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EQUITY
Markets witness bloodbath for second straight session
Oct-19-2018

Indian equity benchmarks logged deep losses on the last trading day of the week, with both Sensex and Nifty ending over 1% cut each. The start of the day was negative, amid State Bank of India’s latest research report stating 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). Domestic sentiments also got hit by credit rating agency Care Ratings’ latest 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. Sentiments remained pessimistic throughout the day 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. Some concerns also came with a private report stating that in 2018, in USD terms wealth in India grew a modest 2.6% to around $6 trillion and wealth per adult stayed flat at $7,020.

Traders overlooked a private study report stating that flexible working could contribute $376 billion annually to the Indian economy by 2030 as shared office space helps corporates to save cost and boost employee productivity. The street also failed to take any sense of relief 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%. The markets participants remained pessimistic even though the Finance Ministry allayed fears among businesses about reconciliation of returns and said the deadline to avail input tax credit (ITC) for last financial year (FY18) will remain October 20. Meanwhile, the RBI announced more measures to increase liquidity flows to the NBFCs. The RBI permitted banks to use government securities equal to their incremental outstanding credit to NBFCs, over and above their outstanding credit to them as on October 19, to be used to meet liquidity coverage ratio requirements.

On the global front, European markets were trading mostly in red, as Italian government bond yields hit four-year highs on concerns over the country's controversial budget plans. Adding some concerns, UK retail sales dropped more-than-expected in September reflecting the biggest decline in food store sales in almost two years. As per figures from the Office for National Statistics, retail sales including auto fuel fell 0.8% month-on-month in September, due to a large decline of 1.5% in food stores, which was the largest food store sales fall since October 2015. Asian markets ended mixed, after Chinese growth figures missed expectations, suggesting that there was downward pressure on the world's second-largest economy due to the ongoing Sino-US trade war. China's GDP climbed an annual 6.5% in the third quarter of 2018- shy of estimates for 6.6% and down from 6.7% in the previous three months.

Back home, on the sectoral front, IT stocks ended lower, impacted by Moody’s Investors Service’s report indicating that share buybacks by information technology (IT) firms in the country impede their ability to invest for their future business needs, while logistics companies stocks also ended in red terrain, even though CARE Ratings’ latest report showed that the country's logistics industry is projected to be worth $215 billion by 2020-21, recording a 10% compounded annual growth rate (CAGR) over its approximate size of $160 billion in 2016-17. However, majority of gems and jewellery stocks ended higher amid reports that the government is expected to come out with a comprehensive gold policy soon to promote the metal industry and the gems and jewellery sector, which is a major contributor to the export basket. Further, metal stocks remained in focused amid reports that a lower-than-estimated rainfall in the July-September quarter has augured well for the entire domestic steel industry, which kept its capacity utilisation much higher than usual, in turn indicating strong volume growth for the quarter.

Finally, the BSE Sensex plunged 463.95 points or 1.33% to 34,315.63, while the CNX Nifty was down by 149.50 points or 1.43% to 10,303.55.

The BSE Sensex touched a high and a low of 34,563.29 and 34,140.32, respectively and there were 7 stocks advancing against 24 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index slipped 1.10%, while Small cap index was down by 1.32%.

The only gaining sectoral indices on the BSE were FMCG up by 0.41% and Metal was up by 0.10%, while Energy down by 2.75%, IT down by 2.60%, TECK down by 2.41%, Auto down by 1.42%, Consumer Discretionary Goods & Services down by 1.25% were the top losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 2.52%, Kotak Mahindra Bank up by 1.74%, Vedanta up by 1.51%, Adani Ports & SEZ up by 1.18% and Hindustan Unilever up by 1.16%. On the flip side, Yes Bank down by 6.06%, HDFC down by 4.32%, Reliance Industries down by 4.11%, Tata Motors - DVR down by 4.00% and Hero MotoCorp down by 3.70% were the top losers.

