Domestic indices end with minor cuts on Wednesday

Extending losses for the fifth straight session, Indian equity benchmarks ended Wednesday’s session with minor cuts, as investors remained cautious over spiking virus infections. The benchmarks staged a gap up opening, as India and China agreed to stop sending troops to the front line of their disputed Himalayan border in what appears to be the first step towards resolving the 20-week military standoff along the Line of Actual Control (LAC) in Ladakh. Traders found some solace with ICRA’s report that India's current account will swing to a surplus of $30 billion or 1.2 percent of GDP in FY21, due to slowdown in imports during the pandemic, making it clear that it will be a temporary phenomenon. Some support also came as parliament passed amendments to the Banking Regulation Act to bring cooperative banks under the supervision of the RBI, a move aimed at protecting the interest of depositors.

However, local indices pared all intra-day gains and slipped into red terrain in afternoon deals, due to profit-booking at higher levels a day ahead of expiry of September derivative contracts. Some anxiety also came as the United Nations Conference on Trade and Development (UNCTAD) projected India’s economy to contract 5.9 per cent in 2020, and warned the country to not repeat its past mistake of announcing austerity measures. It forecast the economy to grow 3.9 per cent next year. Though, in the final hour of trading, key gauges managed to cut the losses significantly, as some optimism remained among traders with report that the government aims to catapult India to among the top 10 countries in World Bank's ease of doing business rankings with the comprehensive labour reforms which are likely to be completed after Parliament approves three draft codes in the ongoing session.

On the global front, Asian markets ended mixed on Wednesday, as persistent worries about the global economic recovery kept investors cautious. Besides, the latest survey from Jibun Bank revealed that the manufacturing sector in Japan continued to contract in September, albeit at a barely slower pace, with a manufacturing PMI score of 47.3. That's up marginally from 47.2 in August, although it remains beneath the boom-or-bust line of 50 that separates expansion from contraction. European markets were trading higher, after Federal Reserve Chairman Jerome Powell reiterated the Fed's commitment to use all of its monetary policy tools for as long as necessary to support the economy. Investors shrugged off flash survey data from IHS Markit showing that the euro area private sector stagnated in September. The composite output index declined to 50.1 in September from 51.9 in August. Economists had forecast the reading to drop to 51.7.

Back home, on the sectoral front, select pharma stocks ended higher as the Drugs Controller General of India (DCGI) issued a new set of guidelines, focusing on safety, immunogenicity and efficacy parameters for pharma giants who are developing COVID-19 vaccines. Majority of stocks related to telecom sector ended lower with Minister of State for Communications Sanjay Dhotre stating that telecom operators shall pay 10 percent of the adjusted gross revenue (AGR) dues demanded by the DoT by March 31 as directed by the Supreme Court. He also said the estimated revenue likely to be generated will depend on the payments made by the telecom companies. There was some reaction in power stocks as the Union ministry of power drafted a Standard Bidding Document (SBD) for the privatisation of the state-owned power distribution companies.

Finally, the BSE Sensex fell 65.66 points or 0.17% to 37,668.42, while the CNX Nifty was down by 21.80 points or 0.20% to 11,131.85.

The BSE Sensex touched high and low of 38,140.07 and 37,313.09, respectively and there were 12 stocks advancing against 18 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell 0.33%, while Small cap index was down by 0.07%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 0.77%, Realty up by 0.56%, Energy up by 0.49%, Consumer Discretionary up by 0.31% and Bankex up by 0.13%, while Telecom down by 7.36%, Power down by 2.13%, Utilities down by 1.39%, TECK down by 1.37% and Healthcare down by 1.20% were the top losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 1.82%, Hindustan Unilever up by 1.27%, Infosys up by 1.24%, HDFC Bank up by 1.11% and Nestle up by 1.05%. On the flip side, Bharti Airtel down by 7.89%, Tata Steel down by 3.46%, Indusind Bank down by 3.10%, NTPC down by 3.02% and Power Grid down by 2.85% were the top losers.

Meanwhile, rating agency ICRA in its latest report has said that India's current account balance will swing into a sizable, albeit temporary, surplus of $30 billion or 1.2 percent of Gross Domestic Product (GDP) in FY21, due to slowdown in imports during the pandemic. It also said the crucial number, which is one of the key aspects gauged while determining a country's macroeconomic position, will swing back to a deficit of $15 billion in the next financial year. It added that the deficit stood at $24.6 billion or 0.9 percent of GDP in FY20.

With the domestic and global lockdowns to fight COVID-19 exuding a differentiated impact on exports, imports and remittances, the report expects India to display a sharp current account surplus of $24 billion in H1 FY2021 (April-September). It also said a lagged pickup in domestic non-oil imports, as well as the potential fresh restrictions that may be warranted in some major trading partners to ward off rising COVID-19 infections, are likely to restrict India's current account surplus to $6 billion in the second half of the fiscal year. 

As per to the report, merchandise exports contracted by 36.7 percent to $51.3 billion in Q1 FY21 from $81.1 billion in Q1 FY20, but merchandise imports recorded a much sharper 52.4 percent decline to $60.4 billion in the same period as against $127 billion a year ago on severely constrained demand conditions. It noted that this compressed the merchandise trade deficit to $9.1 billion in the quarter, down from $46.0 billion in the year-ago period. It added that despite a contraction in services exports and imports, the services trade surplus rose to $21 billion in Q1 FY21 from $19.6 billion in Q1 FY20.

The CNX Nifty traded in a range of 11,259.55 and 11,024.40 and there were 19 stocks advancing against 31 stocks declining on the index.

The top gainers on Nifty were Axis Bank up by 2.43%, Coal India up by 2.38%, GAIL India up by 1.72%, HDFC Bank up by 1.31% and Hindustan Unilever up by 1.31%. On the flip side, Bharti Infratel down by 8.26%, Bharti Airtel down by 8.16%, Tata Steel down by 3.47%, Zee Entertainment down by 3.25% and Indusind Bank down by 2.95% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 136.34 points or 2.34% to 5,965.80, France’s CAC rose 86.08 points or 1.8% to 4,858.92 and Germany’s DAX was up by 201.30 points or 1.6% to 12,795.69.

Asian markets ended mixed on Wednesday, despite strong Wall Street gains overnight after Federal Reserve Chairman Jerome Powell said the US central bank is committed to helping the economy. Japanese shares ended lower as traders returned to their desks after a long weekend, with concerns over surging corona virus pandemic infections in Europe and a delay in US fiscal stimulus. The latest survey from Jibun Bank revealed that the manufacturing sector in Japan continued to contract in September, albeit at a barely slower pace, with a manufacturing PMI score of 47.3. However, Chinese shares ended higher on gains in healthcare shares after the state planner said the country would accelerate development of corona virus vaccine innovation, diagnostic, testing reagents and antibody drugs.