Bourses give up gains to end lower on Tuesday

Indian equity bourses gave up all of their gains on Tuesday to end on lower note. Markets made a fabulous start, aided with Union Minister Nitin Gadkari’s statement that the government is in the process of launching 'Digital data based credit ratings' of Micro, Small and Medium Enterprises, to help entrepreneurs to get bank loans on the basis of these credit ratings. Firm trade persisted for the most part of the session, amid a report stating that Prime Minister Narendra Modi is finally attempting to overhaul India’s most controversial labour laws to attract investment and make it easier to do business in a country where changing archaic rules is a challenge for any government.

In the last hour of the trading day, key indices turned negative, on the back of weak cues from the global markets. Domestic sentiments got hampered after credit rating agency India Ratings and Research (Ind-Ra) revised its GDP growth forecast for the current financial year (FY20) to 5.6 per cent. This is the fourth revision and has come in after the agency had revised its FY20 GDP growth forecast only a month ago to 6.1 per cent. Some concerns also came with the Employees State Insurance Corporation’s (ESIC) latest payroll data showing that around 12.23 lakh jobs were created in September 2019, lower than 13.38 lakh in the previous month.

On the global front, European markets were trading in red, after Finland's jobless rate rose in October after easing in the previous month. The data from Statistics Finland showed that the jobless rate for the 15 to 74 age group rose to 6.2 percent in October from 5.9 percent in September. Asian markets ended lower, as Taiwan's industrial production fell for a second consecutive month in October and at the sharpest rate in seven months. The figures from the Ministry of Economic Affairs showed that industrial production declined 2.92 percent year-on-year in October, following a 0.68 percent fall in September.

Back home, the logistic industry stocks remained in focus, after the commerce ministry sought views of all the ministries, including steel, shipping, and others on the draft national logistics policy, which aims at promoting seamless movement of goods across the country. Further, stocks related to the infra sector also remained in watch, as credit rating agency CRISIL said that states need to scale up investments to Rs 110 lakh crore over the next decade to achieve India's massive infrastructure targets. States already account for 41 per cent of the overall infrastructure spending of Rs 77 lakh crore this decade.

Finally, the BSE Sensex lost 67.93 points or 0.17% to 40,821.30, while the CNX Nifty was down by 36.05 points or 0.30% to 12,037.70.

The BSE Sensex touched high and low of 41,120.28 and 40,710.20, respectively and there were 09 stocks advancing against 22 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.79%, while Small cap index was down by 0.38%.

The only gaining sectoral indices on the BSE were Bankex up by 0.67% and FMCG up by 0.06%, while Telecom down by 4.93%, TECK down by 1.95%, IT down by 1.21%, Capital Goods down by 1.16% and Industrials down by 1.10% were the top losing indices on BSE.

The top gainers on the Sensex were ICICI Bank up by 2.62%, Indusind Bank up by 1.32%, Tata Steel up by 1.17%, ITC up by 0.52% and HDFC up by 0.44%. On the flip side, Bharti Airtel down by 4.34%, Tata Motors - DVR down by 2.76%, Power Grid down by 2.26%, Sun Pharma down by 1.75% and Mahindra & Mahindra down by 1.67% were the top losers.

Meanwhile, global rating agency Moody’s Investors Service in its latest report has said that the inclusion of Non-banking financial companies (NBFCs) into the Insolvency and Bankruptcy Code (IBC) is credit positive for banks (NBFCs' biggest source of funds) because IBC provides for the orderly resolution of a stressed NBFC company.

According to the report, the close involvement of the Reserve Bank of India (RBI) in the resolution process indicates the importance of the NBFC sector to overall financial stability, including the direct effect of any systemically important NBFC's failure on banks and other credit providers. It said “we expect the RBI to selectively approach the IBC to resolve NBFCs with severe liquidity or solvency issues, or to resolve companies whose weak corporate governance is deterring potential buyers.” It also expects banks and the RBI to utilize other debt restructuring options before approaching the IBC.

Recently, the government had empowered RBI to refer stressed NBFCs and housing finance companies (HFCs) having assets worth of at least Rs 500 crore to insolvency courts after notifying Section 227 of the IBC. Prior to this, the only resolution framework available for stressed NBFCs was liquidation. Section 227 of IBC empowers the government to notify, in consultation with financial sector regulators, insolvency and liquidation proceedings. The section specifies that RBI can initiate the bankruptcy process for an NBFC or a housing finance company.

The CNX Nifty traded in a range of 12,132.45 and 12,006.35. There were 18 stocks advancing against 32 stocks declining on the index.

The top gainers on Nifty were ICICI Bank up by 3.05%, GAIL India up by 2.46%, Dr. Reddy’s Lab up by 1.86%, Indusind Bank up by 1.53% and Tata Steel up by 1.38%. On the flip side, Zee Entertainment down by 7.34%, Bharti Infratel down by 6.52%, Grasim Industries down by 4.36%, Bharti Airtel down by 4.03% and JSW Steel down by 2.71% were the top losers.

European markets were trading mostly in red; France’s CAC decreased 10.07 points or 0.17% to 5,914.79 and Germany’s DAX fell 37.46 points or 0.28% to 13,208.99, while UK’s FTSE 100 was up by 0.21 points or 0% to 7,396.50.

Asian markets ended mostly lower on Tuesday, even after reports suggesting that China and the United States were 'very close' to a phase one trade deal. Hong Kong shares ended lower as investors locked in profit after a recent rally, while Alibaba’s shares rose to a small premium over New York in their debut at the financial hub. However, Japanese shares ended higher as the dollar hit a one-week high against the yen on growing optimism that China and the United States will soon announce a partial trade agreement. Earlier today, China's commerce ministry said Vice premier Liu He, China's chief trade negotiator, held a call with his US counterparts and that both sides agreed to maintain communication on remaining issues.