Local indices end lower for second straight day

Indian equity benchmarks recovered from the day's low but still closed in the red for the second straight day on Wednesday, amid concerns over India-China tensions and intense selloff in global markets. Domestic equities opened on a negative note and stayed in red terrain for whole day, as traders were concerned with report that the clinical trials for the Covid-19 vaccine candidate developed by the University of Oxford, which was expected to start at PGIMER in Chandigarh, have been delayed by at least a week over safety approvals. Trading sentiments remain dampened as Fitch Ratings has sharply lowered its forecast for India's gross domestic product (GDP) growth for the current fiscal year (FY21) to (-) 10.5 percent from (-) 5 percent estimated earlier. It pointed out that the continued spread of the virus and the imposition of sporadic shutdowns across the country depress sentiment and disrupts economic activity. Adding to the pessimism, the private report said that India is witnessing the weakest hiring sentiment in 15 years with just 3 percent companies planning to add staff in the next three months.

However, domestic benchmark indices managed to recoup most of the losses towards the end of the trading session, as some optimism remained among traders with a private report that the Indian economy is expected to climb from a deeper trough in the calendar year 2020 (CY20) and see a stronger rebound in the year 2021. Markets participants also took a note of Reserve Bank of India (RBI) board member Manish Sabharwal’s statement that India needs more banks for sustaining high growth and doubling the credit-to-GDP ratio to 100 per cent. He also said the country needs immediate reforms in banking, compliance, labour laws and education because hope is not a strategy.

On the global front, Asian markets ended lower on Wednesday, following the sharp losses on Wall Street. Worries that a highly-anticipated coronavirus vaccine candidate being developed by drug maker AstraZeneca and the University of Oxford could be delayed also weighed on the markets. AstraZeneca reportedly paused the vaccine trial following an adverse reaction in a trial participant. European markets were trading higher as investors looked to shrug off the technology-led rout in the U.S. that is putting pressure on financial markets around the world. However, traders remained on sidelines ahead of the European Central Bank's monetary policy announcement tomorrow. The ECB is unlikely to announce any big changes to its policy, but might well indicate that it is prepared to loosen policy if required.

Back home, on the sectoral front, Aviation stocks ended lower despite a private report stated that government is all set to operationalize 26 new airports and award another 12 airports for development through the public-private partnership (PPP) mode this fiscal. Pharma stocks were also buzzing as NITI Aayog CEO Amitabh Kant’s statement that India, a global hub for generic drugs manufacturing, has launched a new scheme to boost production of active pharmaceutical ingredients that are greatly dependent on the Chinese supply chain.

Finally, the BSE Sensex fell 171.43 points or 0.45% to 38,193.92, while the CNX Nifty was down by 39.35 points or 0.35% to 11,278.00.

The BSE Sensex touched high and low of 38,252.67 and 37,935.26, respectively and there were 12 stocks advancing against 18 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.28%, while Small cap index was down by 0.94%.

The top gaining sectoral indices on the BSE were Energy up by 1.78%, Metal up by 1.26%, Healthcare up by 1.09%, Telecom up by 0.62% and Basic Materials up by 0.43%, while Bankex down by 2.14%, Finance down by 1.74%, Realty down by 1.50%, IT down by 0.89% and Industrials down by 0.67% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 3.04%, Reliance Industries up by 2.57%, Sun Pharma up by 1.40%, Bharti Airtel up by 1.33% and Asian Paints up by 1.27%. On the flip side, SBI down by 4.46%, Bajaj Finserv down by 3.29%, Axis Bank down by 2.94%, ONGC down by 2.42% and ITC down by 2.23% were the top losers.

Meanwhile, Reserve Bank of India (RBI) board member Manish Sabharwal has said India needs more banks for sustaining high growth and doubling the credit-to-GDP ratio to 100 per cent. Sabharwal also said the country needs immediate reforms in banking, compliance, labour laws and education because hope is not a strategy.

Further, talking about economic recovery, he said various sectors are in different stages of improvement.  He said the FMCG sector is back to 100 per cent, whereas hotel, airlines and construction segments have a long way to go. He noted COVID-19 has created great business opportunities, but not everybody is in a position to raise funds.

He pointed out that bank credit, venture capital and private equity funding had slowed down since March but it is a great opportunity for those who are in a position to raise funds to acquire assets.  On the issue of stimulus package, he said it would be wrong to throw money from the helicopter, and the right thing would be to create a better environment for entrepreneurship through reforms. This is a time to build for the next quarter century and not for the next quarter.

The CNX Nifty traded in a range of 11,298.15 and 11,185.15 and there were 25 stocks advancing against 24 stocks declining, while 1 stock remains unchanged on the index.

The top gainers on Nifty were Tata Steel up by 3.57%, Zee Entertainment up by 3.06%, Cipla up by 2.73%, Reliance Industries up by 2.68% and Grasim Industries up by 2.39%. On the flip side, SBI down by 4.09%, GAIL India down by 3.38%, Bajaj Finserv down by 2.89%, Axis Bank down by 2.73% and Indian Oil Corporation down by 2.60% were the top losers.

European markets were trading higher;  UK’s FTSE 100 increased 46.61 points or 0.79% to 5,976.91, France’s CAC rose 21.21 points or 0.43% to 4,994.73 and Germany’s DAX was up by 108.21 points or 0.83% to 13,076.54.

Asian markets ended lower on Wednesday. Japanese shares ended lower with the stronger safe-haven yen after US technology stocks sold off overnight and a leading corona virus vaccine candidate faced delay. Final clinical trials for a corona virus vaccine, developed by drug maker AstraZeneca and Oxford University have been put on hold after a participant had a suspected adverse reaction in the UK. Further, heightened trade tensions between Washington and Beijing, and falling oil prices also curbing risk appetite. Chinese inflation data for August showed the producer price index declined 2.0% in August from a year earlier, and in line with expectations; while the consumer price index in August rose 2.4% as compared with a year ago.