Markets continue lacklustre trade during late afternoon deals

Indian equity markets continued their lacklustre trade in late afternoon session amid fading hopes of peace deal between US and Iran after US President Donald Trump ruled out an extension of the ceasefire arrangement. Further, these heightened geopolitical tensions have shot up the global crude oil prices, with Brent crude oil prices trading over $91 a barrel mark, alleviating concerns over high inflationary pressure. Besides, investors took cautious approach as foreign institutional investors (FIIs) continued to pull-out funds from Indian capital markets. FIIs were the net sellers on Tuesday’s session, offloading securities worth Rs 2,535.10 crore. Moreover, traders stayed away from risky bets ahead of weekly expiry of Nifty F&O contract later in the day.

On the global front, Asian equity markets were trading mixed, European equity markets were trading lower amid escalating tensions in Middle-East and rising bond yields.

The BSE Sensex is currently trading at 77371.53, down by 356.63 points or 0.46% after trading in a range of 77275.96 and 77575.21. There were 9 stocks advancing against 21 stocks declining on the index.

The top gaining sectoral indices on the BSE were Auto up by 0.27%, Healthcare up by 0.26%, Energy up by 0.22%, Utilities up by 0.13% and Telecom up by 0.02%, while IT down by 1.46%, TECK down by 1.28%, Realty down by 1.02%, Consumer Durables down by 0.83% and FMCG down by 0.59% were the top losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 1.14%, Mahindra & Mahindra up by 0.82%, Power Grid Corporation up by 0.51%, NTPC up by 0.39% and Reliance Industries up by 0.35%. On the flip side, Asian Paints down by 2.45%, HCL Technologies down by 2.39%, Infosys down by 2.02%, Tech Mahindra down by 1.54% and TCS down by 1.40% were the top losers.

Meanwhile, regarding the Reserve Bank of India's (RBI) decision to close the window for fresh FCNR(B) deposits under the special swap facility on August 31, one month ahead of the scheduled date (September 30), SBI Research in its report 'Ecowrap' has said that FCNR (B) swaps cost is unlikely to have been a constraining factor for RBI’s decision to close the window ahead of schedule. Instead, it pointed that most likely reason could be that the target for FCNR(B) mobilisation has already been achieved. It added that FCNR(B) deposits stood at $52.3 billion as of August 13, while total mobilisation under the facility, including overseas foreign currency borrowings and external commercial borrowings, stood at $56.8 billion. Further, it expects FCNR(B) mobilisation of $60-65 billion and total inflows, including OFCBs and ECBs, of $80-85 billion. 

Clarifying that swaps cost unlikely to be a key reason for early closure of the facility, SBI research noted that the potential FCNR(B) mobilisation of $65-70 billion, combined with an average USD/INR hedging cost of around 3% per annum, implies an annual notional hedging cost of about $2.1 billion on a $70 billion corpus. Therefore, the cumulative hedging cost could amount to around $10.5 billion over five years. With current reserves at around $700 billion and incremental reserve accumulation assumed at roughly $20 billion annually, the five-year cumulative hedging cost of $10.5 billion would amount to only 1.45% of the current reserve stock and around 1.27% of the projected reserve stock. It added that the cost is unlikely to represent a significant trade-off against the broader objective of strengthening India's external liquidity and reserve position. 

Despite the sizeable inflows, the rupee has barely responded to the FCNR(B) measures. SBI Research said that the rupee's appreciation has been only around 0.1% from the opening levels when the FCNR(B) scheme started as compared with 2013, when the rupee appreciated 4.9% between August 31 and November 30 and 8.8% by March 2014 following the FCNR(B) swap window.

The CNX Nifty is currently trading at 24198.55, down by 89.10 points or 0.37% after trading in a range of 24174.45 and 24269.65. There were 16 stocks advancing against 34 stocks declining on the index.

The top gainers on Nifty were Axis Bank up by 1.42%, Mahindra & Mahindra up by 1.03%, Grasim Industries up by 0.91%, Max Healthcare Institute up by 0.71% and Power Grid Corporation up by 0.66%. On the flip side, HCL Technologies down by 2.23%, Asian Paints down by 2.05%, Infosys down by 2.04%, Tata Motors Passenger Vehicles down by 1.76% and JIO Financial Services down by 1.48% were the top losers.

Asian equity markets were trading mixed; Shanghai Composite strengthened 7.65 points or 0.19% to 3,990.30, Hang Seng advanced 6.77 points or 0.03% to 25,460.00 and Jakarta Composite gained 56.26 points or 0.87% to 6,458.15, while Nikkei 225 slipped 1715.25 points or 2.54% to 67,505.00, Taiwan Weighted lost 548.59 points or 1.21% to 45,308.68, KOSPI dropped 108.11 points or 1.57% to 6,869.83 and Straits Times fell 75.64 points or 1.31% to 5,692.82.

European equity markets were trading lower; UK’s FTSE 100 decreased 5.71 points or 0.05% to 10,714.59, France’s CAC fell 45.6 points or 0.53% to 8,534.00 and Germany’s DAX lost 94.61 points or 0.36% to 26,244.00.