Markets erase day’s gains to settle with negative bias

Indian equity benchmarks erased their intra-day gains to settle with negative bias on Tuesday, amid selling in blue-chip counters such as Tata Steel, Bharti Airtel, Axis Bank and ONGC. After making a cautious start, key indices gained traction and traded firmly higher for most part of the day, as traders took support with report that the Reserve Bank of India (RBI) announced a special round of simultaneous sale and purchase of government securities (G-Secs) for Rs 10,000 crore each, on September 10, 2020. It has released details of the sale and purchase of securities, which will be done using the multiple price auction method. Some optimism also came with industry chamber Assocham’s statement that the rate of decline in output of core segments of the economy has been arrested considerably in July 2020. In line with an evaluation by Assocham, cement, steel and coal, which suffered heavy declines in the first quarter, recovered significantly in July 2020, even though the annualised numbers reflect contraction.

However, the benchmark indices failed to hold initial gains and fell in the final minutes of trade to end with minor cuts, as traders got anxious with Moody's Investors Service’s report that the continued rise in new infection rates across parts of Europe and Asia highlights the risk of a second wave of infections which could lead to renewed closures and a sustained pullback in consumption. Some cautiousness also came after domestic rating agency India Ratings and Research revised the country's FY21 GDP growth forecast to (-) 11.8 per cent from (-) 5.3 per cent earlier. The agency, however, expects India’s gross domestic product (GDP) to rebound and grow at 9.9 per cent year-on-year in FY22 mainly due to the weak base of FY21. Meanwhile, the Finance Ministry said banks have sanctioned loans of about Rs 1,61,017 crore under the Rs 3-lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector reeling under the slowdown caused by the coronavirus pandemic. 

On the global front, Asian markets ended mostly in green, as investors shrugged off worries about U.S.-China tensions as well as data that showed the Japanese economy shrank more than initially estimated in the second quarter. European markets were trading lower, ahead of the European Central Bank’s post-summer meeting later in the week, while renewed warnings from London of a no-deal Brexit kept sterling on the slide. Back home, on the sectoral front, majority of telecom stocks ended in red as India Ratings and Research’s (Ind-Ra) report stated that the telecom industry's subscriber base continued to decline month-on-month in May for the third month in a row due to outbreak of COVID-19, which led to issues like movement of migrant labourers to their home towns and SIM card consolidation. Aviation stocks were in watch as rating agency ICRA said air passenger traffic in the country logged a 26 per cent month-on-month growth at 2.6 million passengers in August, with airlines scaling up capacity by 27 per cent over July.

Finally, the BSE Sensex fell 51.88 points or 0.14% to 38,365.35, while the CNX Nifty was down by 37.70 points or 0.33% to 11,317.35.

The BSE Sensex touched high and low of 38,746.48 and 38,275.45, respectively and there were 9 stocks advancing against 21 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 1.49%, while Small cap index was down by 0.93%.

The top gaining sectoral indices on the BSE were IT up by 1.35%, Energy up by 0.86%, TECK up by 0.31% and Oil & Gas up by 0.17%, while Telecom down by 4.01%, Metal down by 2.96%, Basic Materials down by 1.91%, Realty down by 1.73% and Industrials down by 1.66% were the top losing indices on BSE.

The top gainers on the Sensex were HCL Technologies up by 2.26%, Infosys up by 1.67%, Reliance Industries up by 1.18%, TCS up by 0.93% and ICICI Bank up by 0.71%. On the flip side, Tata Steel down by 4.13%, Bharti Airtel down by 3.36%, Axis Bank down by 3.13%, ONGC down by 2.55% and Sun Pharma down by 2.17% were the top losers.

Meanwhile, the Associated Chambers of Commerce and Industry of India (Assocham) has said that the rate of decline in output of core segments of the economy has been arrested considerably in July 2020. In line with an evaluation by Assocham, cement, steel and coal, which suffered heavy declines in the first quarter, recovered significantly in July 2020, even though the annualised numbers reflect contraction. It also said within the broader index of industrial production, manufacturing has the largest of the weight. Having fallen off the cliff by 40.7 percent during the April-June quarter, it is likely to witness a rebound when July IIP data is released. However, turnaround to positive growth trajectory could be some time away. 

Industry chamber has stated that after a contraction of 15 percent in Q1 of 2020-21 over the same quarter in the previous fiscal, coal production dropped at a much lesser pace of 5.7 per cent in July. Likewise, cement output in July dropped by 13.5 percent in the month after witnessing a sharp contraction of 38.3 percent in April-June. Fall in steel output too has been arrested to 16.4 percent in July, after a drop of 56.8 percent for the April-June period. The Assocham analysis, however, takes production and consumption at the same level due to absence of data about the possible inventory. 

It further said other vital sectors of the economy like electricity and construction too are expected to restore much of their lost traction. It believes that agriculture and allied sector, which remains the bright spot in the challenging times, is likely to retain the positive trajectory, thus boosting segments like tractors, chemicals, fertiliser, two-wheelers and non-discretionary consumption.

The CNX Nifty traded in a range of 11,437.25 and 11,290.45 and there were 13 stocks advancing against 37 stocks declining on the index.

The top gainers on Nifty were BPCL up by 2.75%, HCL Technologies up by 1.95%, Infosys up by 1.41%, Reliance Industries up by 1.17% and Wipro up by 1.09%. On the flip side, Bharti Infratel down by 8.14%, Zee Entertainment down by 4.69%, Tata Motors down by 4.45%, Hindalco down by 3.92%, Tata Steel down by 3.83% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 16.30 points or 0.27% to 5,921.10, France’s CAC fell 69.52 points or 1.38% to 4,984.20 and Germany’s DAX was down by 123.94 points or 0.95% to 12,976.34.

Asian markets ended mostly higher on Tuesday as investors shrugged off latest worries about tensions between Washington and Beijing. Investors are focusing on uncertainties over the corona virus pandemic and hopes for a vaccine. Japanese shares ended higher followed by rallies in major European markets overnight with US markets closed for the Labor Day holiday, despite data showing that Japan's economy contracted more than initially estimated in the second quarter. Chinese shares gained after four days of losses as investors brushed aside Trump's anti-China rhetoric.