Post Session: Quick Review

Indian equity benchmarks gave up most of their losses in last leg of trade to come off their intraday low points, but failed to erase all losses and ended with minor cut, tracking weak overseas trend. Key indices made a gap-down opening, as traders remained pessimistic with a private report stating that a spike in India's retail inflation in December has raised the chances that the Reserve Bank of India (RBI) will put rate cuts on hold for some time despite economic growth languishing at more than six-year lows. As per the report, the RBI's monetary policy committee (MPC) may even change its stance from accommodative to neutral at its February meeting. Indices hit fresh intraday low in afternoon trade as the bilateral trade between India and China declined by about $3 billion last year while India's trade deficit continues to be high amounting to $56.77 billion as both countries experienced an economic slowdown.

However, key indices pared most of their losses in final hour of trade, as traders found some solace with report that new FICCI President Sangita Reddy has urged the government not to worry too much about the fiscal deficit and try to pump the economy by increasing investments to arrest slowdown and accelerate growth. Traders also took a note of the Asian Development Bank’s (ADB) report stating that sound economic policies and strong institutions have transformed Asia and the Pacific over the past five decades into a center of global dynamism.

On the global front, Asian markets ended mostly lower on Wednesday, while European markets were trading mostly in red ahead of the signing of an initial trade deal between Washington and Beijing, as comments from the U.S. Treasury Secretary on China tariffs somewhat dimmed optimism. Back home, reality stocks were in focus with a joint report by Knight Frank-FICCI-Naredco stating that real estate sentiments in the country revived in December quarter and turned optimistic after two quarters on the back of several measures taken by the government and the RBI to boost demand.

The BSE Sensex ended at 41910.37, down by 42.26 points or 0.10% after trading in a range of 41648.11 and 41969.86. There were 16 stocks advancing against 14 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index rose 0.69%, while Small cap index was up by 1.07%. (Provisional)

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.39%, Realty up by 1.35%, Auto up by 1.14%, Consumer Discretionary Goods & Services up by 1.06% and Utilities up by 0.92%, while Bankex down by 0.67%, Telecom down by 0.25%, Energy down by 0.22%, TECK down by 0.12% and IT down by 0.06% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Hero MotoCorp up by 2.87%, Titan Co up by 1.56%, Maruti Suzuki up by 1.43%, Mahindra & Mahindra up by 1.40% and Asian Paints up by 1.40%. (Provisional)

On the flip side, Indusind Bank down by 5.79%, SBI down by 1.08%, Infosys down by 0.97%, Power Grid down by 0.59% and HDFC Bank down by 0.38% were the top losers.(Provisional)

Meanwhile, with an aim to arrest India’s economic slowdown and accelerate growth, new Federation of Indian Chambers of Commerce and Industry (FICCI) President Sangita Reddy has urged the government not to worry too much about the fiscal deficit and try to pump the economy by increasing investments. She said ‘we need to infuse capital into the economy. The fact is that there is a slowdown of the GDP but to pump prime economy, adequate capital is really the need of the hour and therefore the preposition which we put forward is that we should not worry for a small expansion in fiscal deficit.’

She also said that the government should find a mechanism to infuse Rs 1.5 to Rs 2 lakh crore into the economy as it would help to spur consumption. With the slowdown in economic growth, the government will face difficulty in adhering to the fiscal deficit road map laid down in the FRBM Act. With the increased consumption or purchasing power of people, investments and the overall sentiment of the corporate India will improve and this will create a virtuous cycle, which grows the Gross Domestic Product (GDP).

Reddy further said the government has enough fiscal space to infuse money into the system because the fiscal deficit is still under control. She noted that one mechanism to do this would be to raise money from the RBI and added that the government should also simultaneously pursue disinvestment programme in a time-bound manner. Besides, the government aims to restrict the fiscal deficit to 3.3% of the GDP for the financial year ending March 2020. If there will be well articulated and executed plan, then the expansion in fiscal deficit will not affect India's ratings.

She highlighted that there is a need to focus on boosting exports. She said ‘we are only 1.7% of global trade and this is miniscule for country like India and we should ramp this up’. Exports during April-November 2019-20 dipped by about 2% to $212 billion. On ease of doing business, she said there is more work needs to done by reducing amount of regulation, and further simplification. She said ‘we have improved but definitely there is a more scope’.

The CNX Nifty ended at 12340.35, down by 21.95 points or 0.18% after trading in a range of 12278.75 and 12355.15. There were 26 stocks advancing against 23 stocks declining on the index. (Provisional)

The top gainers on Nifty were Yes Bank up by 3.50%, Hero MotoCorp up by 2.52%, Tata Motors up by 1.97%, GAIL India up by 1.42% and Titan Co up by 1.33%. (Provisional)

On the flip side, Indusind Bank down by 5.58%, Wipro down by 3.54%, SBI down by 1.22%, Infosys down by 1.21% and BPCL down by 1.13% were the top losers.(Provisional)

European markets were trading mostly in red; France’s CAC decreased 2.21 points or 0.04% to 6,038.68 and Germany’s DAX decreased 12.85 points or 0.1% to 13,443.64, while UK’s FTSE 100 increased 14.19 points or 0.19% to 7,636.54.

Asian markets ended mostly lower on Wednesday on concerns over trade tensions lingered ahead of the signing of a phase one trade deal between the United States and China. US Treasury Secretary Steven Mnuchin said that tariffs on Chinese goods will remain in place until the completion of a second phase of a Sino-US trade agreement, even as both sides are expected to sign an interim deal at the White House. US President Donald Trump is slated to sign the Phase One trade deal with Chinese Vice Premier Liu He at the White House on later in the day. Under the Phase One trade deal, China would also buy over $50 billion more in energy supplies and boost purchases of US services by about $35 billion over the same two-year period. Further, the Chinese currency yuan also weakened after the US signaled that tariffs on Chinese imports would continue at least until the upcoming presidential elections, while the People’s Bank of China added $58 billion into the country’s banking system as holiday nears.