Post Session: Quick Review

Extending their losing streak for second straight session, Indian equity benchmarks ended Friday’s trade on a pessimistic note, as India's Wholesale Price Index (WPI) inflation worsened to 3.1 percent in January from 2.59 percent in December, registering a 0.1 percent increase. This is the highest inflation figure in last eight months. Sensex and Nifty closed below their crucial 41,300 and 12,150 levels, respectively. Markets started the day on optimistic note and were trading firmly higher, as traders took encouragement with global ratings agency Standard and Poor's affirmed India's sovereign rating at BBB- with stable outlook, saying the country's GDP growth is likely to gradually recover towards longer-term trend rates over the next two to three years. However, Indian markets witnessed a sudden fall in early noon deals, as market-men got anxious with the International Monetary Fund’s (IMF) communications director Gerry Rice’s statement that India's economy looks weaker than the IMF projected earlier in January and the government needs to focus on more ambitious structural and financial sector reform measures.

In afternoon trade, the markets managed to trim most of their initial losses, as traders found some solace with Commerce and Industry Minister Piyush Goyal’s statement that the government is focusing on 12-13 sectors such as textiles where India has a competitive edge to boost exports. He said that exports grow when there is both comparative and competitive edge on different sectors. However, key indices failed to erase all losses and witnessed sharp sell-off in late hour of trade, as some banking stocks fell sharply after the Supreme Court asked telecom companies to clear their dues to the government by March 17. Traders also took a note of Moody's statement that the Reserve Bank of India's recent asset recognition norms that allows banks not to treat real estate loans as restructured for one year is credit negative for Indian banks.

On the global front, Asian markets ended mostly in green on Friday, helped by hopes governments will make provisions to soften the impact on their economies from the coronavirus epidemic. European markets were trading mostly in red, as investors worried about slowing growth momentum in the eurozone ahead of an estimate of how its economy performed in the fourth quarter. Back home, select construction sector companies ended in red as India Ratings has revised its outlook for the construction industry to negative for FY21 on the back of muted order inflows and subdued bank credit flow. Besides, stocks related to logistics sector were in focus with private report stating that logistics leasing activity increased 30 percent in 2019 to touch 33 million sqft, mainly driven by policy announcements made by the government which boosted e-commerce and retail sectors.

The BSE Sensex ended at 41255.26, down by 204.53 points or 0.49% after trading in a range of 41183.13 and 41702.36. There were 8 stocks advancing against 22 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index fell 0.75%, while Small cap index was down by 0.32%. (Provisional)

The top gaining sectoral indices on the BSE were Telecom up by 2.50%, Energy up by 0.39%, TECK up by 0.20% and Consumer Durables up by 0.07%, while Utilities down by 2.62%, Power down by 2.33%, PSU down by 1.88%, Metal down by 1.42% and Auto down by 1.27% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Bharti Airtel up by 4.65%, HCL Tech. up by 1.50%, Reliance Industries up by 0.94%, ICICI Bank up by 0.87% and Tech Mahindra up by 0.81%. (Provisional)

On the flip side, Indusind Bank down by 4.45%, Power Grid down by 3.18%, NTPC down by 2.56%, Hero MotoCorp down by 2.28% and Mahindra & Mahindra down by 2.26% were the top losers. (Provisional)

Meanwhile, global ratings agency Standard and Poor's (S&P) in its latest report affirmed India's sovereign rating at 'BBB-' with stable outlook and said that the country's Gross Domestic Product (GDP) growth is likely to gradually recover towards longer-term trend rates over the next two to three years. 'BBB' rating refers to adequate capacity of the rated entity to meet its financial commitments. It said ‘despite a notable deceleration in India's economy in recent quarters, we believe its structural growth outperformance remains intact. Real GDP growth is therefore likely to gradually recover toward longer-term trend rates over the next two to three years’.

As per the report, the economic growth rate to improve to 6% during 2020-21, 7% in the next fiscal and 7.4% thereafter. It expects India's economy to continue to outperform peers at a similar level of income, despite a recent slowdown in real GDP growth. It added that supportive monetary, fiscal, and cyclical factors should support economic recovery, with real GDP growth averaging 7.1% in fiscals 2020-2024. Though, it pointed out that India's fiscal position remains precarious, with elevated fiscal deficits and net government indebtedness. It said fiscal deficits have exceeded the government's plan, and added that it expects limited consolidation over the next few years.

S&P Global Ratings affirmed its 'BBB-' long-term and 'A-3' short-term unsolicited foreign and local currency sovereign credit ratings on India. The outlook on the long-term rating is stable. Providing rationale for its rating action, S&P said the ratings on India reflect the country's above-average real GDP growth, sound external profile, and evolving monetary settings. The stable outlook reflects S&P's expectation that India's growth will be strong, the country will maintain its sound net external position, and its fiscal deficits will remain elevated but broadly in line with its forecasts over the next two years.

Further, ‘upward pressure’ on the ratings could build if the government significantly curtails its fiscal deficits, resulting in lower net indebtedness at the general government level. Upside potential on the ratings could also increase if India's external accounts strengthen substantially. Also, the downward pressure on the ratings could emerge if India's GDP growth falls well below the agency's forecasts, causing it to reassess view of trend growth; net general government deficits rise further from their currently elevated levels; and political developments materially undermine economic reform momentum.

The CNX Nifty ended at 12113.00, down by 61.65 points or 0.51% after trading in a range of 12091.20 and 12246.70. There were 15 stocks advancing against 35 stocks declining on the index. (Provisional)

The top gainers on Nifty were Yes Bank up by 4.70%, Bharti Airtel up by 4.44%, UPL up by 2.17%, HCL Tech. up by 1.61% and BPCL up by 1.59%. (Provisional)

On the flip side, GAIL India down by 6.06%, Indusind Bank down by 4.37%, Bharti Infratel down by 3.96%, Power Grid down by 3.36% and Eicher Motors down by 3.34% were the top losers. (Provisional)

European markets were trading mostly in red; UK’s FTSE 100 decreased 7.61 points or 0.1% to 7,444.42 and France’s CAC decreased 12.06 points or 0.2% to 6,081.08, while Germany’s DAX increased 16.37 points or 0.12% to 13,761.80.

Asian markets ended mostly higher on Friday amid expectation that the Chinese government would unveil more measures to contain the corona virus outbreak and limit its economic impact. Nearly 64,000 people are now recorded as having been made ill by the virus - named COVID-19 - in China, with the last two days showing a steep rise after a change in diagnostic methods. Further, the United States and China have lowered tariffs on each other's goods today as part of the ‘Phase One’ trade agreement. However, Japanese shares ended lower as investors continued to worry about the economic impact as well as spread of the corona virus outbreak, while a firmer yen too hurt export-related stocks.