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EQUITY
Post Session: Quick Review
Jul-19-2019

Extending their losing streak for second straight session, Indian equity benchmarks ended Friday’s session at two-month closing low, on the back of sustained selling activities by market-participants and disappointed quarterly earnings. The markets had a slightly positive start to the day but quickly erased gains and slipped deep into the red, as Finance Minister Nirmala Sitharaman dashed hope of a tweak in FPI surcharge. Some cautiousness also crept in 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. The street remained worried, as sticking to his analysis that India's economic growth has been overestimated, Arvind Subramanian said he had raised doubts about the GDP numbers in 2015 when he was the chief economic adviser of the Modi government as he found inconsistency between projected growth and other macro indicators. Traders paid no heed towards 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.

On the global front, Asian markets ended higher on Friday, while European markets were trading in green as comments from a top Federal Reserve official were pounced on by investors as indicating the central bank will unveil a deep interest rate cut at the end of the month. Back home, the BSE Sensex ended at 38343.17, down by 554.29 points or 1.43% after trading in a range of 38271.35 and 39058.73. There were 3 stocks advancing against 28 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index fell 1.84%, while Small cap index was down by 1.75%.(Provisional)

The only gaining sectoral indices on the BSE were Power up by 0.34% and Consumer Durables up by 0.24%, while Auto down by 3.21%, Bankex down by 2.09%, Consumer Discretionary Goods & Services down by 2.08%, Healthcare down by 1.73% and Basic Materials down by 1.67% were the top losing indices on BSE. (Provisional)

The few gainers on the Sensex were NTPC up by 2.16%, TCS up by 0.46% and Power Grid up by 0.10%. (Provisional)

On the flip side, Mahindra & Mahindra down by 4.49%, Tata Motors - DVR down by 4.03%, Bajaj Finance down by 4.02%, Hero MotoCorp down by 3.86% and Tata Motors down by 3.42% were the top losers. (Provisional)

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 ended at 11423.15, down by 173.75 points or 1.50% after trading in a range of 11399.30 and 11640.35. There were 7 stocks advancing against 43 stocks declining on the index. (Provisional)

The top gainers on Nifty were NTPC up by 2.13%, Titan Co up by 0.85%, Coal India up by 0.57%, TCS up by 0.37% and BPCL up by 0.19%. (Provisional)

On the flip side, Mahindra & Mahindra down by 4.47%, Bajaj Finance down by 4.10%, Eicher Motors down by 4.01%, Hero MotoCorp down by 3.77% and Bajaj Finserv down by 3.68% were the top losers. (Provisional)

European markets were trading in green; UK’s FTSE 100 increased 16.39 points or 0.22% to 7,509.48, France’s CAC rose 8.96 points or 0.16% to 5,559.51 and Germany’s DAX added 34.49 points or 0.28% to 12,262.34.

Asian markets ended higher on Friday, as investors cheered dovish comments by a top Fed official as well as better-than-expected fourth-quarter earnings results from Microsoft Corp. Japanese shares ended up after steep losses in the previous session as the appreciation of the yen took a breather. Further, Seoul shares rallied to snap a two-day losing streak on hopes for a Fed rate cut during a policy meeting slated for later this month. New York Fed President John Williams said that policymakers need to add stimulus early to deal with too-low inflation when interest rates are near zero and cannot wait for economic disaster to unfold, in a speech read as a strong argument in favour of quick action. The comments by Williams made it a virtual certainty the Fed 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 bps reduction.

Asian Indices

Last Trade           

Change in Points

Change in %

Shanghai Composite

2,924.20
23.02
0.79

Hang Seng

28,765.40
303.74
1.07

Jakarta Composite

6,456.54
53.25
0.83

KLSE Composite

1,658.19

9.26

0.56

Nikkei 225

21,466.99
420.75
2.00

Straits Times

3,377.96
16.91
0.50

KOSPI Composite

2,094.36
27.81
1.35

Taiwan Weighted

10,873.19
73.91
0.68
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