Local indices wipe out gains to end in red terrain

Erasing all of their intra-day gains, Indian equity benchmarks ended in the negative territory on Monday as telecom, banking, finance and energy shares came under selling pressure. The broader markets, however, outperformed after market regulator Securities and Exchange Board of India (Sebi) tweaked the asset allocation norms for Multi-Cap Funds. According to the new norms, multi-cap funds must invest 25 percent each in small, mid, and large-cap stocks. The benchmarks made an optimistic start and traded on a strong note for most part of the day, as sentiments got a boost as Chief Economic Adviser K V Subramanian exuded confidence that retail inflation will come down in the days ahead with the easing of lockdowns, attributing the rise in inflation to supply-side frictions. Some support also came in as the finance ministry said banks have sanctioned loans worth over Rs 1.63 lakh crore to more than 42 lakh business units under the Rs 3-lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector.

However, local indices failed to carry forward positive momentum in late trade and ended with marginal losses, as traders got anxious with CARE Ratings’ report that India’s Gross Domestic Product (GDP) is likely to see a sharper contraction of 8-8.2 percent in the current financial year (FY21) under the assumption of there being no fiscal stimulus from the government. It said this would imply that there would be no increase in capital expenditure (capex) during the year beyond what is provided in the Budget. Some cautiousness also came as India’s industrial output contracted 10.4 percent in July as against a 4.9 percent growth year-on-year (YoY). Traders may be concerned as rating agency Moody's projected India's real gross domestic product (GDP) to contract by 11.5 percent in FY21. Besides, India’s inflation based on wholesale price index (WPI) surged 0.16% in the month of August, 2020 (over August, 2019) as compared to 1.17% during the corresponding month of the previous year.

On the global front, Asian markets ended mostly in green, as positive news on the coronavirus vaccine front boosted sentiment. Drug maker AstraZeneca said it has resumed the late-stage trial of its coronavirus vaccine candidate in the UK after the trial was suspended last week following an adverse reaction in a trial participant. European markets were trading mostly in red as traders digested last week's dovish tone from European Central Bank policymakers and looked towards the Federal Reserve's two-day policy meeting.  The Fed is widely expected to make some slight changes in its statement with regard to interest rates. Back home, on the sectoral front, DTH companies stocks were in focus with Crisil’s report that people staying indoors due to the COVID-19 pandemic has proved to be a bonanza for direct-to-home (DTH) broadcasters as the industry is all set to post a growth of up to 6 per cent in its topline to Rs 22,000 crore in FY21. Coal industry stocks also were in watch as India's coal import declined by 34.9 percent to 12.46 million tonnes (MT) in August on account of subdued demand for the dry fuel from consuming sectors like power and cement.

Finally, the BSE Sensex fell 97.92 points or 0.25% to 38,756.63, while the CNX Nifty was down by 24.40 points or 0.21% to 11,440.05.

The BSE Sensex touched high and low of 39,230.16 and 38,573.17, 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 1.56%, while Small cap index was up by 4.03%.

The top gaining sectoral indices on the BSE were IT up by 4.76%, Realty up by 3.85%, TECK up by 3.57%, Consumer Durables up by 3.40%, Industrials up by 2.16% while, Telecom down by 2.09%, Bankex down by 1.56%, Finance down by 1.31%, Energy down by 0.67% and FMCG down by 0.48% were the top losing indices on BSE.

The top gainers on the Sensex were HCL Technologies up by 10.08%, TCS up by 5.00%, Infosys up by 3.44%, Tech Mahindra up by 3.09% and Titan Company up by 1.81%. On the flip side, Bharti Airtel down by 3.46%, Bajaj Finance down by 2.91%, Power Grid down by 2.06%, SBI down by 2.05% and HDFC Bank down by 1.91% were the top losers.

Meanwhile, domestic rating agency CARE Ratings has said India’s Gross Domestic Product (GDP) is likely to see a sharper contraction of 8-8.2 percent in the current financial year (FY21) under the assumption of there being no fiscal stimulus from the government. It said this would imply that there would be no increase in capital expenditure (capex) during the year beyond what is provided in the Budget. Earlier, it had a projection of 6.4 percent de-growth in GDP for FY21, based on the expected progress of the lockdown and unlock processes which were prevalent in the country at that time.

According to the report, the decline in GDP growth by around 8 percent would also be associated with a decline in the gross fixed capital formation. It said the same would hold for consumption growth that will be affected by lower growth in income across all categories of consumers. However, it said the sharp fall in GDP growth in FY21 would provide the cushion of a faster pace of growth in FY22 depending on the rate at which various sectors get back on track. It noted that the GDP fall of about 24 percent in the first quarter was slightly higher than its expectations of a 20.2 percent contraction. The element which came in as a surprise was the growth in the public administration, defence and other services segments at (-) 10.3 percent.

The rating agency further stated that the factors that are working well in the economy are more in the agricultural sector as well as the financial domain where a good monsoon as well as the efforts of the government and the RBI to enhance the flow of credit have shown some positive tendencies. It also said the unlock process has been gradual, and it needs to be seen whether there is continuity in the approach which will have a bearing on the resumption of some services and the attainment of minimum capacity utilisation in these sectors.

The CNX Nifty traded in a range of 11,568.90 and 11,383.55 and there were 16 stocks advancing against 34 stocks declining on the index.

The top gainers on Nifty were HCL Technologies up by 10.60%, TCS up by 4.85%, Wipro up by 4.45%, Tech Mahindra up by 3.38% and UPL up by 2.99%. On the flip side, Bharti Airtel down by 3.77%, Bajaj Finance down by 3.17%, BPCL down by 3.16%, Power Grid down by 2.37% and SBI down by 2.37% were the top losers.

European markets were trading mostly in red; UK’s FTSE 100 decreased 16.84 points or 0.28% to 6,015.25 and Germany’s DAX decreased 19.28 points or 0.15% to 13,183.56, while France’s CAC increased 2.35 points or 0.05% to 5,036.49.

Asian markets ended mostly higher on Monday amid renewed optimism surrounding corona virus vaccines after Biopharmaceutical giant AstraZeneca and the University of Oxford on Saturday resumed its phase-3 vaccine trials in the UK after the Medicines Health Regulatory Authority’s approval. The trial was suspended last week over safety concerns. Meanwhile, investors are looking ahead to the US Federal Reserve’s monetary policy decision scheduled for Wednesday for monetary policy outlook cues in the world’s largest economy. Japanese shares closed higher after reports that Japan's Chief Cabinet Secretary Yoshihide Suga was elected new president of the Liberal Democratic Party, succeeding outgoing Prime Minister Shinzo Abe. As Suga, a long-time loyal aide to Abe, has vowed to continue his policies, few market players expect radical changes. Further, Chinese shares finished higher with Shanghai’s STAR Market leading gains after securities regulator approved the first batch of ETFs, which are expected to draw fresh funds towards the market.