Weak macro-economic data snaps 3-day rally of Indian markets on Monday

Weak macro-economic data of wholesale inflation & exports snapped 3-day rally of Indian markets on Monday, with Sensex & Nifty ending in red terrain. Markets made a firm start, aided with Chief Economic Advisor Krishnamurthy Subramanian’s statement that the government is focusing on increasing consumption to boost economic growth. Highlighting steps taken by government to improve Indian economy, he said that the measures include corporate tax cuts to improve risk-return of companies. But soon, indices turned volatile, as India’s exports contracted for the fourth month in a row in November, dipping 0.34% to $25.98 billion.

Sluggish trade continued in the equity markets throughout the day, as India’s Wholesale price index (WPI) inflation rose to 0.58% in the month of November 2019 as against 0.16% for the previous month and 4.47% during the corresponding month of the previous year. The rise in inflation is due to pick up in vegetable prices including onions. Market participants paid no heed towards Reserve Bank’s Governor Shaktikanta Das’ statement that the central bank had acted ahead of time by starting to slash rates in February this year, and hoped the decision to pause the cuts earlier this month will prove to be a right call over time.

On the global front, European markets were trading in green, even though Germany's private sector contracted again in December with growth across the service sector continued to be offset by a downturn in manufacturing. The survey results from IHS Markit showed that the composite output index held steady at 49.4 in December. The score was forecast to rise to 50.1. Asian markets ended lower, as the manufacturing sector in Japan continued to contract in December and at a slightly faster rate. The the latest survey from Nikkei revealed a preliminary PMI score of 48.8. That's down marginally from 48.9 in November.

Back home, the banking sector stocks ended in red territory, after global rating agency, Moody’s report showed that banks may see a spike in bad loans because of stress in the non-banking financial company (NBFC) sector and it warned that the trend of improvement in key bank metrics is likely to reverse or slow. Further, stocks related to the coal industry remained in watch, as the Ministry of Coal decided to establish a Sustainable Development Cell (SDC) in order to promote environmentally sustainable coal mining in the country and address environmental concerns during the decommissioning or closure of mines.

Finally, the BSE Sensex fell 70.99 points or 0.17% to 40,938.72, while the CNX Nifty was down by 32.75 points or 0.27% to 12,053.95.

The BSE Sensex touched high and low of 41,185.03 and 40,917.93, respectively and there were 10 stocks advancing against 20 stocks declining, while 1 stock remain unchanged on the index.

The broader indices ended in red; the BSE Mid cap index lost 0.46%, while Small cap index was down by 0.20%.

The top gaining sectoral indices on the BSE were IT up by 1.18%, TECK up by 0.79%, Realty up by 0.46%, Utilities up by 0.23% and Healthcare up by 0.03%, while Telecom down by 1.59%, Metal down by 1.43%, FMCG down by 1.28%, Consumer Durables down by 1.05% and Auto down by 1.05% were the top losing indices on BSE.

The top gainers on the Sensex were TCS up by 2.70%, HCL Tech. up by 1.65%, Tech Mahindra up by 1.60%, HDFC up by 0.83% and Kotak Mahindra Bank up by 0.73%. On the flip side, ITC down by 1.97%, Tata Steel down by 1.80%, Hindustan Unilever down by 1.57%, Vedanta down by 1.44% and Bharti Airtel down by 1.37% were the top losers.

Meanwhile, Moody's Investors Service in its latest report has lowered 2019 gross domestic product (GDP) growth forecast for India to 5.6 per cent, which is lower than 7.4 per cent growth in 2018, as slow employment growth weighs on consumption. Moody's future said that it expects economic growth to pick up in 2020 and 2021 to 6.6 per cent and 6.7 per cent, respectively, but sees the pace of growth remaining lower than past.

It noted that India's economic growth has decelerated since mid-2018, with real GDP growth slipping from nearly 8 per cent to 5 per cent in the second quarter (April-June) of 2019. It further slipped to 4.5 per cent in July-September quarter.

Besides, it highlighted that fiscal measures undertaken by the government - such as corporate tax rate cuts, bank recapitalisation, infrastructure spending plans, support for the auto sector and others - do not directly address widespread weakness in consumption demand, which has been the chief driver of the economy. Moreover, it said that interest rate cuts by the Reserve Bank of India (BRI) are not being adequately transmitted to lending rates because of the credit squeeze caused by disruption in the non-bank financial sector.

The CNX Nifty traded in a range of 12,134.65 and 12,046.30. There were 13 stocks advancing against 37 stocks declining on the index.

The top gainers on Nifty were TCS up by 2.84%, HCL Tech. up by 1.66%, Tech Mahindra up by 1.66%, HDFC up by 0.91% and Kotak Mahindra Bank up by 0.90%. On the flip side, Grasim Industries down by 2.37%, Adani Ports & SEZ down by 2.29%, ITC down by 1.92%, Eicher Motors down by 1.83% and JSW Steel down by 1.81% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 168.96 points or 2.3% to 7,522.40, France’s CAC rose 53.84 points or 0.91% to 5,972.86 and Germany’s DAX was up by 77.71 points or 0.59% to 13,360.43.

Asian markets ended mostly lower on Monday as investors’ initial enthusiasm over a phase one Sino-US trade deal gave way to concerns about the lack of concrete details on the agreement. Japanese shares ended lower as survey showed the manufacturing sector in Japan continued to contract in December, and at a slightly faster rate. Though, Chinese shares ended higher after the United States and China reaching a historic agreement on a phase one trade deal and key Chinese data beats forecasts. China industrial production and retail sales expanded at the fastest pace in five months in November as steps taken by the government helped to boost domestic demand.