Markets trade lower with marginal cut in early deals

Indian equity benchmarks made weak start and are trading lower with marginal cut in early deals on Thursday amid economic growth concerns. Losses in Metal, Realty and Telecom stocks pulled the markets lower, however gains in FMCG, IT and TECK shares limited the downside. Traders were concerned with former Chief Economic Adviser Arvind Subramanian’s statement that India is facing a Great Slowdown with its economy headed for intensive care unit primarily due to a second wave of the twin balance sheet crisis at banks. Also, some cautiousness crept in with report that most of the states opposed a change in slabs or hike in Goods and Services Tax (GST) during the crucial GST Council meeting on Wednesday arguing an increase in the levies would have adverse implications for the economy facing a slowdown. Besides, the GST Council has fixed a uniform tax rate of 28 per cent on both state and private lottery. Losses remained capped with industry body Nasscom’s statement that technology startups alone have created 60,000 direct jobs this year and overall the IT sector will be a positive hirer in the current financial year.

Global cues also remained lackluster with all the Asian markets trading in red amid weak trade overnight on Wall Street and as investors preferred to remain on the sidelines due to a lack of fresh catalysts. Investors digested reports that the US House of Representatives voted to impeach President Donald Trump, making him the third US president to be impeached. Trump will now face a Senate trial next month. Back home, amid rising inward shipments of gold, the government has imposed restrictions on import of precious metals. According to a notification issued by the Directorate General of Foreign Trade (DGFT), import of gold in any form has been placed in restricted category from the free category. In stock specific development, NMDC gained as it received from Approval for Modified Mining Plan of Kumaraswamy Iron Ore Mines of NMDC from 7 MTPA (7-Million Tonnes per Annum) to 10 MTPA (10-Million Tonnes per Annum) from the Indian Bureau of Mines (IBM), Ministry of Mines, Government of India.

The BSE Sensex is currently trading at 41496.89, down by 61.68 points or 0.15% after trading in a range of 41469.64 and 41591.22. There were 10 stocks advancing against 20 stocks declining, while 1 stock remains unchanged on the index.

The broader indices were trading mixed; the BSE Mid cap index declined 0.13%, while Small cap index was up by 0.02%.

The few gaining sectoral indices on the BSE were FMCG up by 0.36%, IT up by 0.29%, TECK up by 0.16% and Energy was up by 0.06%, while Metal down by 0.65%, Realty down by 0.60%, Telecom down by 0.60%, Capital Goods down by 0.47% and Utilities was down by 0.44% were the top losing indices on BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 1.26%, Tata Motors up by 1.06%, Asian Paints up by 0.87%, HCL Tech up by 0.87% and TCS up by 0.80%. On the flip side, Yes Bank down by 2.46%, Indusind Bank down by 1.34%, ICICI Bank down by 1.16%, HDFC down by 0.89% and Tata Steel down by 0.85% were the top losers.

Meanwhile, expressing concern over economic growth of India, former Chief Economic Adviser Arvind Subramanian, in new paper co-authored with the former head of the International Monetary Fund's India office Josh Felman, has said that the country is facing a ‘Great Slowdown’ with its economy headed for intensive care unit primarily due to a ‘second wave’ of the twin balance sheet crisis at banks. He noted that India is facing a ‘Four Balance Sheet’ challenge -- comprising banks, infrastructure, plus non-banking financial companies (NBFCs) and real estate companies -- and is trapped in an adverse interest growth dynamic. Besides, the nation’s Gross Domestic Product (GDP) growth in the July-September quarter slowed to a six-year low of 4.5%. This was the sixth consecutive quarter when the growth rate had fallen.

He said clearly, this is not an ordinary slowdown. It is India's Great Slowdown, where the economy seems headed for the intensive care unit. In his new paper, he has made a distinction between the original TBS and ‘TBS-2’. TBS-1 was about bank loans made to steel, power, and infrastructure sector companies during the investment boom of 2004-11 turning bad. TBS-2 is largely a post-demonetization phenomenon, involving NBFCs and real estate firms. He also said ‘since the Global Financial Crisis, India's long-term growth has slowed as the two engines propelling rapid growth -- investment and exports -- sputtered. Today, the other engine -- consumption -- has also stalled. As a result, growth has plummeted precipitously over the past few quarters’.

Subramanian further said indeed, the economy seems locked in a downward spiral. Best capturing this stark reality is the astonishingly high interest-growth differential. The corporate cost of borrowing now exceeds the GDP growth rate by more than 4 percentage points, meaning that interest on the debt is accumulating far faster than the revenues that companies are generating. This has caused a resurgence in the amount of stressed debt, a second wave of the Balance Sheet Crisis. He highlighted that if this process is left unchecked, the economy will continue to spiral downward, as stress reduces growth, which then intensifies the stress. He noted that clearly, action must be taken to stabilize the economy and get it back on the path of rapid growth.

The CNX Nifty is currently trading at 12198.65, down by 23.00 points or 0.19% after trading in a range of 12191.15 and 12225.40. There were 15 stocks advancing against 35 stocks declining on the index.

The top gainers on Nifty were Mahindra & Mahindra up by 1.69%, Asian Paints up by 0.97%, Tata Motors up by 0.89%, HCL Tech up by 0.80% and Axis Bank up by 0.71%. On the flip side, Yes Bank down by 2.89%, Indusind Bank down by 1.23%, ICICI Bank down by 1.18%, Grasim Industries down by 1.12% and Tata Steel down by 1.05% were the top losers.

All Asian markets were trading in red; Hang Seng decreased 181.51 points or 0.65% to 27,702.70, Taiwan Weighted dropped 94.51 points or 0.78% to 12,027.94, Nikkei 225 slipped 58.94 points or 0.25% to 23,875.49, Jakarta Composite lost 29.76 points or 0.47% to 6,257.49, Straits Times trembled 7.54 points or 0.23% to 3,202.00, Shanghai Composite declined 6.18 points or 0.2% to 3,010.86 and KOSPI was down by 0.01 points to 2,194.75.