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Markets trade flat with positive bias amid disappointing trade data
Sep-18-2024

Indian equity benchmarks made cautious start and are trading flat on Wednesday as investors react to disappointing trade data and await the outcome of a Federal Reserve meeting later in the due for directional cues. According to data released by Commerce & Industry Ministry, India's trade deficit widened to a 10-month high of nearly $30 billion in August as gold-led merchandise imports surged to over $64 billion and merchandise exports declined. Exports contracted for the second month in a row to $34.7 billion due to softening of oil prices and muted global demand. Surge in crude oil prices also dented sentiments in the domestic markets. Oil prices rose as the industry continued to survey the impact of Hurricane Francine on output in the US Gulf of Mexico. However, downside remained capped amid foreign fund inflows. The foreign institutional investors (FIIs) bought equities worth Rs 482 crore on September 17. Sectorally, IT stocks turned out to be the laggards, while realty and oil & gas stocks remained upbeat.

On the global front, Asian markets are trading mostly lower, following the mixed cues from Wall Street overnight, as traders weighed the odds of a super-sized Federal Reserve interest rate cut later in the day. Uncertainty about the size of interest-rate reduction is weighing on market sentiment after a report unexpectedly showed a modest increase by U.S. retail sales in the month of August. Meanwhile, Japan posted a merchandise trade deficit of 695.3 billion yen in August. Exports were up 5.6 percent on year, shy of expectations for an increase of 10.0 percent and slowing from the 10.2 percent gain in the previous month. Hong Kong and South Korea were among major markets closed for holidays.

Back home, oil & gas sector stocks are in focus as the government slashed windfall tax on domestically produced crude oil to nil per tonne with effect from September 18. The government, on August 31, slashed windfall tax on domestically produced crude oil to Rs 1,850 per tonne from previous Rs 2,100 per tonne. In stock specific development, Torrent Power gained on receiving a letter of intent for a 1,500 MW pumped hydro storage project from Maharashtra State Electricity Distribution Co (MSEDCL).

The BSE Sensex is currently trading at 83142.32, up by 62.66 points or 0.08% after trading in a range of 82949.42 and 83149.16. There were 22 stocks advancing against 8 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.11%, while Small cap index was up by 0.25%.

The top gaining sectoral indices on the BSE were Utilities up by 0.53%, PSU up by 0.49%, Auto up by 0.48%, Bankex up by 0.45% and FMCG up by 0.36%, while IT down by 2.20%, TECK down by 1.71%, Healthcare down by 0.24% and Realty down by 0.11% were the few losing indices on BSE.

The top gainers on the Sensex were Bajaj Finance up by 1.78%, HDFC Bank up by 0.85%, ITC up by 0.83%, Mahindra & Mahindra up by 0.80% and Ultratech Cement up by 0.76%. On the flip side, Tech Mahindra down by 3.05%, Infosys down by 2.52%, TCS down by 2.38%, HCL Technologies down by 1.45% and Asian Paints down by 0.46% were the top losers.

Meanwhile, Crisil Ratings has said the recent developments in Bangladesh did not have a significant impact on India's trade and it does not foresee any near-term impact on the credit quality of India Inc. It said the effect will vary based on industry/sector-specific nuances and exposure. However, a prolonged disruption can affect the revenue profiles and working capital cycles of some export-oriented industries for which Bangladesh is either a demand Centre or a production hub. Also, the movement in the Bangladeshi Currency Taka, will have to be watched.

It said ‘Recent developments in Bangladesh haven't had a significant impact on India's trade and going forward, the effect will vary based on industry/sector-specific nuances and exposure. We do not foresee any near-term impact on the credit quality of India Inc either’. Companies into footwear, FMCG and soft luggage could also see some impact because of manufacturing facilities located in Bangladesh. These facilities faced operational challenges during the initial phase of the crisis.

However, it said most have since commenced operations, though a full ramp-up and the ability to maintain their supply chain will be critical. Engineering, procurement and construction companies engaged in power and other projects in Bangladesh could see execution delays this fiscal as a sizeable portion of their workforce has been recalled to India for almost a month now. It added with only a gradual ramp-up in workforce expected, revenue booking could be lower this fiscal compared with earlier expectations. It said while sectors such as cotton yarn, power, footwear, soft luggage, fast moving consumer goods (FMCG) may see a small but manageable negative impact, ship breaking, jute, readymade garments (RMG) should benefit. For most others, the impact will be insignificant.

According to Crisil Ratings, India's trade with Bangladesh is relatively low, accounting for 2.5 per cent of its total exports and 0.3 per cent of total imports last fiscal. Merchandise exports mainly comprise cotton and cotton yarn, petroleum products, electric energy, etc., while imports largely consist of vegetable fat oils, marine products and apparel. It added for cotton yarn players, Bangladesh accounts for 8-10 per cent of sales, so the revenue profile of major exporters could be affected. Their ability to compensate for sales in other geographies will be an important monitorable. Nobel Prize winner Muhammad Yunus was last month appointed as Bangladesh's Chief Advisor following the resignation of Sheikh Hasina who fled the country on August 5, amidst student-led mass protests.

The CNX Nifty is currently trading at 25435.10, up by 16.55 points or 0.07% after trading in a range of 25380.80 and 25440.25. There were 35 stocks advancing against 15 stocks declining on the index.

The top gainers on Nifty were Hero MotoCorp up by 2.83%, Bajaj Finance up by 1.72%, Shriram Finance up by 1.67%, Coal India up by 0.95% and Mahindra & Mahindra up by 0.87%. On the flip side, Tech Mahindra down by 3.10%, Infosys down by 2.60%, TCS down by 2.46%, Wipro down by 2.45% and LTIMindtree down by 2.07% were the top losers.

Asian markets are trading mostly in red; Taiwan Weighted lost 96.13 points or 0.44% to 21,753.95, Nikkei 225 slipped 34.55 points or 0.1% to 36,168.67, Straits Times fell 2.8 points or 0.08% to 3,590.62 and Shanghai Composite weakened 1.24 points or 0.05% to 2,702.85, while Jakarta Composite was up by 6.08 points or 0.08% to 7,837.86.
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