Meanwhile, in order to promote the metal industry and the gems and jewellery sector, which is a major contributor to India's export basket, the government may soon roll out a comprehensive gold policy. The policy also aims at creating jobs in the gold sector. The policy likely to focus on promoting domestic gold industry and exports of gems and jewellery, which contributes about 15 percent to total merchandise outbound shipments.

Finance Minister Arun jaitley, in February, had announced formulation of a comprehensive gold policy to develop gold as an asset class. Besides, in order to create a tax compliant system within the gold sector, the government think tank Niti Aayog has recommended the government to reduce the basic customs duty on gold from the existing level of 10% to as low as possible. It also suggested that slash the Goods and Services Tax rate on the precious metal from the current 3%. It had recommended the government to review and revamp of the gold monetisation scheme, sovereign gold bond scheme besides setting up of a gold board and bullion exchanges across the country to have greater financialisation of the yellow metal.

To promote exports, the Gems and Jewellery Export Promotion Council (GJEPC) has asked for support in terms of increasing incentives under the Merchandise Exports from India Scheme (MEIS) to boost shipments. Under Merchandise Exports from India Scheme (MEIS), the government provides duty benefits depending upon the product and country. Rewards under the scheme are payable as percentage of realised free-on-board value and MEIS duty credit scrip can be transferred or used for payment of a number of duties including the basic customs duty.

The CNX Nifty traded in a range of 10,380.10 and 10,249.60. There were 18 stocks in green as against 30 stocks in red, while 2 stocks remain unchanged on the index.

The top gainers on Nifty were HPCL up by 4.00%, Sun Pharma up by 2.59%, Vedanta up by 2.28%, Kotak Mahindra Bank up by 1.87% and ITC up by 1.59%. On the flip side, Indiabulls Housing Finance down by 16.43%, HCL Tech down by 6.57%, Yes Bank down by 5.41%, Reliance Industries down by 4.43% and HDFC down by 4.19% were the top losers.

European markets were trading mostly in red; France’s CAC shed 34.23 points or 0.67% to 5,082.56 and Germany’s DAX fell 20.17 points or 0.17% to 11,569.04, while UK’s FTSE 100 was up by 16.86 points or 0.24% to 7,043.85.

Asian markets ended mixed on Friday as weak Chinese data added to investor concerns over Italy's controversial budget, rising US interest rates and US-Saudi tensions. The euro hovered near a one-week low against the dollar after the European Commission said Italy's 2019 budget draft is in serious breach of EU budget rules. US President Donald Trump said on Thursday he presumes journalist Jamal Khashoggi had likely been killed and that the US response to Saudi Arabia will likely be ‘very severe’. Chinese shares closed sharply higher after central bank chief downplayed market fluctuations and the securities regulator said it would encourage funds to help resolve liquidity difficulties at listed companies. Data showed earlier in the day that China's GDP climbed an annual 6.5 percent in the third quarter of 2018- shy of estimates for 6.6 percent and down from 6.7 percent in the previous three months. Industrial production climbed 5.8 percent year-on-year in September, shy of forecasts for 6.0 percent and down from 6.1 percent in August. However, retail sales climbed an annual 9.2 percent and fixed asset investment gained 5.4 percent to beat forecasts. Meanwhile, Japanese shares ended lower after tracking broader overnight losses on Wall Street and Europe.

Asian Indices

Last Trade           

Change in Points

Change in %

Shanghai Composite

2,550.47

64.05

2.51

Hang Seng

25,561.40

106.85

0.42

Jakarta Composite

5,837.29

-7.95

-0.14

KLSE Composite

1,732.14

-5.87

-0.34

Nikkei 225

22,532.08

-126.08

-0.56

Straits Times

3,062.51

-7.16

-0.23

KOSPI Composite

2,156.26

7.95

0.37

Taiwan Weighted

9,919.26

-34.47

-0.35


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