Markets trade marginally lower in early deals

Indian equity markets made a cautious start and are trading marginally lower in early deals on Wednesday. There was cautiousness as Nobel Laureate Abhijit Banerjee said India is among the worst performing economies in the world and the government’s economic stimulus was inadequate to tackle the problem. But, he said that the country will see a revival in growth in the July-September quarter of the current fiscal. He said the country's economic growth was slowing down even before the Covid-19 pandemic hit. Downside remained capped, with an aim to help state governments tide over the financial problems triggered by the Covid-19 pandemic, the Reserve Bank of India (RBI) extended by six months the additional flexibility provided to states to raise funds through market borrowing and overdraft. The RBI in April provided additional flexibility to states and Union Territories (UTs) to raise funds to deal with the Covid-19 crisis. The flexibility was available till September 30, 2020. Meanwhile, the Securities and Exchange Board of India (Sebi) has extended the special dispensations given to companies wanting to go public. The regulator has said the validity of Sebi observations for initial public offerings (IPOs) expiring between October 1, 2020 and March 31, 2021 will be extended till March 31, 2021.

On the global front, Asian markets are trading mostly lower on Wednesday despite weak cues overnight from US markets ahead of the first presidential debate and as investors digested a raft of local economic data. The US markets ended lower on Tuesday ahead of the first presidential debate before the November election. Bach home, stock specific development, Welspun Corp hit an upper circuit limit of 5 per cent at Rs 113.70 apiece on the BSE, a day after the company announced it has received multiple orders of approximately 147 kilometre-tonne (KMT) valuing close to Rs 1,400 crore.

The BSE Sensex is currently trading at 37931.35, down by 41.87 points or 0.11% after trading in a range of 37890.61 and 38080.08. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.38%, while Small cap index up by 0.17%.

The gaining sectoral indices on the BSE were Healthcare up by 1.50%, Capital Goods up by 0.68%, FMCG up by 0.67%, Power up by 0.53% and Auto up by 0.47%, while Bankex down by 0.95%, Realty down by 0.57%, PSU down by 0.42%, Metal down by 0.42% and IT down by 0.32% were the losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 1.53%, Mahindra & Mahindra up by 1.38%, Bajaj Auto up by 0.99%, Hindustan Unilever up by 0.98% and ONGC up by 0.94%. On the flip side, Indusind Bank down by 2.25%, ICICI Bank down by 1.36%, Axis Bank down by 1.09%, SBI down by 1.00% and TCS down by 0.61% were the top losers.

Meanwhile, India Ratings and Ratings (Ind-Ra) in its latest report has said that the auto ancillary sector's revenue is likely to decline 16-20 percent in the current financial year (FY21), with both the domestic market as well as exports expected to see a contraction in demand. Also, it has maintained a negative outlook for the auto ancillary sector for the October-March period of 2020-21

According to the report, auto ancillaries with high exposure to the commercial vehicle segment are expected to continue to be the worst impacted, about those with a higher two-wheeler, passenger vehicle, or tractor segment exposures. It said although demand from the after-market segment is also likely to remain subdued, it would be the least affected. However, it stated that the performance in the October-March period of 2020-21 is expected to be better than the previous half, as auto demand has shown a gradual improvement in both domestic and export markets. It added that a recovery to pre-COVID-19 levels is expected by the second half of this fiscal stoked by an improvement in demand from OEMs and exports.

Further, Ind-Ra expects auto ancillaries to record revenue growth of 12-15 percent y-o-y in 2021-22, as most auto ancillaries have taken cost-cutting measures to curtail fixed costs in FY21. However, it said lower operating leverage could constrain profitability margins by 200-250 basis points Year-on-Year. It has also maintained a negative outlook on its rated portfolio for 2020-21 based on the expectations of a continued weaker-than-envisaged operating performance and credit metrics amid a challenging economic environment.

The CNX Nifty is currently trading at 11207.65, down by 14.75 points or 0.13% after trading in a range of 11199.70 and 11249.50. There were 20 stocks advancing against 30 stocks declining on the index.

The top gainers on Nifty were Cipla up by 2.70%, Dr. Reddys Lab up by 2.62%, Divis Lab up by 2.16%, Sun Pharma up by 1.52% and Mahindra & Mahindra up by 1.34%. On the flip side, Indusind Bank down by 2.25%, ICICI Bank down by 1.40%, Coal India down by 1.27%, Axis Bank down by 1.14% and SBI down by 1.05% were the top losers.

Asian markets were trading mostly in green; Straits Times rose 6.11 points or 0.25% to 2,478.41, KOSPI jumped 19.81 points or 0.86% to 2,327.89, Shanghai Composite rose 14.50 points or 0.45% to 3,238.86, Hang Seng gained 273.94 points or 1.18% to 23,549.47 and Taiwan Weighted was up 46.87 points or 0.38% to 12,514.60. However, Jakarta Composite fell 24.31 points or 0.50% to 4,854.79 and Nikkei 225 dropped 176.07 points or 0.75% to 23,363.03.