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Local equities continue to show sluggish trend
Oct-19-2018

Local equity benchmarks continued to show a sluggish trend in morning session, on heavy selling in Energy, IT and Auto stocks triggered by weak trends in global markets. A level of pressure was seen in blue-chip companies like Reliance Industries, Infosys and YES Bank. Nifty dipped below the 10,350 mark, while BSE barometer Sensex dropped 373.52 points. Sentiments remained pessimistic with a private report stating that consumer confidence in the Indian economy plummeted by about 7 points in the month of October due to a clutch of macroeconomic problems causing personal finance issues. India’s consumers have become more nervous about rising fuel prices and crumbling stock markets amid the festivities. Traders remained concerned with credit rating agency Care Ratings’ report that job creation by corporate India dropped to 3.8% in 2017-18 from 4.2% growth achieved in 2016-17, with jobs in smaller firms being hit the hardest. Trader failed to get some solace with Reserve Bank of India’s (RBI) report that India’s investment cycles in the last 60 years has revealed that the latest investment upswing will run till 2022-23 to the peak of 33% from the current rate of 31%.

On the global front, Asian markets were trading in red, as China posted its weakest economic growth since the global financial crisis, adding to market concerns about trade disputes, rising US interest rates and Italy’s free-spending budget. Back home, on the sectoral front, Steel Industries stocks were trading in red, as Union Minister Birender Singh stated that the government has no plans to scale down its target for steel production unlike other countries as consumption of the alloy in India is growing slower than expected.

The BSE Sensex is currently trading at 34406.06, down by 373.52 points or 1.07% after trading in a range of 34288.25 and 34563.29. There were 8 stocks advancing against 22 stocks declining, while 1 stock remained unchanged on the index.

The broader indices were trading in red; the BSE Mid cap index slipped 1.13%, while Small cap index was down by 1.41%.

The few gaining sectoral indices on the BSE were Utilities up by 0.52%, FMCG up by 0.16%, PSU up by 0.12% and Telecom was up by 0.05%, while Energy down by 3.42%, IT down by 2.71%, TECK down by 2.43%, Auto down by 1.28% and Industrials was down by 1.10% were the top losing indices on BSE.

The top gainers on the Sensex were Asian Paints up by 2.26%, NTPC up by 1.29%, Sun Pharma up by 1.07%, Hindustan Unilever up by 0.99% and ICICI Bank was up by 0.95%. On the flip side, Yes Bank down by 6.84%, Reliance Industries down by 5.00%, Infosys down by 3.31%, Hero MotoCorp down by 3.04% and Tata Motors - DVR was down by 2.45% were the top losers.

Meanwhile, amid continues fall in Indian currency, the State Bank of India in its latest research report stated that depreciation of rupee has neither helped in improving exports nor in slowing imports, leading to an incremental trade deficit of $4 billion in the first half of the current fiscal (H1FY19). The research report 'Ecowrap' based on an analysis of both export and import intensive industries during April-September 2018 concluded that rupee depreciation has not helped exports as is widely believed.

The report said ‘In effect, this means we are having a situation of declining exports and increasing imports. We estimate that the net incremental impact on trade deficit is $4 billion.’ It said thus, the common refrain that rupee depreciation will lead to export increase and import decline stands challenged.

Ecowrap further said month wise External Commercial Borrowing (ECB) data suggests, during March-August 2018, industries like petroleum, NBFCs, power, telecommunication and automobile are heavily borrowing through automatic route and aggregately contributing more than 71% of total borrowing. So, any depreciation in rupee will have significant impact on their bottom line if the corporates have not adequately naturalised their risk through hedging.

According to the commerce ministry data, India's exports entered the negative zone after five months, contracting 2.15% in September to $27.95 billion due to dip in shipments in key sectors, including engineering and gems and jewellery, even though trade deficit narrowed to a five-month low. Imports in September grew by 10.45% to $41.9 billion.

The CNX Nifty is currently trading at 10321.20, down by 131.85 points or 1.26% after trading in a range of 10304.60 and 10380.10. There were 13 stocks advancing against 37 stocks declining on the index.

The top gainers on Nifty were GAIL India up by 3.75%, Asian Paints up by 1.88%, HPCL up by 1.71%, Bharti Infratel up by 1.63% and JSW was Steel up by 1.51%. On the flip side, Indiabulls Housing Finance down by 12.61%, Yes Bank down by 6.96%, Reliance Industries down by 5.30%, HCL Tech down by 4.36% and Infosys was down by 3.45% were the top losers.

All Asian markets were trading in red, KOSPI fell 1.53 points or 0.07% to 2,146.78, Taiwan Weighted declined 67.85 points or 0.69% to 9,885.88, Nikkei 225 lost 238.72 points or 1.06% to 22,419.44, Jakarta Composite slipped 3.63 points or 0.06% to 5,841.61, Straits Times dropped 7.34 points or 0.24% to 3,062.33, Hang Seng decreased 73.41 points or 0.29% to 25,381.14 and Shanghai Composite was down by 0.43 points or 0.02% to 2,485.99.
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