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Weak global cues drag benchmarks lower; Nifty breaches 14,300 mark
Jan-18-2021

Indian equity benchmarks ended the Monday’s trade in red terrain as traders remained worried on account of weak global cues. Markets made a cautious start as India registered 13,962 fresh Covid-19 cases in the last 24 hours, taking the tally to 10,572,672. Sentiments also remain dampened on report stating that the Indian economy is not recovering as fast as the government claims and the country's economy may contract 25 per cent in the current financial year. It further states that due to a big decline in the GDP during the current financial year, the budget estimates have gone completely out of gear and, therefore, there is a need to correct the Budget. Traders also took note of former chief economic adviser Arvind Virmani’s statement that the Indian economy is likely to contract in the range of 5-7.5 per cent this fiscal (FY21) but will see a growth of 9 to 11 per cent in FY 2021-22. Further, Virmani said in the upcoming Budget, the government should come up with policies to accelerate India's economic growth.

Markets trimmed most of their initial losses in second half of the trade as the Reserve Bank of India (RBI) has decided to conduct purchase of Government securities under Open Market Operations (OMO) for an aggregate amount of Rs 10,000 crore on January 21, 2021. Some support also came after the government data showing that India's exports rose marginally to $27.15 billion in December 2020, while imports surged 7.56 per cent to $42.59 billion. The merchandise exports were valued at $27.11 billion in December 2019, while imports had totalled $39.59 billion. Traders also took some solace with Reserve Bank of India (RBI) in its latest report has showed that bank credit grew 3.2 per cent to Rs 107.05 lakh crore in the first nine months (April-December) of the current financial year (FY21), against a growth of 2.7 per cent registered in the corresponding period of 2019-20. In the fortnight ended March 27, 2020, bank advances stood at Rs 103.72 lakh crore. However, intense selling in last of trade dragged markets below their psychological levels of 14,300 (Nifty) and 48,600 (Sensex).

Weak cues from global markets mainly dampened the sentiments. European markets made a weak opening, amid a pullback in global markets. Asian markets finished mostly lower on Monday, even after China's economy gained further momentum towards the end of 2020 as the domestic activity continued to recover from the Covid-19 driven downturn. Gross domestic product climbed 6.5 percent on year in the fourth quarter of 2020. The rate exceeded the expected 6.1 percent and up from 4.9 percent growth posted in the third quarter.

Back home, finance ministry is looking at other avenues for affordable capital infusion, including setting up of a Bank Investment Company (BIC), as the RBI has raised concern over the issuance of zero coupon bonds for recapitalisation of public sector banks (PSBs). Aviation stocks remained in limelight reacting to their passenger load factor data. Besides, auto stocks also remained in focus with Union Minister Nitin Gadkari’s statement that the much-awaited policy to scrap 15-year old vehicles is likely to get government nod soon.

Finally, the BSE Sensex fell 470.40 points or 0.96% to 48,564.27, while the CNX Nifty was down by 152.40 points or 1.06% to 14,281.30.

The BSE Sensex touched high and low of 49,122.23 and 48,403.97, respectively and there were 4 stocks advancing against 26 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index declined 2.01%, while Small cap index was down by 1.89%.

The only gaining sectoral indices on the BSE were Energy up by 1.10% and Consumer Durables was up by 0.77%, while Metal down by 4.14%, PSU down by 2.68%, Utilities down by 2.66%, Telecom down by 2.41% and Healthcare down by 2.31% were the top losing indices on BSE.

The few gainers on the Sensex were Reliance Industries up by 2.37%, Titan Company up by 1.86%, HDFC Bank up by 1.15% and ITC up by 0.76%. On the flip side, ONGC down by 4.59%, Sun Pharma down by 3.74%, Indusind Bank down by 3.71%, Power Grid down by 3.50% and Bajaj Finance down by 3.44% were the top losers.

Meanwhile, former chief economic adviser Arvind Virmani has said that the Indian economy is likely to contract in the range of 5-7.5 per cent this fiscal (FY21) but will see a growth of 9 to 11 per cent in FY 2021-22. Further, Virmani said in the upcoming Budget, the government should come up with policies to accelerate India's economic growth.

Besides, he said that India can't become 'Aatmanirbhar' with the 20th century Direct Tax Code (DTC). He mentioned ‘There is a need to simplify direct taxes and indirect taxes for MSMEs. We can't have 21st century Aatmanirbhar with 20th century DTC... We need 21st century Direct Tax Code.’ He also emphasised that there is a need of 15 per cent uniform GST rate for 75 per cent of goods and services. Noting that production-linked incentive (PLI) was actually a very good scheme, Virmani said the government should promote employment generating exports.

He also pointed out that free trade agreements (FTAs) with the US, European Union (EU) and the UK are much important than with the Regional Comprehensive Economic Partnership (RCEP) because most MNCs are located in the US, EU and the UK. He also suggested that the government should spend more on infrastructure projects, modernise sewage system to deal with the future pandemic and invest on R&D on contagious diseases.

The CNX Nifty traded in a range of 14,222.80 and 14,459.15 and there were 6 stocks advancing against 44 stocks declining on the index.

The top gainers on Nifty were UPL up by 6.21%, Reliance Industries up by 1.82%, Titan Company up by 1.40%, HDFC Bank up by 0.91% and Eicher Motors up by 0.09%. On the flip side, Tata Motors down by 6.07%, Tata Steel down by 5.79%, ONGC down by 4.93%, Hindalco down by 4.28% and JSW Steel down by 4.25% were the top losers.

European markets were trading mostly lower; UK’s FTSE 100 slipped 7.77 points or 0.12% to 6,727.94 and France’s CAC decreased 11.23 points or 0.20% to 5,600.46, however Germany’s DAX was up by 7.68 points or 0.06 % to 13,795.41.

Asian markets finished mostly lower on Monday as surging corona virus infections and worries about worsening Sino-US relations kept the market sentiments under pressure. Japanese shares declined as investors booked profits after gains on hopes of big US stimulus spending by Biden Administration. However, Chinese shares ended higher on optimism over swift economic recovery after better-than-expected growth and industrial production data. China's GDP climbed 6.5 percent year-on-year in the fourth quarter of 2020 against expectations for an increase of 6.1% and up from 4.9% in the three months prior. Industrial production jumped an annual 7.3% in December against forecasts for 6.9% and up from 7% in November.

Asian Indices

Last Trade           

Change in Points

Change in %

Shanghai Composite

3,596.22
29.84
0.84

Hang Seng

28,862.77
288.91
1.01

Jakarta Composite

6,389.83
16.42
0.26

KLSE Composite

1,609.52

-17.49

-1.07

Nikkei 225

28,242.21
-276.97
-0.97

Straits Times

2,990.40
-14.47
-0.48

KOSPI Composite

3,013.93
-71.97
-2.33

Taiwan Weighted

15,612.00
-4.39
-0.03
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