Benchmarks end flat in volatile session

Fluctuating between losses and gains, Indian equity benchmarks ended the day largely flat on Friday, on the back of weak global cues amid ongoing coronavirus spread. Markets made a cautious start and struggled for direction throughout the day, as sentiments got hurt with ratings agency Crisil’s report that the Indian economy will contract by 9 per cent in 2020-21 as the coronavirus infections are yet to peak and the government is not providing adequate direct fiscal support. Some concern also came with rating agency ICRA’s report that asset reconstruction companies (ARCs) are facing slowdown in recoveries from bad loans procured from banks due to failed auctions, absence of bidders and delay in payments amid COVID-19 pandemic.

Trading sentiments remained in lackluster mood with CARE Ratings’ report that reflecting the overall stress in the economy, the employment growth rate declined to 3.5 percent in FY20 as compared to 3.8 percent in the previous fiscal year, but the total number of jobs increased to 50.02 lakh from 48.32 lakh. Adding more pessimism, the International Monetary Fund (IMF) has said the impact of COVID-19 pandemic is significant on India's development and the immediate priority is a coordinated policy response. However, markets managed close session with minor gains, as traders found some solace with report that India and China have agreed on a five-point plan for resolving the prolonged border face-off in eastern Ladakh that included abiding by all existing agreements and protocol on management of the frontier, maintaining peace and tranquility and avoiding any action that could escalate matters.

On the global front, Asian markets ended mostly higher on Friday despite weak cues from Wall Street as tech stocks resumed their decline after a one-day respite and U.S. lawmakers failed to reach agreement on a new coronavirus stimulus bill. Japanese shares recovered by news that the Tokyo Metropolitan Government plans to ease voluntary restrictions on dining and travel amid a downward trend in coronavirus infections in the capital city. European markets were trading mostly in red, as doubts about extra monetary stimulus and overnight falls in US big tech shares kept investors on edge. Besides, the European Central Bank left its key interest rates and the size of asset purchases unchanged, and reiterated that it stands ready to make adjustments to its tools when needed. The ECB said the Governing Council expects the key interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.

Back home, India has fallen 26 spots to the 105th position on the Global Economic Freedom Index 2020, while the country was at the 79th spot in last year’s rankings. On the sectoral front, stocks related to agriculture sector remained in limelight as National Bank for Agriculture and Rural Development (NABARD) said it aims to disburse Rs 1.20 lakh crore crop loan to farmers for meeting production expenses this fiscal. It annually disbursed Rs 90,000 crore crop loan at a concessional rate. 

Finally, the BSE Sensex rose 14.23 points or 0.04% to 38,854.55, while the CNX Nifty was up by 15.20 points or 0.13% to 11,464.45.

The BSE Sensex touched high and low of 38,978.52 and 38,711.80, respectively and there were 10 stocks advancing against 20 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.58%, while Small cap index was up by 0.52%.

The gaining sectoral indices on the BSE were Realty up by 1.31%, IT up by 1.15%, Consumer Durables up by 0.87%, TECK up by 0.76% and Metal up by 0.71%, while Telecom down by 0.97% and Utilities down by 0.07% were the few losing indices on BSE.

The top gainers on the Sensex were SBI up by 2.30%, TCS up by 1.81%, Tech Mahindra up by 1.76%, Bajaj Finance up by 1.27% and Hindustan Unilever up by 1.16%. On the flip side, Indusind Bank down by 1.71%, Power Grid down by 1.52%, Asian Paints down by 1.34%, Bharti Airtel down by 1.19% and HDFC Bank down by 1.11% were the top losers.

Meanwhile, ratings agency Crisil in its latest report has sharply lowered its forecast for India's gross domestic product (GDP) growth for the current fiscal 2020-21 (FY21) to (-) 9 percent as against its earlier estimate of (-) 5 percent projected in May, as the coronavirus infections are yet to peak and the government is not providing adequate direct fiscal support. It noted that the 9 percent contraction will be the highest since the 1950s.

According to the report, a stretched fiscal position has constrained the government from spending more to support the economy. It noted that till date, the policy push to growth remains muted, except in pockets. It also stated that if the pandemic were to peak out in September-October, GDP growth could move into mild positive territory towards the end of this fiscal. It indicated that with over 42 lakh COVID-19 cases, India overtakes Brazil to become second worst-hit country. It added that the pandemic will leave a permanent scar even as many analysts have been pitching for a sharp rebound or a v-shaped recovery.

The report expects a permanent loss of 13 percent of real GDP over the medium term, pegging its value in nominal terms at Rs 30 lakh crore and added that this is much higher than a 3 percent permanent hit to GDP in Asia-Pacific economies estimated by its parent S&P. It said a catch-up with the pre-pandemic trend value of real GDP would require average real GDP growth to surge to 13 percent annually for the next three fiscals, which is a feat never accomplished by India before. It pegged the September quarter GDP to contract by 12 percent, attributing the same to higher economic activity seen in many indicators.

The CNX Nifty traded in a range of 11,493.50 and 11,419.90 and there were 21 stocks advancing against 29 stocks declining on the index.

The top gainers on Nifty were Wipro up by 2.81%, SBI up by 2.80%, Tech Mahindra up by 1.83%, TCS up by 1.68% and Hero Motocorp up by 1.43%. On the flip side, Zee Entertainment down by 2.22%, Indusind Bank down by 1.68%, Power Grid down by 1.58%, BPCL down by 1.53% and Coal India down by 1.18% were the top losers.

European markets were trading mostly in red; France’s CAC decreased 20.19 points or 0.4% to 5,003.74 and Germany’s DAX fell 69.52 points or 0.53% to 13,139.37, while UK’s FTSE 100 increased 14.62 points or 0.24% to 6,017.94.

Asian markets ended mostly higher on Friday, despite weak cues overnight from Wall Street as tech stocks resumed their decline on growing doubts about US stimulus and worries about their stretched valuations. Japanese shares ended up as the capital city Tokyo dropped its corona virus alert by one notch from the highest level as Covid-19 infections continue to decline. Hong Kong shares closed higher, though the benchmark index ended lower for the week as economic worries and tensions between Washington and Beijing continued to weigh on sentiment.