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Benchmarks trade slightly in red in early deals
Jul-19-2019

Indian equity benchmarks made positive start but sooner gave up all of the gains and entered into red territory in early deals on Friday, with Sensex and Nifty trading below their crucial levels of 38,900 and 11,600, respectively. Market participants are looking ahead to the quarterly numbers from Reliance Industries (RIL) later in the day. In early trade, traders took encouragement with NITI Aayog Vice Chairman Rajiv Kumar’s statement that the focus of the second term of the Narendra Modi government is accelerated economic growth led by the private sector and private enterprise. He asserted that India will be at the cusp of a major transformation over the next five years. However, sentiments turned cautious with the International Monetary Fund (IMF) report that India's current account (CA) balance deficit grew to $68 billion in 2018-19 from $49 billion the previous year, and it said the deficit was justified by development needs. Besides, India's overall international reserves, stood at $411.9 billion at the end of March this year, down from March last year by $12.5 billion. Meanwhile, Finance minister Nirmala Sitharaman stuck to her budget proposals and declined to relent on the demand by foreign portfolio investors (FPIs) structured as trusts that they be exempted from a higher surcharge.

On the global front, all the Asian market were trading higher after a top Federal Reserve official cemented expectations of a US interest rate cut later this month. The comments made it a virtual certainty the US central bank would opt to cut interest rates by 25 basis points (bps) at its July 30-31 policy meeting and also fuelled expectations of an even deeper 50 basis points reduction.

Back home, market regulator Securities and Exchange Board of India (SEBI) has proposed to ramp up disclosure for auditors of listed companies. The decision by the regulator came after a number of firms abruptly resigned from audit assignments without citing sufficient reasons, leaving investors in the dark. In scrip specific development, Cyient witnessed selling pressure with cut of around 11% after reporting a decline in its consolidated revenues in the first quarter ended June 30, 2019. The firm’s revenue for the quarter at $156.6 million was down 5.2% over its revenue of $165.2 million in the previous quarter. However, ACC gained on reporting a rise of 38.61% in its consolidated net profit at Rs 455.68 crore for the quarter ended June 30, 2019 under review as compared to Rs 328.74 crore for the same quarter in the previous year.

The BSE Sensex is currently trading at 38884.53, down by 12.93 points or 0.03% after trading in a range of 38876.94 and 39058.73. There were 13 stocks advancing against 16 stocks declining, while 2 stock remains unchanged on the index.

The broader indices were trading in red; the BSE Mid cap index declined 0.22%, while Small cap index was down by 0.20%.

The top gaining sectoral indices on the BSE were Telecom up by 0.69%, Basic Materials up by 0.66%, Metal up by 0.30%, Power up by 0.21% and Consumer Durables was up by 0.18%, while Auto down by 0.95%, Consumer Discretionary Goods & Services down by 0.47%, Oil & Gas down by 0.40%, PSU down by 0.21% and Bankex was down by 0.13% were the top losing indices on BSE.

The top gainers on the Sensex were Vedanta up by 0.95%, HCL Technologies up by 0.94%, TCS up by 0.82%, Tata Steel up by 0.73% and Asian Paints up by 0.73%. On the flip side, Yes Bank down by 2.39%, Mahindra & Mahindra down by 1.67%, ONGC down by 1.53%, Tata Motors - DVR down by 1.24% and Bajaj Auto down by 1.15% were the top losers.

Meanwhile, ICRA in its latest report has said that India’s current account deficit (CAD) is likely to remain largely steady at $16-17 billion or 2.3% of Gross Domestic Product (GDP) in the first quarter of current fiscal year (Q1FY20), despite the recent contraction in merchandise exports and imports. For the FY20, the rating agency forecasted that the country’s CAD to widen to $63-68 billion, from $57.2 billion in FY19, while remaining steady at around 2.1% of GDP.

It said this de-growth is likely to persist in the immediate term, with the year-on-year (Y-o-Y) decline in crude oil prices, and the impact of the recent customs duty hike on gold and precious metals. Such factors, in addition to the threat imposed by global trade wars, as well as sluggish domestic demand, are likely to restrict the overall growth of both merchandise exports and imports to low single digits in FY20. Besides, India’s merchandise exports and imports contracted by 1.7% and 0.3%, respectively, in Q1FY20.

As per the report, the prevailing Y-o-Y decline in crude oil prices and a temporary dip in gold imports following the tax changes introduced in the Union Budget, may well result in a contraction in aggregate merchandise imports as well as exports in July 2019. However, both these factors would contribute to a sizeable reduction in the size of the trade deficit in July 2019 to approximately $16.0-16.5 billion from the $18.6 billion recorded in July 2018, which was the highest monthly print for FY19.

ICRA further said a revival in gold imports, closer to the festive season, may push up the size of the CAD to $28-30 billion in H2 FY20, relative to the $21.5 billion recorded in H2 FY19. A sustained pick-up in the price of crude oil, which appears to be an unlikely scenario at present, remains a risk to the size of the CAD. According to report, every $1/barrel increase in the average price of crude oil in FY20, is likely to expand the CAD by around $1.6 billion.

The CNX Nifty is currently trading at 11578.05, down by 18.85 points or 0.16% after trading in a range of 11577.60 and 11640.35. There were 21 stocks advancing against 28 stocks declining, while 1 stock remain unchanged on the index.

The top gainers on Nifty were Ultratech Cement up by 2.14%, Bharti Infratel up by 0.87%, Vedanta up by 0.80%, HCL Technologies up by 0.77% and Titan Company up by 0.76%. On the flip side, Yes Bank down by 2.33%, Mahindra & Mahindra down by 1.72%, Indian Oil Corporation down by 1.56%, Wipro down by 1.24% and Hero MotoCorp down by 1.19% were the top losers.

All Asian markets were trading in green; Nikkei 225 surged 406.43points or 1.93% to 21,452.67, Straits Times strengthened 14.27 points or 0.42% to 3,375.32, Hang Seng gained 310.80 points or 1.09% to28, 772.46, Taiwan Weighted advanced 84.01 points or 0.78% to 10,883.29, KOSPI soared 25.79 points or 1.25% to 2,092.34, Jakarta Composite gained 38.70 points or 0.60% to 6,441.99 and Shanghai Composite was up by 29.40 points or 1.01 % to 2,930.58.
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