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Local bourses suffer sharp losses on Monday
Oct-26-2020

Indian equity benchmarks suffered sharp losses of over a percent on Monday, tracking heavy losses in index majors Bajaj Auto, Mahindra & Mahindra and Reliance Industries amid negative cues from global markets. Markets made slightly negative start as traders remained cautious with RBI Governor Shaktikanta Das’ statement that the risk of a second wave of COVID-19 could put sand in the wheels of the nascent recovery. He also said the decision to cut benchmark repo rate would depend upon the evolving situation with regard to inflation which is currently above the tolerance level of the central bank. Key gauges extended fall in the afternoon session, as anxiety remained among traders with report that as many as 441 infrastructure projects, each worth Rs 150 crore or more, have been hit by cost overruns of over Rs 4.35 lakh crore owing to delays and other reasons. 

Market participants also took note of report that industry body PHDCCI expects India’s GDP to contract by 7.9 percent in the current financial year and grow by 7.7 percent in 2021-22, assessing that the worst is over and the economy is on the verge of a slow recovery. The chamber, however, stated that unemployment remains a key challenge to be addressed by the government. A sharp depreciation in the rupee against the US dollar also weighed on investor sentiment. Indian rupee settled at 73.84 against the US dollar, registering a fall of 23 paise over its previous close. Meanwhile, the Ministry of Finance has issued operational guidelines for implementation of the interest waiver scheme ahead of the hearing in the matter in the apex court on November 2. 

On the global front, Asian markets ended mostly in red,  as a recent global spike in coronavirus infections coupled with a stalemate over U.S. fiscal stimulus dashed hopes for an earlier-than-expected economic recovery. Traders are becoming increasingly pessimistic that U.S. lawmakers will pass a new stimulus package before next week's election. European markets were trading lower, as survey data from ifo Institute showed German business sentiment weakened in October. The business climate index fell to 92.7 in October from revised 93.2 in September. The reading was below economists' forecast of 93.0. Assessment of current situation as well as expectations deteriorated in the month. Back home, on the sectoral front, Agriculture sector stocks were in focus as Prime Minister Narendra Modi said his government is taking initiatives to strengthen the agriculture sector in the country so that farmers do not have to face any trouble. Besides, Airline stocks were buzzing as the Directorate General of Civil Aviation (DGCA) has approved 12,983 weekly domestic flights of airlines for the winter schedule that begins on October 25, 2020 and ends on March 27 next year.

Finally, the BSE Sensex fell 540.00 points or 1.33% to 40,145.50, while the CNX Nifty was down by 162.60 points or 1.36% to 11,767.75.

The BSE Sensex touched high and low of 40,724.40 and 39,948.29, respectively and there 8 stocks advancing against 22 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index lost 1.77%, while Small cap index was down by 0.88%.

The lone gaining sectoral index on the BSE was FMCG up by 0.11%, while Energy down by 3.51%, Metal down by 3.37%, Auto down by 3.28%, Consumer Discretionary down by 2.27% and Basic Materials down by 1.99% were the top losing indices on BSE.

The top gainers on the Sensex were Nestle up by 2.48%, Kotak Mahindra Bank up by 2.36%, Indusind Bank up by 1.45%, Power Grid up by 1.23% and Hindustan Unilever up by 1.12%. On the flip side, Bajaj Auto down by 6.10%, Mahindra & Mahindra down by 4.53%, Reliance Industries down by 3.97%, Tata Steel down by 3.60% and Tech Mahindra down by 3.38% were the top losers.

Meanwhile, Reserve Bank of India (RBI) Governor Shaktikanta Das has said that there is room for rate cut but monetary policy action would depend upon the evolving situation with regard to inflation which is currently above the tolerance level of the central bank. He said ‘I recognise that there exists space for future rate cuts if the inflation evolves in line with our expectations. This space needs to be used judiciously to support recovery in growth.’

Das has stated that the reconstituted Monetary Policy Committee (MPC), which met from October 7 to 9, had decided to keep the benchmark lending rates unchanged to revive growth on a durable basis and mitigate the impact of coronavirus disease (covid-19) pandemic on the economy, while ensuring that inflation remains within the target going forward. He also said after the sharpest contraction in economic activity in the first quarter of 2020-21, a number of high frequency indicators of economic activity for the second quarter suggest a sequential improvement. However, he said that there are downside uncertainties that could put sand in the wheels of this nascent recovery. He added that primary among them is the risk of a second wave of covid-19 pandemic. 

RBI Governor further said private investment activity is likely to be subdued, even as domestic financial conditions have eased significantly. He also said external demand is also expected to remain anaemic with sharp contraction in global economic activity and trade. As per RBI, the full year gross domestic product (GDP) is expected to contract by 9.5 per cent with a strong rebound next year. On the outlook for inflation, he said food inflation should moderate going forward on a combination of good kharif harvest and a favourable rabi season.

The CNX Nifty traded in a range of 11,942.85 and 11,711.70 and there were 11 stocks advancing against 39 stocks declining on the index.

The top gainers on Nifty were HDFC Life Insurance up by 3.16%, Nestle up by 2.58%, Kotak Mahindra Bank up by 2.01%, Indusind Bank up by 1.44% and SBI Life up by 1.34%. On the flip side, Hero MotoCorp down by 6.69%, Bajaj Auto down by 6.12%, Hindalco down by 5.35%, Mahindra & Mahindra down by 4.69% and JSW Steel down by 4.39% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 14.78 points or 0.25% to 5,845.50, France’s CAC decreased 29.32 points or 0.6% to 4,880.32 and Germany’s DAX decreased 276.56 points or 2.19% to 12,369.19.

Asian markets ended mostly lower on Monday as investors dashed hopes for a new stimulus package before next week's presidential election. Market sentiments weakened further by fears of surging corona virus pandemic cases worldwide, while record numbers of new infections in Europe has heightened the possibility of economic lockdowns. Japanese shares closed almost flat ahead of a slew of earnings reports, while the Bank of Japan policy meeting due this week. Chinese shares ended down after the country’s largest liquor giant posted slower than expected growth in quarterly profit and investors also awaited the outcome of a key policy meeting of ruling Communist Party this week, where China’s top leaders will chart the country's economic course for 2021-2025. Meanwhile, markets in Hong Kong were closed for Chung Yeung Festival holiday.

Asian Indices

Last Trade           

Change in Points

Change in %

Shanghai Composite

3,251.12
-26.88
-0.82

Hang Seng

--
--
--

Jakarta Composite

5,144.05
31.86
0.62

KLSE Composite

1,494.61

-0.03

--

Nikkei 225

23,494.34
-22.25
-0.09

Straits Times

2,523.31
-14.08
-0.55

KOSPI Composite

2,343.91
-16.90
-0.72

Taiwan Weighted

12,909.03
10.21
0.08
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