Local equities continue weak trade in morning session

Local equity benchmarks continued to show a weak trend in morning session, with losses of over a percent, on account of selling by investors in the blue-chip counters amid subdued cues from the global front. The frontline indices have drifted below the psychological 34,750 (Sensex) and 10,250 (Nifty) levels. Sentiments remained down-beat with private report stating that extended period of the lockdown and increase in COVID-19 positive cases will have a strong impact on the economic growth, while supply chain disruption is expected to keep food prices at elevated levels. The Standard and Poor’s (S&P) warning that the Indian economy is in deep trouble also weighed on investor sentiment. The rater has projected the Indian economy's growth to contract by 5 percent this fiscal. The market participants failed to take support with the India Meteorological Department’s statement that the Southwest Monsoon has covered the entire country nearly two weeks ahead of its schedule. On the sectoral front, stocks related to gems and jewellery sector were in focus as Gems and Jewellery Export Promotion Council (GJEPC) said the new definition of micro, small and medium enterprises (MSMEs) will significantly help the majority of exporters in the gems and jewellery sector in these difficult times. It said in the sector over 85 percent exporters constitute MSME, who deal in high-value goods.

On the global front, Asian markets were trading in red as the relentless spread of the coronavirus finally made investors question their optimism on the global economy, benefiting safe harbour bonds and the U.S. dollar. Back home, the BSE Sensex is currently trading at 34739.18, down by 432.09 points or 1.23% after trading in a range of 34665.55 and 34958.90. There were 6 stocks advancing against 24 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell 1.42%, while Small cap index was down by 1.52%.

The lone gaining sectoral index on the BSE was FMCG up by 0.59%, while Metal down by 2.82%, Realty down by 2.64%, Bankex down by 2.25%, Capital Goods down by 2.14% and Industrials down by 1.98% were the top losing indices on BSE.

The top gainers on the Sensex were ITC up by 1.49%, Nestle up by 1.25%, Hindustan Unilever up by 0.58%, Sun Pharma up by 0.31% and Asian Paints up by 0.06%. On the flip side, Axis Bank down by 4.34%, Indusind Bank down by 3.44%, Bajaj Finance down by 3.37%, Bajaj Finserv down by 2.96% and Tech Mahindra down by 2.71% were the top losers.

Meanwhile, S&P Global Ratings in its report titled 'Asia-Pacific losses near $3 trillion as balance sheet recession looms’ has said Indian economy is in deep trouble with growth expected to contract by 5 percent in this year before rebounding in 2021 on account of difficulties in containing the virus, an anemic policy response, and underlying vulnerabilities, especially across the financial sector. It projected the Asia-Pacific region's economy to shrink by 1.3 per cent in 2020, but grow by 6.9 per cent in 2021.

It said Asia-Pacific has shown some success in containing COVID-19 and, by and large, responded with effective macroeconomic policies. This can help cushion the blow and provide a bridge to the recovery. However, the recovery looks set to be weighed down by indebted balance sheets. S&P said one risk now looming larger is yet another ‘balance sheet recession’ in which at least one important sector of the economy -- the government, firms, or households -- tries to bolster its weak financial position by saving more, paying down debt, and spending less.

The pandemic caused a sudden stop in activity and to prevent a collapse, policymakers, helped by banks, have provided extraordinary financial support to firms and households. Banks may lend less than they normally would in a recovery to focus on the overhang from the pandemic. Private firms may prefer to stabilize debt rather than ramp up spending on new investments, even though demand is improving.

The CNX Nifty is currently trading at 10243.40, down by 139.60 points or 1.34% after trading in a range of 10230.85 and 10325.90. There were 7 stocks advancing against 43 stocks declining on the index.

The top gainers on Nifty were Cipla up by 1.26%, Nestle up by 1.26%, Hindustan Unilever up by 0.97%, ITC up by 0.90% and Britannia Industries up by 0.87%. On the flip side, Axis Bank down by 4.44%, Coal India down by 4.19%, Bajaj Finance down by 3.67%, Indusind Bank down by 3.31% and Hindalco down by 3.21% were the top losers.

Asian markets were trading in red; Nikkei 225 slipped 492.38 points or 2.19% to 22,019.70, Taiwan Weighted dropped 130.36 points or 1.12% to 11,530.31, KOSPI fell 43.24 points or 2.03% to 2,091.41, Straits Times trembled 25.23 points or 0.97% to 2,579.28, Shanghai Composite declined 21.09 points or 0.71% to 2,958.46, Jakarta Composite lost 40.95 points or 0.84% to 4,863.14 and Hang Seng decreased 390.30 points or 1.59% to 24,159.69.