Markets remain subdued in afternoon trade

Indian bourses continued their lackluster trade and were trading with cut of over half a percent each in afternoon session as selling appeared in banking, PSU and metal stocks, with Sensex and Nifty tumbling by 305 and 84 points, respectively. Sentiments remained fragile with Reserve Bank of India (RBI) official’s statement that the country’s GDP is likely to contract by 8.6 percent for second quarter of current financial year (Q2FY21), which means India will enter into a recession for the first time in history in the first half of this fiscal with two successive quarters of negative growth due to the COVID-19 pandemic. Meanwhile, government said it has set up a 22-member inter-ministerial committee for strengthening India's capital goods sector through interventions that help it in contributing more actively towards achieving the target of a $5 trillion economy and a $1 trillion manufacturing sector.

On the global front, Asian markets were trading mostly in red as the continued surge in covid-19 infections and new economic restrictions in some states of US dampened investor sentiments. Back home, in scrip specific developments, GE Power India touched roof on turning black in Q2, while Apollo Hospitals tumbled on reporting 30% fall in Q2 consolidated net profit.

The BSE Sensex is currently trading at 43288.66, down by 305.01 points or 0.70% after trading in a range of 43250.34 and 43543.96. There were 13 stocks advancing against 17 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.42%, while Small cap index was up by 1.10%.

The top gaining sectoral indices on the BSE were Capital Goods up by 1.24%, Industrials up by 0.96%, Healthcare up by 0.90%, Realty up by 0.77% and Power was up by 0.67%, while Bankex down by 2.08%, PSU down by 0.91%, Metal down by 0.77%, Utilities down by 0.30% and Energy was down by 0.30% were the top losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 1.51%, ITC up by 1.48%, Larsen & Toubro up by 1.24%, Hindustan Unilever up by 0.84% and Tech Mahindra was up by 0.76%. On the flip side, Kotak Mahindra Bank down by 2.73%, SBI down by 2.52%, ICICI Bank down by 2.45%, Indusind Bank down by 2.38% and Axis Bank was down by 1.89% were the top losers.

Meanwhile, Rating agency ICRA in its latest report has said that twelve major state governments may have to undertake an aggregate cut of Rs 2.5-2.7 trillion in their budgeted capital spending in the current fiscal (FY21) to make up for shortfall in revenue due to coronavirus disease (covid-19) pandemic. It noted that the twelve states include Maharashtra, Punjab, Gujarat, Andhra Pradesh, Haryana, Karnataka, Kerala, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh and West Bengal. It has projected the aggregate debt of these 12 states to deteriorate sharply to 28.9 percent of Gross State Domestic Product (GSDP) in FY21 from 21.9 percent of GSDP in FY19, and an estimated 22.3 percent of GSDP in FY20.

According to the report, the pandemic has dealt a sharp revenue shock to the state governments in the current fiscal. While the gap in GST compensation is largely proposed to be financed through additional borrowings, it said the expected substantial shortfall in central tax devolution would severely restrict the ability of the states to undertake growth-reviving capital expenditure in FY21. Given their limited flexibility to curtail or defer revenue spending, the agency's projections reveal a sharp widening of the combined revenue deficit of the states in its sample to Rs 5.8 trillion, or 3.9 per cent of its estimate of GSDP in FY21, from the level of Rs 82,200 crore budgeted by these states for FY21.

The report further stated that funding a revenue deficit of this magnitude would absorb a huge part of the enhanced borrowing limit of the state governments, leaving many of them with little option other than substantially compressing capital expenditure. It added that this would counteract the nascent economic recovery within their jurisdictions, and may further constrain a revival in revenues in the near term.

The CNX Nifty is currently trading at 12664.45, down by 84.70 points or 0.66% after trading in a range of 12659.50 and 12741.15. There were 22 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were Shree Cement up by 2.60%, ITC up by 1.62%, Sun Pharma up by 1.55%, Grasim Industries up by 1.23% and Eicher Motors was up by 1.07%. On the flip side, Kotak Mahindra Bank down by 2.98%, SBI down by 2.54%, ICICI Bank down by 2.45%, Indusind Bank down by 2.42% and Coal India was down by 2.26% were the top losers.

Asian markets were trading mostly in red; KOSPI fell 10.25 points or 0.41% to 2,475.62, Hang Seng decreased 113.20 points or 0.43% to 26,113.78, Jakarta Composite lost 37.85 points or 0.69% to 5,471.66, Taiwan Weighted dropped 40.41 points or 0.3% to 13,221.78, Straits Times trembled 13.70 points or 0.5% to 2,699.58 and Shanghai Composite was down by 8.23 points or 0.25% to 3,333.97. On the flip side, Nikkei 225 was up by 171.28 points or 0.68% to 25,520.88.