HOME > MARKETS > MARKET COMMENTARY
  MARKET COMMENTARY
EQUITY
Last hour selling drags indices lower
Feb-19-2019

Last hour sell-off dragged Indian equity indices lower on Tuesday, with Sensex and Nifty closing below their crucial psychological levels of 35,500 and 10,650, respectively. After a positive start, the markets gained traction to trade firm for the most part of the session, as the Reserve Bank of India (RBI) said it would inject Rs 12,500 crore into the system through purchase of government securities on February 21 to increase liquidity. The purchase will be made through open market operations (OMOs). Trading sentiments got boost, with Union Minister of Commerce & Industry and Civil Aviation, Suresh Prabhu’s statement that exports have been growing for the last three years. He said the Ministry of Commerce and industry has made a plan to improve the ease of doing business at district level.  He also added that if GDP of districts grow by 3% it will lead to overall growth of national GDP. Adding enthusiasm among traders, the President of India, Ram Nath Kovind said that in trade and technology, agriculture and Antarctic science, cyberspace and satellites, India’s transformative growth and Argentine capabilities are creating new bilateral opportunities.

However, in the last leg of the trade, the key indices erased all of their gains to settle in negative terrain, tracking weak European markets. The markets participants got cautious, with the S&P Global Ratings’ latest report stating that Indian corporates are likely to see slowdown in revenue growth over the next 12-24 months. In a report, S&P said that India's central government elections this year may pose additional risks for Indian corporates. A change of administration may trigger expansionary government spending that pushes up borrowing costs or raises inflation. The street were seen taking a note of the rating agency ICRA’s latest report that there is need to strengthen the corporate insolvency resolution process to ensure that the resolution plans approved by the National Company Law Tribunal (NCLT) are firmly implemented so that the sanctity of the process is maintained.

On the global front, European markets were trading in red, UK households' assessment of their financial well-being fell to the lowest level in eleven months in February. The survey data from the IHS Markit showed that the IHS Markit Household Finance Index, or HFI, fell to 43.4 from 44.7 in January, marking the lowest reading since March 2018. Job security perceptions weakened for the fourth straight month to lowest since January 2018, hurting the year-ahead financial health expectations. February survey showed the highest degree of pessimism regarding job security since January 2018. Asian markets ended mixed, amid renewed geopolitical tensions, with China accusing the US of fueling cybersecurity fears. Investors also awaited developments on the US-China trade front. The White House said that trade talks between the two economic powerhouses will continue in Washington on Tuesday, with higher level negotiations starting later in the week.

Back home, textile stocks ended higher, after Union Minister of Textiles, Smriti Zubin Irani, launched four projectsin North East for the development of silk sector. The Minister inaugurated Muga silk seed production centre in Tura, Meghalaya, silk printing and processing unit in Agartala, Tripura, Eri spun silk mill in Sangaipat, Imphal and development of sericulture in Mamit, Mizoram. Stocks related to realty sector also gained, amid reports that the Goods and Services Tax (GST) Council headed by Finance Minister Arun Jaitley may lower rates on under-construction properties in February 20 meet. Further, telecom sector stocks remained in focus, with a report stating that industry body COAI has written to the Telecom Department saying financial support and subsidies should be provided to facilitate major 5G trials in India, and that permissions and fee on network equipment purchases need to be waived for the entire trial period.

Finally, the BSE Sensex fell 145.83 points or 0.41% to 35,352.61, while the CNX Nifty was down by 36.60 points or 0.34% to 10,604.35.

The BSE Sensex touched a high and a low of 35,776.04 and 35,287.16, respectively and there were 14 stocks advancing against 17 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.51%, while Small cap index was up by 0.33%.

The top gaining sectoral indices on the BSE were Realty up by 1.66%, Metal up by 1.44%, Basic Materials up by 1.01%, Telecom up by 0.91% and Capital Goods up by 0.69%, while IT down by 2.09%, TECK down by 1.67%, Power down by 0.57%, Utilities down by 0.51% and Healthcare down by 0.14% were the top losing indices on BSE.

The top gainers on the Sensex were Vedanta up by 3.38%, ICICI Bank up by 1.42%, ONGC up by 1.39%, Mahindra & Mahindra up by 1.37% and Larsen & Toubro up by 1.25%. On the flip side, TCS down by 3.39%, NTPC down by 2.34%, Indusind Bank down by 2.30%, Infosys down by 2.02% and Hero MotoCorp down by 1.50% were the top losers.

Meanwhile, in order to achieve economies of scale in the banking sector, Finance Minister Arun Jaitley has said India needs fewer and mega banks. The finance Minister stated ‘India needs fewer and mega banks which are strong because in every sense, from borrowing rates to optimum utilisation, the economies of scale as far as banking sector is concerned are of great help’.

After the amalgamation of five associates and Bharatiya Mahila Bank with SBI in 2017, the government earlier this year approved the merger of Dena Bank and Vijaya Bank with Bank of Baroda. The merger of the three banks to create the country's third-largest lender after SBI and ICICI Bank. Jaitley said ‘with the experience in the past really has been of SBI merger, now it is second one which is taking place’.

The amalgamation, the first-ever three-way consolidation of banks in India, will be effective from April 1, 2019. After the merger, the number of public sector banks will come down to 18. Besides, in September 2018, the Alternative Mechanism, headed by Jaitley, gave in-principle approval for the merger of the three banks to create a global-sized lender.

The CNX Nifty traded in a range of 10,722.85 and 10,585.65. There were 25 stocks advancing against 24 stocks declining, while 1 stock remain unchanged on the index.

The top gainers on Nifty were Vedanta up by 3.34%, Grasim Industries up by 3.02%, BPCL up by 2.75%, Zee Entertainment up by 2.06% and JSW Steel up by 1.78%. On the flip side, Wipro down by 3.26%, TCS down by 3.18%, Indusind Bank down by 2.79%, Adani Ports down by 2.49% and NTPC down by 2.44% were the top losers.

European markets were trading in red; UK’s FTSE 100 lost 39.12 points or 0.54% to 7,180.35, France’s CAC fell 19.70 points or 0.38% to 5,148.84 and Germany’s DAX was down by 16.77 points or 0.15% to 11,282.43.

Asian markets ended mixed on Tuesday amid renewed geopolitical and trade tensions after China accused the United States of fueling cybersecurity fears. The Chinese government on Monday accused the US is attempting of trying to curtail its technology development by putting pressure on allies to shun networks supplied by Huawei Technologies. Chinese shares ended on a flat note as investors awaited the outcome of a new round of talks between the United States and China taking place in Washington. Besides, Japanese shares hit fresh two-month highs, with defensive stocks rising as trade talks between the US and China continue in Washington.

Asian Indices

Last Trade           

Change in Points

Change in %

Shanghai Composite

2,755.65
1.29
0.05

Hang Seng

28,228.13
-118.88
-0.42

Jakarta Composite

6,494.67
-3.15
-0.05

KLSE Composite

1,706.56

13.82

0.82

Nikkei 225

21,302.65
20.80
0.10

Straits Times

3,259.80
-6.17
-0.19

KOSPI Composite

2,205.63
-5.26
-0.24

Taiwan Weighted

10,152.26
6.98
0.07


  RELATED NEWS >>