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Benchmarks trade near neutral lines with negative bias in early deals
Feb-20-2020

Indian equity benchmarks started last session of the week on a lackluster note amid rise in crude oil prices. Markets are hovering near neutral lines with negative bias in early deals on Thursday as the overhanging disruptions due to the coronavirus epidemic in China weighted down on the sentiments. Some cautiousness came in with the Reserve Bank of India (RBI) Governor Shaktikanta Das’ statement that the coronavirus outbreak will have a limited impact on India but the global GDP and trade will definitely get affected due to the large size of the Chinese economy. He added that only a couple of sectors in India are likely to see some disruptions but alternatives are being explored to overcome those issues. Adding some pessimism among market participants Fitch Ratings’ report stated that with deceleration in growth and tight liquidity conditions, the country's financial institution sector may continue to face challenging operating environment.

On the global front, Asian markets were trading mixed despite easing fears about the coronavirus outbreak and optimism of further stimulus measures by China to support its economy. Besides, China cut the one-year loan prime rate or LPR by 10 basis points in order to lower financing costs for businesses. Meanwhile, China's National Health Commission reported only 394 new confirmed cases related to the coronavirus outbreak as of February 19, sharply lower than the 1,749 new cases reported in the previous day.

Back home, auto stocks were in focus with ICRA’s report that India’s automobile industry is likely to be negatively impacted and supply chain disrupted if the Coronavirus (COVID-19) outbreak in China and South-East Asia persisted longer. In stock specific development, Sterlite Technologies jumped on adding new orders of Rs 1,500 crore. These orders have ranged from continued business development in its core areas of optical connectivity solutions and network services to emerging areas such as software virtualization.

The BSE Sensex is currently trading at 41320.76, down by 2.24 points or 0.01% after trading in a range of 41220.81 and 41334.96. There were 17 stocks advancing against 13 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.51%, while Small cap index was up by 0.43%.

The top gaining sectoral indices on the BSE were Telecom up by 0.86%, Healthcare up by 0.67%, Consumer Durables up by 0.62%, TECK up by 0.48% and IT was up by 0.37%, while Metal down by 0.36%, Energy down by 0.16%, Realty down by 0.05% and Capital Goods was down by 0.04% were the few losing indices on BSE.

The top gainers on the Sensex were Indusind Bank up by 3.57%, ONGC up by 1.38%, Sun Pharma Industries up by 0.92%, TCS up by 0.80% and SBI up by 0.77%. On the flip side, HDFC down by 0.93%, Kotak Mahindra Bank down by 0.92%, Nestle down by 0.63%, Asian Paints down by 0.49% and Hindustan Unilever down by 0.45% were the top losers.

Meanwhile, easing concerns over coronavirus outbreak, the Reserve Bank of India (RBI) Governor Shaktikanta Das has said that it will have a limited impact on India but the global Gross Domestic Product (GDP) and trade will definitely get affected due to the large size of the Chinese economy. He added that only a couple of sectors in India are likely to see some disruptions but alternatives are being explored to overcome those issues. The deadly virus has brought a large part of the world's second-largest economy China to a standstill and its impact has been felt across industries.

The Governor said the country’s pharmaceutical and electronic manufacturing sectors are dependent on China for inputs and they may be impacted. He also said it is definitely an issue which needs to be closely monitored by every policymaker whether in India or any other country. Every policymaker, every monetary authority needs to keep a very close watch. So coronavirus issue needs to be closely watched. He said a similar problem, perhaps on a lower scale, occurred last time during the outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003, and added that the Chinese economy had slowed down by about 1% during that time.

Das said for India, China is an important trading partner and policymakers both in the government and the monetary authority are very watchful of the developments that are taking place. He further said if the Chinese authorities are able to contain the problem, the impact on the global economy and on India will be minimised. On the impact on India, he said the pharmaceutical sector is sourcing raw materials from China. Most of the large pharma companies, according to information that we have, always keep stock for three-four months.

Therefore, he said they should be able to manage and also those provinces from where these pharma intermediates are sourced have not been impacted by the virus outbreak. Therefore, he said there is an expectation that the supply of pharma raw materials will be maintained. He noted that India exports iron ore to China and it could be impacted. He said but in economics, something negative in one place always works positive elsewhere. So if your iron ore exports are impacted, then perhaps the raw material supply to local domestic steel manufacturers will be at reduced costs. So their cost of production may go down.

The CNX Nifty is currently trading at 12119.90, down by 6.00 points or 0.05% after trading in a range of 12092.80 and 12131.95. There were 24 stocks advancing against 26 stocks declining on the index.

The top gainers on Nifty were Indusind Bank up by 3.40%, Dr. Reddy’s Lab up by 2.48%, Zee Entertainment up by 1.59%, Bharti Infratel up by 1.18% and Yes Bank up by 0.99%. On the flip side, Cipla down by 1.05%, Kotak Mahindra Bank down by 0.96%, HDFC down by 0.95%, Hindalco down by 0.80% and Nestle down by 0.71% were the top losers.

Asian markets were trading mixed; Hang Seng decreased 224.21 points or 0.81% to 27,431.60, Taiwan Weighted dropped 37.95 points or 0.32% to 11,720.89, KOSPI fell 18.75 points or 0.85% to 2,191.59, Straits Times trembled 16.31 points or 0.51% to 3,197.40. On the flip side, Jakarta Composite soared 9.18 points or 0.15% to 5,937.97, Shanghai Composite gained 13.91 points or 0.47% to 2,989.31 and Nikkei 225 was up by 84.12 points or 0.36% to 23,484.82.

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