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Post Session: Quick Review
Dec-18-2018

Buying activity which took place during late hour of trade mainly helped the markets to cut all of their losses and end Tuesday’s session slightly in green. This was the sixth consecutive day of rise for the domestic markets, recapturing their crucial 10,900 (Nifty) and 36,300 (Sensex) bastions. Markets made a pessimistic start on weak global cues amid lingering concerns about global economic growth. Traders remain concerned about S&P Global Ratings’ statement that the increasing involvement of the government in the affairs of the Reserve Bank of India (RBI) could undermine the hard-fought improvements in the banking system over the past few years. It termed the exit of Urjit Patel as credit negative. Some pessimism also spread among investors with Former RBI Governor Raghuram Rajan cautioning that transfer of excess reserve to the government may bring down rating of the central bank. Rating downgrade of the RBI from ‘AAA’ would make borrowing costlier for the central bank and will have implication for the entire economy.

However, local barometer gauges wiped off early losses to trade in the positive zone in late session, on the back of gains by the domestic currency. Sentiments turned optimistic with Prime Minister Narendra Modi’s statement that his government wants to ensure that 99 percent things attract sub-18 per cent GST slab, indicating further simplification of the Goods and Services Tax (GST) is on the anvil. Traders also took a note of Commerce and Industry Minister Suresh Prabhu’s statement that huge investment opportunities exist in India in various sectors including construction for Turkish companies.

On the global front, Asian markets ended in red on Tuesday, while European markets were trading mostly in red, following a sharp retreat on Wall Street fuelled by increasing worries about the global economy, while investors awaited the Federal Reserve policy meeting this week. Back home, the e-commerce sector related stocks were in focus with report that the National Association of Software and Services Companies (NASSCOM) Strategic Review 2018, in the Information Technology and Business Process Management (IT-BPM) sector in India, said that the Indian e-commerce market grew 17% to $38.5 billion in the financial year 2018-19.

The BSE Sensex ended at 36348.61, up by 78.54 points or 0.22% after trading in a range of 36046.52 and 36362.83. There were 23 stocks advancing against 8 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index was up by 0.20%, while Small cap index up by 0.44%. (Provisional)

The top gaining sectoral indices on the BSE were PSU up by 1.12%, Capital Goods up by 1.02%, Telecom up by 0.99%, Metal up by 0.98% and Power up by 0.94%, while TECK down by 1.19%, IT down by 1.15%, FMCG down by 0.28% and Consumer Durables down by 0.05% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Sun Pharma up by 2.72%, Power Grid up by 1.92%, Vedanta up by 1.77%, SBI up by 1.73% and Mahindra & Mahindra up by 1.71%. (Provisional)

On the flip side, Infosys down by 2.53%, Yes Bank down by 1.24%, Wipro down by 1.19%, ITC down by 0.80% and Hindustan Unilever down by 0.52% were the top losers. (Provisional)

Meanwhile, S&P Global Ratings in its latest report has termed the recent resignation of Urjit Patel as credit negative and said Indian government’s sustained and intense involvement in the affairs of the Reserve Bank of India (RBI) could undermine the hard-fought improvements in the banking system over the past few years as well as the long-term financial stability in the country. It added ‘We await any changes to banking system regulation at the next RBI board meeting in January 2019’.

The report said it does not anticipate any material change in the central bank’s level of independence, especially with regards to its adoption and implementation of prudent policy. It said the RBI has traditionally shown greater independence than many regional peers, and a robust institutional culture but sustained and intense external pressure from the Indian government risks eroding these settings over time, and could also undermine the long-term financial stability in the country.

S&P noted that the Central Bank’s actions in recent years have materially improved accountability and transparency in the banking system, since asset quality reviews were introduced by former governor Raghuram Rajan. However, this is off a low base and continues to face headwinds. It added that their assessment of India’s banking system continues to factor in its relatively weak governance and transparency.

Observing that the recognition of stressed assets significantly improved following the RBI’s circular on February 12, 2018, the report said, this simplified recognition and associated provisioning for stressed assets. It emphasised that more needs to be done to recapitalize public sector banks in general. It said ‘In our view, the RBI’s Prompt Corrective Action to rebuild capitalisation at distressed banks is appropriate given the fundamental issues these banks face’.

As per the report, resolution of stressed assets is likely to occur within the next 12-18 months, particularly given the new bankruptcy framework and courts. It, however, said restrictions on the RBI’s authority to reform governance of public sector banks as a weakness in its mandate. The central bank has demonstrated a willingness and ability to reform governance at private sector banks, which they see as a healthy check-and-balance that supports accountability and renewal of leadership.

The CNX Nifty ended at 10911.95, up by 23.60 points or 0.22% after trading in a range of 10819.10 and 10915.40. There were 34 stocks advancing against 16 stocks declining on the index. (Provisional)

The top gainers on Nifty were Sun Pharma up by 2.74%, Bajaj Finance up by 2.37%, JSW Steel up by 2.17%, Mahindra & Mahindra up by 2.06% and Power Grid up by 1.82%. (Provisional)

On the flip side, Zee Entertainment down by 8.32%, UPL down by 3.01%, Infosys down by 2.61%, Wipro down by 1.35% and Tech Mahindra down by 1.35% were the top losers. (Provisional)

European markets were trading mostly in red; UK’s FTSE 100 decreased 41.99 points or 0.62% to 6,731.25 and France’s CAC was down by 21.55 points or 0.45% to 4,778.32, while Germany’s DAX increased 24.17 points or 0.22% to 10,796.37.

Asian markets ended broadly in the red on Tuesday as global growth worries persisted and investors awaited the Federal Open Market Committee (FOMC) rate decision. The US Federal Reserve begins its two-day policy meeting later today and is expected to raise rates for a fourth time this year. However, the accompanying statement is likely to be dovish amid mounting risks to global growth. Chinese shares ended lower after Chinese President Xi Jinping offered no new specific measures for the implementation of reforms in a highly anticipated speech that marked the 40th anniversary of China's reform. Meanwhile, Japanese shares hit a nine-month low as caution set in ahead of the US Federal Reserve and the Bank of Japan's (BOJ) monetary policy decisions due on Wednesday and Thursday, respectively.

Asian Indices

Last Trade           

Change in Points

Change in %

Shanghai Composite

2,576.65
-21.32
-0.82

Hang Seng

25,814.25
-273.73
-1.05

Jakarta Composite

6,081.87
-7.44
-0.12

KLSE Composite

1,635.31

-6.31

-0.38

Nikkei 225

21,115.45

-391.43

-1.82

Straits Times

3,045.54
-68.71
-2.21

KOSPI Composite

2,062.11
-8.98
-0.43

Taiwan Weighted

9,718.82
-68.71
-0.70
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