Local equities turn choppy amid weak macro data

Local equity benchmarks have pared all of their early gains to continue choppy trade in morning deals owing to selling pressure in frontline blue-chip counters as weak inflation numbers weighed on domestic investor sentiment. Traders turned concerned with a monthly survey highlighting that retail inflation rose to about five-and-half year high of 7.35% in December 2019, surpassing the RBI's comfort level, mainly due to spiralling prices of vegetables as onions were selling costlier. Larsen & Toubro, Kotak Mahindra Bank and ONGC were among the top losers in the Sensex pack, shedding up to 0.60%. Sentiments also remained jittery with a report that spike in headline inflation is an ‘unwanted complication’ in a slowing economy and will prevent the Reserve Bank from cutting rates, warning of the ‘spectre of stagflation’ that India risks getting into. Besides, cautiousness remained in the markets as participants were keenly watching for Wholesale Price Index (WPI) data to be out later in the day.

On the global front, Asian markets were trading mostly in green, after the US dropped China’s currency manipulator label, saying that it has made ‘enforceable commitments’ not to devalue the yuan. Back home, in scrip specific development, Indian Railway Catering and Tourism Corporation (IRCTC) trades higher on getting nod from Railway Ministry to operate Ahmedabad-Mumbai Tejas Express.

The BSE Sensex is currently trading at 41829.34, down by 30.35 points or 0.07% after trading in a range of 41770.90 and 41903.36. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.61%, while Small cap index was up by 0.62%.

The top gaining sectoral indices on the BSE were Metal up by 1.08%, Basic Materials up by 0.70%, FMCG up by 0.69%, IT up by 0.67% and TECK was up by 0.59%, while BANKEX down by 0.51%, Capital Goods down by 0.39%, Realty down by 0.11%, Energy down by 0.11% and Industrials was down by 0.10% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 1.60%, TCS up by 1.36%, Hero MotoCorp up by 1.17%, HCL Tech up by 1.01% and ITC was up by 0.88%. On the flip side, Larsen & Toubro down by 1.11%, Kotak Mahindra Bank down by 0.71%, ONGC down by 0.68%, Ultratech Cement was down by 0.68% and IndusInd Bank was down by 0.61% were the top losers.

Meanwhile, the government is expected to address the issue of inverted duty structure, especially in sectors such as chemicals and electronics, in the forthcoming Budget, to boost manufacturing as part of the 'Make In India' campaign. Inverted duty structure refers to taxation of inputs at higher rates than finished products that results in build-up of credits and cascading costs.

Inverted duty structure impacts the domestic industry adversely as manufacturers have to pay a higher price for raw material in terms of duty, while the finished product lands at lower duty and cost. The commerce and industry ministry has proposed to the finance ministry to address the inverted duty structure on several products such as consoles, panels, certain steel products, calcined alumina, ethyl acetate, and viscose staple fibre.

Further, concessions given by India under free trade agreements (FTAs) to its partner countries has also resulted in inverted duty structure that makes Indian manufactured goods (those dependent on imported raw materials) uncompetitive in domestic market. India has implemented FTAs with many countries including Japan, South Korea and Singapore, and is in discussion with several other nations.

The CNX Nifty is currently trading at 12323.05, down by 6.50 points or 0.05% after trading in a range of 12308.70 and 12349.75. There were 27 stocks advancing against 23 stocks declining on the index.

The top gainers on Nifty were Vedanta up by 2.24%, Tata Steel up by 1.53%, TCS up by 1.48%, GAIL India up by 1.36% and Zee Entertainment was up by 1.30%. On the flip side, Yes Bank down by 5.82%, Larsen & Toubro down by 1.19%, UPL down by 0.93%, SBI down by 0.83% and Ultratech Cement was down by 0.80% were the top losers.

Asian markets are trading mostly in green, Nikkei 225 surged 152.26 points or 0.64% to 24,002.83, Taiwan Weighted strengthened 40.52 points or 0.33% to 12,153.94, Straits Times advanced 10.30 points or 0.32% to 3,261.37, Jakarta Composite soared 9.55 points or 0.15% to 6,306.12 and KOSPI rose 5.99 points or 0.27% to 2,235.25.

On the other hand, Shanghai Composite declined 1.61 points or 0.05% to 3,113.96 and Hang Seng was down by 39.16 points or 0.14% to 28,915.78.