Post Session: Quick Review

Indian equity markets have cooled off after four days of continuous up-move and ended with losses of around half a percent, monitoring subdued Asian marketplace. Sensex and Nifty closed below their crucial 41,150 and 12,100 levels, respectively. Domestic equity indices made cautious start and trade slightly lower, as traders remain concerned with ICRA’s report that weak consumer sentiment, the slowdown in the infrastructure sector, and benign commodity prices have negatively impacted the performance of companies in Q3FY20. Selling further crept in with report that the RBI projected the economy to expand by 6% during the next financial year, pegging it at the lower end of the GDP growth estimate of the Economic Survey.

Indian equities added losses to continue weak trade in afternoon session, as sentiments on the street weakened further with RBI’s Consumer Confidence Survey stating that the consumer confidence dropped further in January 2020 as against the last round. However, it said the future expectations index remained positive, implying an improvement in the last survey. Traders took note of private report that if you want to reach a $5 trillion economy, the outstanding credit, which is around Rs 95-98 trillion, it will have to be doubled, which means need to grow (credit) at around 15 percent. Market participants shrugged off RBI Governor Shaktikanta Das’ statement that the Rs 1-lakh-crore of long-term repos are aimed at helping banks lower their lending rates, thus quickening the monetary policy transmission.

On the global front, Asian markets ended mostly lower on Friday, as rising concerns about the economic impact from a coronavirus epidemic led to a downturn in global sentiment. European markets were trading in red after German industrial output for December recorded its biggest decline in a decade and strong employment numbers in the United States encouraged investors to buy the dollar. Back home, Auto stocks were in limelight after Union road transport minister Nitin Gadkari said he has requested the finance ministry to support the automobile industry for undertaking research and development of new technologies. He also expressed confidence that India could become the global hub for exports and manufacturing of electric vehicles. Aviation stocks also were in focus with airlines body IATA’s statement that after four years of double-digit growth, the Indian domestic passenger traffic rose by just 5.1 per cent in 2019, down from 18.9 per cent in 2018.

The BSE Sensex ended at 41120.65, down by 185.38 points or 0.45% after trading in a range of 41073.36 and 41394.41. There were 12 stocks advancing against 18 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index rose 0.42%, while Small cap index was up by 0.71%. (Provisional)

The top gaining sectoral indices on the BSE were Healthcare up by 1.60%, Consumer Durables up by 1.23%, IT up by 0.64%, Metal up by 0.62% and Power up by 0.54%, while Realty down by 1.85%, Auto down by 1.06%, Telecom down by 1.04%, Energy down by 0.99% and Capital Goods down by 0.81% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were NTPC up by 3.84%, ONGC up by 2.14%, Axis Bank up by 1.56%, Hero MotoCorp up by 1.38% and HCL Technologies up by 1.32%. (Provisional)

On the flip side, Indusind Bank down by 2.81%, Mahindra & Mahindra down by 1.98%, Reliance Industries down by 1.74%, Larsen & Toubro down by 1.58% and Tata Steel down by 1.54% were the top losers. (Provisional)

Meanwhile, in an attempt to increase lending to micro, small and medium enterprises (MSMEs), auto and home segment, Reserve Bank of India (RBI) has tweaked maintenance of cash reserve ratio (CRR) norms by providing relaxation in calculation of total deposits. The move will encourage lending towards these targeted sectors having multiplier effect by banks as they will get exemption in CRR over incremental lending. This exemption window is available till July 2020. CRR is the percentage of total deposits that bank mandatorily park with the apex bank. It stands at 4% of a bank’s total deposit.

Alongside sustained efforts to improve monetary transmission, the RBI is actively engaged in revitalising the flow of bank credit to productive sectors to support growth. As a part of this, the central bank said it has now been decided that scheduled commercial banks will be allowed to deduct the equivalent of incremental credit disbursed by them as retail loans for automobiles, residential housing and loans to MSMEs, over and above the outstanding level of credit to these segments as at the end of the fortnight ended January 31, 2020 from their net demand and time liabilities (NDTL) for maintenance of CRR. It added that this exemption will be available for incremental credit extended up to the fortnight ending July 31, 2020.

To give boost to the real estate sector, RBI said, it has been decided to permit extension of date of commencement of commercial operations (DCCO) of project loans for commercial real estate, delayed for reasons beyond the control of promoters, by another one year without downgrading the asset classification, in line with treatment accorded to other project loans for non-infrastructure sector. Observing that MSME sector plays an important role in the growth of the Indian economy, RBI said the restructuring of the borrower account has been extended by further one year to March 31, 2021.

Considering the importance of MSMEs in the Indian economy and for creating an enabling environment for the sector, a one-time restructuring of loans to MSMEs that were in default but ‘standard’ as on January 1, 2019, was permitted without an asset classification downgrade. It said the restructuring of the borrower account was to be implemented by March 31, 2020, and added that the scheme has provided relief to a large number of MSMEs. As the process of formalisation of the MSME sector has a positive impact on financial stability and this process is still underway, it has been decided to extend the benefit of one-time restructuring without an asset classification downgrade to standard accounts of GST registered MSMEs that were in default as on January 1, 2020.

The CNX Nifty ended at 12086.40, down by 51.55 points or 0.42% after trading in a range of 12073.95 and 12154.70. There were 25 stocks advancing against 25 stocks declining on the index. (Provisional)

The top gainers on Nifty were Zee Entertainment up by 5.51%, NTPC up by 3.21%, Coal India up by 2.81%, ONGC up by 2.00% and UPL up by 1.33%. (Provisional)

On the flip side, Eicher Motors down by 3.21%, Tata Motors down by 2.99%, Indusind Bank down by 2.72%, Mahindra & Mahindra down by 1.92% and Grasim Industries down by 1.81% were the top losers. (Provisional)

European markets were trading in red; UK’s FTSE 100 decreased 43.98 points or 0.59% to 7,460.81, France’s CAC decreased 9.60 points or 0.16% to 6,028.58 and Germany’s DAX decreased 53.97 points or 0.4% to 13,520.85.

Asian markets ended mostly lower on Friday after China's customs bureau said it would delay the release of January's trade data and combine them with February's figures. Meanwhile, investors also awaited key US jobs report for directional cues. Japanese shares ended down as investors booked profit after gains in the previous session following China's decision to halve tariffs on some US imports. Though, Chinese shares ended up despite persistent worries over the global economic impact of the deadly corona virus in China, which has killed over 630 people.