Equity parameters turn negative

In a volatile trading session, erasing initial gains equity parameters turns negative in afternoon trading session. Stocks from bank, energy and metal counters were trading lower, while consumer durables, IT and consumer discretionary counters were supporting the markets. Traders turned pessimistic as Federation of Indian Export Organisations (FIEO) stated that the government's decision to cap export incentives under the Merchandise Exports from India Scheme (MEIS) at Rs 2 crore per exporter on exports made between September 1, 2020 to December 31, 2020 is going to seriously affect traders and cause uncertainty. Meanwhile, latest IHS Markit Services Purchasing Managers' Index (PMI) indicated a slower rate of decline in business activity across the Indian service sector during August. The ongoing coronavirus pandemic 2019 (COVID-19) restrictions continued to adversely impact client demand and business operations.

On the global front, Asian markets were trading mostly lower on back of profit taking after the equities rose on hopes of economic recovery after prices rose on better than expected US and China figures. Back home turf; on sectoral front, liquor stocks were in limelight after the government, in ‘Unlock 4.0’ guidelines, relaxed the ban on serving liquor at pubs. The guidelines and standard operating procedures (SoPs) in this regard, however, are to be issued by the states.

The BSE Sensex is currently trading at 39002.26, down by 83.77 points or 0.21% after trading in a range of 38969.34 and 39236.36. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.49%, while Small cap index was up by 0.89%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 2.42%, IT up by 1.26%, Consumer Discretionary up by 1.03%, TECK up by 0.98% and Auto was up by 0.96%, while Bankex down by 1.04%, Energy down by 0.79%, Metal down by 0.71%, PSU down by 0.64% and Realty was down by 0.54% were the top losing indices on BSE.

The top gainers on the Sensex were Titan Company up by 4.93%, Tech Mahindra up by 2.38%, Maruti Suzuki up by 2.31%, Asian Paints up by 1.41% and HCL Tech was up by 1.25%. On the flip side, ICICI Bank down by 2.36%, Indusind Bank down by 1.83%, Bharti Airtel down by 1.74%, Axis Bank down by 1.58% and NTPC was down by 1.52% were the top losers.

Meanwhile, the Economic Advisory Council to the Prime Minister (EACPM) member Nilesh Shah has said that India’s Gross domestic product (GDP) growth will come into positive territory only by March or June quarter 2021, but the country will have to turn the crisis into an opportunity by introducing reforms. He attributed the surge in equity markets to the optimism they get by looking at the future and not at the data of the past.

Shah said ‘GDP will be hit by the coronavirus disease (COVID-19) pandemic for two years but stressed that we need to take advantage of the challenging situation, just the way we did in 1991 during the forex crisis which put the growth momentum in a new orbit’. He also said companies want to shift out of China and that India ought to roll out the red carpet for them and also cut the red tape. He noted that the cost of logistics, which makes Indian goods uncompetitive at the global level, has to be reduced. Besides, he said the cost of power has to go down as subsidized supply to farmers makes it expensive for the industry to get electricity.

Commenting on the surge in markets, EACPM member said while the past is about lockdowns, the future is about reforms which will change the growth orbit of India and markets are reading into the same. He pointed out that high capital flows, low oil prices, a good monsoon are among the factors which can make one hopeful about the future and added that the market is looking ahead with optimism.

The CNX Nifty is currently trading at 11518.70, down by 16.30 points or 0.14% after trading in a range of 11507.65 and 11584.95. There were 26 stocks advancing against 24 stocks declining on the index.

The top gainers on Nifty were Bharti Infratel up by 7.04%, Titan Company up by 4.88%, Eicher Motors up by 3.46%, UPL up by 3.30% and Grasim Industries was up by 2.53%. On the flip side, ICICI Bank down by 2.40%, Hindalco down by 1.96%, Indusind Bank down by 1.87%, Bharti Airtel down by 1.87% and NTPC was down by 1.72% were the top losers.

Asian markets were trading mostly in red; Hang Seng decreased 225.83 points or 0.9% to 24,894.26, Jakarta Composite lost 48.33 points or 0.91% to 5,263.64, Straits Times trembled 15.35 points or 0.6% to 2,524.59 and Shanghai Composite was down by 21.51 points or 0.63% to 3,383.2. On the other hand; Taiwan Weighted strengthened 58.47 points or 0.46% to 12,757.97, KOSPI rose 31.53 points or 1.33% to 2,395.90 and Nikkei 225 was up by 218.38 points or 0.94% to 23,465.53.