite reporting a consolidated net profit of Rs 1,064 crore for the July-September quarter, against a loss of Rs 269.6 crore corresponding period of last year.

The BSE Sensex is currently trading at 40549.88, down by 103.86 points or 0.26% after trading in a range of 40503.67 and 40630.56. There were 12 stocks advancing against 19 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.18%, while Small cap index was up by 0.33%.

The top gaining sectoral indices on the BSE were Realty up by 1.84%, Auto up by 0.47%, Consumer Disc up by 0.34%, Consumer Durables up by 0.26%, Bankex up by 0.24%, while Telecom down by 0.97%, Energy down by 0.58%, Power down by 0.55%, FMCG down by 0.48%, Healthcare down by 0.43% were the top losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 2.18%, Indusind Bank up by 1.86%, ICICI Bank up by 1.81%, HCL Technologies up by 1.32% and Mahindra & Mahindra up by 1.05%. On the flip side, Sun Pharma down by 1.58%, NTPC down by 1.05%, Hindustan Unilever down by 1.02%, Power Grid down by 0.90% and Bharti Airtel down by 0.89% were the top losers.

Meanwhile, expressing caution over India’s economic growth, international rating agency Moody’s Investors Service in its latest report has changed the outlook on India's rating to 'negative' from 'stable'. It said that there was increasing risks that economic growth will remain materially lower than the past, citing a growing debt burden and the government’s struggle to narrow the budget deficit. It affirmed the nation’s foreign-currency and local-currency long-term issuer ratings at Baa2, the second-lowest investment grade score.

The rating agency’s decision to change the outlook to negative reflects increasing risks that economic growth will remain materially lower than in the past, partly reflecting lower government and policy effectiveness at addressing long-standing economic and institutional weaknesses than Moody's had previously estimated, leading to a gradual rise in the debt burden from already high levels.

Moody’s also said while government measures to support the economy should help to reduce the depth and duration of India's growth slowdown, prolonged financial stress among rural households, weak job creation, and, more recently, a credit crunch among non-bank financial institutions (NBFIs), have increased the probability of a more entrenched slowdown. It further said the prospects of further reforms that would support business investment and growth at high levels, and significantly broaden the narrow tax base, have diminished.

The CNX Nifty is currently trading at 11979.45, down by 32.60 points or 0.27% after trading in a range of 11966.50 and 11992.15. There were 17 stocks advancing against 32 stocks declining, while 1 stock remain unchanged on the index.

The top gainers on Nifty were Yes Bank up by 2.33%, ICICI Bank up by 1.93%, Indusind Bank up by 1.42%, Mahindra & Mahindra up by 1.34% and Zee Entertainment up by 1.10%. On the flip side, UPL down by 2.35%, Bharti Infratel down by 1.96%, Sun Pharma down by 1.84%, Hindustan Unilever down by 1.30% and Bharti Airtel down by 1.12% were the top losers.

Asian markets were mostly trading in red; Straits Times lost 26.04 points or 0.79% to 3,259.68, Hang Seng decreased 121.19 points or 0.44% to 27,726.04, Taiwan Weighted dropped 19.86 points or 0.17% to 11,586.70, KOSPI fell 5.83 points or 0.27% to 2,138.46 and Jakarta Composite was down by 1.79 points or 0.03% to 6,163.83. On the flip side, Nikkei 225 rose 35.09 points or 0.15% to 23,365.41 and Shanghai Composite was up by 10.53 points or 0.35% to 2,989.24.