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Volatility leads markets to end flat
Jan-16-2019

Volatility led the key Indian equity benchmarks to end the Wednesday’s trading session flat with minor gains.  The key indices made a positive start of day, as India's exports grew by a 0.34 percent to $27.93 billion in December, continuing growth momentum for the third straight month. The trade deficit narrowed to ten-month low of $13.08 billion in December 2018 as against $14.20 billion in the same month previous year. The overall trade deficit for April- December 2018-19 is estimated at $82.72 billion as compared to $69.63 billion during April- December 2017-18. Traders were optimistic with the Reserve Bank of India’s (RBI) statement that it will inject Rs 10,000 crore into the system through purchase of government securities on January 17 to increase liquidity. The purchase will be made through open market operations (OMOs). The RBI plans to inject liquidity under OMOs for Rs 50,000 crore in January 2019. The central bank has so far injected Rs 20,000 through OMOs in January. Meanwhile, the government has unveiled its much-awaited national air cargo policy, with an aim to make India among the top five air freight markets by 2025 and creating air transport shipment hubs at all major airports over the next six years.

Trade remained positive for the most part of the session, tracking firm Asian markets. The market participants were seen taking support with private report stating that benign headline inflation to provide a dovish tilt to monetary policy committee (MPC). Softer December CPI and WPI prints of 2.2 per cent and 3.8 per cent, respectively reaffirm its belief that the MPC will adopt a more dovish tone in the February meeting and change its stance to neutral from calibrated tightening. The street also got some relief after the Fertiliser Ministry sought an additional Rs 23,000 crore from the Finance counterpart, in order to meet the subsidy requirement for the Q4 (January-March) of 2018-19. The fertiliser subsidy arrear touched about Rs 23,283 crore till December 2018, and some of it would be cleared with available funds and the remaining on receipt of additional funds. However, last leg volatility pulled markets near neutral lines to end flat. Sentiments also got hit, with ICRA’s latest report indicating that a recent policy change favouring advanced degree holders for visas in US will lead to a hit on IT companies' profitability as the number of H1-B visas approved gets reduced.

On the global front, European markets were trading mixed, after a crushing defeat to U.K. Prime Minister Theresa May's EU withdrawal agreement raised hopes that politicians can avoid a no-deal Brexit. The PM faces a vote of no confidence today, which, if successful, could topple the government and spark a general election. The street took note of reports that Germany's gross domestic product rose a price-adjusted and chain-linked 1.5 percent from 2017, when it expanded 2.2 percent. Growth was the weakest since 2013, when the economy expanded 0.5 percent. Asian markets ended in green, even though Japan's core machinery orders slowed sharply in November in a sign corporate capital expenditure could lose momentum as bruising US-China trade war spills into the global economy.

Back Home, airline stocks ended mostly higher, aided by Ministry of Civil Aviation's vision document stating that India's air passenger traffic is expected to grow six-fold to 1.1 billion and the number of operational airports increases to around 200 in 2040, while stocks related to steel sector ended lower, despite reports that the government is considering raising import duty on iron ore, a key raw material used in steel making, with a view to protecting the domestic industry. The low import duty of 2.5% encourages steel players to go for import rather than utilising the local ore. Further, real estate sector stocks too remained in focus, amid report that a ministerial panel headed by Gujarat Deputy Chief Minister Nitin Patel will look into the possibility of rationalisation of GST rate in real estate sector besides formulating a composition scheme.

Finally, the BSE Sensex gained 2.96 points or 0.01% to 36,321.29, while the CNX Nifty was up by 3.50 points or 0.03% to 10,890.30.

The BSE Sensex touched a high and a low of 36,462.03 and 36,278.61, respectively and there were 13 stocks advancing against 18 stocks declining on the index.

The broader indices ended mixed; the BSE Mid cap index declined 0.02%, while Small cap index was up by 0.14%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 0.66%, IT up by 0.65%, Utilities up by 0.52%, Energy up by 0.45% and Healthcare up by 0.44%, while Telecom down by 0.82%, FMCG down by 0.74%, Metal down by 0.68%, Auto down by 0.38% and Consumer Disc down by 0.33% were the top losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 2.66%, Indusind Bank up by 2.02%, Infosys up by 1.38%, ICICI Bank up by 0.68% and ONGC up by 0.62%. On the flip side, Bharti Airtel down by 1.38%, Vedanta down by 1.33%, Asian Paints down by 1.21%, HCL Tech. down by 1.02% and Bajaj Finance down by 1.01% were the top losers.

Meanwhile, with an aim to protect the domestic industry, the government is mulling hike in import duty on iron ore, as lower import duty encourages steel players to go for import rather than utilising the local ore. Iron ore is a key raw material used in the steel making.

The matter is under discussion among different ministries including steel. Besides, the government is also considering to cut export duty on iron ore and the commerce and industry ministry has sought views of steel and mines ministry on the issue. Recently, the Karnataka government informed regarding issues of the sector in the state and sought a hike in the import duty on the mineral.

Meanwhile, iron ore exports in 2017-18 dipped to $ 1.47 billion from $ 1.53 billion in the previous fiscal. Karnataka is the largest iron ore producing state in the country. The other major producers include Orissa, Chhattisgarh, Goa and Jharkhand.

The CNX Nifty traded in a range of 10,928.15 and 10,876.90. There were 22 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were Indiabulls Housing Finance up by 2.66%, YES Bank up by 2.36%, Wipro up by 2.18%, Indusind Bank up by 1.99%, and BPCL up by 1.58%. On the flip side, JSW Steel down by 1.97%, Bharti Infratel down by 1.57%, Bajaj Finance down by 1.50%, UPL down by 1.43% and Asian Paints down by 1.28% were the top losers.

European markets were trading mixed; UK’s FTSE 100 decreased 37.26 points or 0.54% to 6,857.76 and Germany’s DAX fell 0.47 points or 0% to 10,891.32, while France’s CAC was up by 12.60 points or 0.26% to 4,798.77.

Asian markets ended mostly higher on Wednesday even as the UK House of Commons voted down Prime Minister Theresa May's Brexit deal by a crushing margin, stoking fresh uncertainty. Investors now focus on a no-confidence vote on May's government by Britain's parliament later in the day. Chinese shares ended little changed amid the political turmoil surrounding Brexit. Japanese shares ended lower, as the dollar remained defensive against the yen amid a partial government shutdown in the US and the ‘very uncertain and unstable’ political situation in Britain over its divorce from Europe. Weak Japanese data also pulled the shares lower. Reports showed Japan's core machine orders, considered a leading indicator of capital expenditure, held largely unchanged month-on-month in November, well below forecasts for an increase of 3.0 percent and down sharply from 7.6 percent in October.

Asian Indices

Last Trade           

Change in Points

Change in %

Shanghai Composite

2,570.42
0.08

--

Hang Seng

26,902.10
71.81
0.27

Jakarta Composite

6,413.36
4.58
0.07

KLSE Composite

1,673.08
-6.34

-0.38

Nikkei 225

20,442.75
-112.54
-0.55

Straits Times

3,229.11
16.81
0.52

KOSPI Composite

2,106.10
8.92
0.43

Taiwan Weighted

9,763.81
-42.23
-0.43
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