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Bears tighten grip on Dalal Street; Sensex falls over 300 points
Feb-18-2019

Bears tightened their grip on Dalal Street on Monday, as Sensex and Nifty ended with the losses of over 300 and 80 points, respectively. The markets made a slightly higher opening, as India's exports grew by 3.74 percent to $26.36 billion in January, as exports of gems and jewellery, chemicals and pharmaceuticals increased. The trade deficit narrowed to $14.73 billion in January 2019 as against $15.67 billion in the same month previous year. But, key indices soon slipped in red terrain, after the Federation of Indian Chambers of Commerce (Ficci) and the Indian Banks’ Association (IBA) survey said that liquidity is expected to remain constrained till the end of March owing to factors such as higher demand for money at the end of 2018-19, the upcoming Lok Sabha elections and advance tax outflow. The survey said higher fiscal deficit too will be a factor in constraining liquidity. The survey covered areas like current liquidity and suggestions to improve it and enhance credit growth.

Trading sentiments remained pessimistic till the end of the session, amid the Reserve Bank of India’s (RBI) data report showing that the country's foreign exchange reserves declined by $2.119 billion to $398.122 billion in the week to February 8, due to fall in foreign currency assets. In the previous week, the reserves had surged by $2.063 billion to $ 400.24 billion. Adding more concerns, Former Reserve Bank of India Governor Y V Reddy termed the recent trend of rolling out doles for the farm sector, including the Union Budget's basic income scheme, as a 'disturbing trend' which will impact fiscal stability, growth and also Centre-state relations. Weak cues from European markets also dampened the investors’ sentiments in noon deals. Further, the market participants took a note of Finance Minister Arun Jaitley’s statement that India needs fewer banks and mega banks which are strong to help the needs of common man. He said economies of scale are of great help in the banking sector.

On the global front, European markets were trading in red, after Eurozone's merchandise trade surplus for December came in below the street expectations, as exports decreased, while imports were unchanged. According to figures from the Statistical Office Eurostat, the seasonally adjusted trade surplus fell to EUR 15.6 billion from EUR 15.8 billion in November. The street had expected a surplus of EUR 16.3 billion. Further, Turkey's retail sales fell for a fourth straight month and at the fastest pace in as many months. The data from the Turkish Statistical Institute showed that the retail sales volume dropped a calendar adjusted 9.2 percent year-on-year in December, following a 6.0 percent fall in November. Asian markets ended in green, as investors pin hopes for progress in the Sino-US trade talks and await more policy stimulus from major central banks.

Back home, shipping industry stocks ended mostly lower, even after the Ministry of Shipping revised its guidelines for chartering of ships by providing Right of First Refusal (RoFR) to ships built in India. Henceforth, whenever a tendering process is undertaken to charter a vessel, a bidder offering a ship built in India will be given the first priority to match the L1 quote. It is expected that this priority given to ships built in India will raise the demand for such vessels, providing them with additional market access and business support. Stocks related to the tourism industry remained in focus, amid reports that the government made series of amendments in e-visa regime, liberalizing it further and making it more tourist friendly. The Ministry of Tourism has been working very closely with Ministry of Home Affairs for easing of the Visa Regime in the country over a period of time.

Finally, the BSE Sensex fell 310.51 points or 0.87% to 35,498.44, while the CNX Nifty was down by 83.45 points or 0.78% to 10,640.95.

The BSE Sensex touched a high and a low of 35,912.44 and 35,470.76, respectively and there were 08 stocks advancing against 23 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index lost 1.04%, while Small cap index was down by 1.01%.

The only gaining sectoral indices on the BSE were Telecom up by 0.88% and Realty up by 0.62%, while Consumer Durables down by 1.39%, Energy down by 1.38%, FMCG down by 1.36%, IT down by 1.14% and Basic Materials down by 0.97% were the losing indices on BSE.

The top gainers on the Sensex were ONGC up by 1.48%, Tata Motors up by 1.18%, Axis Bank up by 0.88%, Tata Motors - DVR up by 0.60% and NTPC up by 0.48%. On the flip side, TCS down by 2.91%, Yes Bank down by 2.54%, ITC down by 1.95%, Sun Pharma down by 1.94% and Reliance Industries down by 1.91% were the top losers.

Meanwhile, the rating agency ICRA in its latest report has said that the government’s move to hike the minimum selling price (MSP) of sugar will augur well for the sugar mills and is expected to improve their operating profit margins by around 6 percent from the current levels. That apart, it said the move will help millers clear farmers' dues. To support the oversupply hit sugar industry, the government has increased the MSP of sugar to Rs 31,000/MT from Rs 29,000/MT (announced in June 2018).

According to the report, the sugar prices were relatively subdued at around Rs 29,000/MT in the recent months, resulting in high cane arrears of around Rs 20,000 crore as on January 2019 end. It also noted that while, the MSP hike is a credit positive for the sugar mills, and also benefit cane farmers through better settlement of dues, the government's ability to enforce the price regulations will be critical. It also pointed out that as per the latest estimates on domestic sugar stocks, the country is likely to produce 30.7 million tonnes (MT) of sugar in 2018-19 as against the earlier estimates of 31.5 MT.

The rating agency further said that this is after considering the diversion of B heavy molasses and sugarcane juice from sugar into ethanol. It stated that notwithstanding this and the estimates of growth in domestic sugar consumption by 2-3 percent to around 25.8 MT in sugar year 2019, the production would still be higher by at least 4.5 MT than the estimated consumption.

The CNX Nifty traded in a range of 10,759.90 and 10,628.40. There were 13 stocks advancing against 37 stocks declining on the index.

The top gainers on Nifty were Bharti Infratel up by 3.13%, ONGC up by 1.59%, Zee Entertainment up by 1.51%, Tata Motors up by 0.90% and Axis Bank up by 0.84%. On the flip side, Indiabulls Housing Finance down by 3.50%, TCS down by 2.96%, Reliance down by 2.31%, Bajaj Finserv down by 2.31% and Yes Bank down by 2.28% were the top losers.

European markets were trading in red; UK’s FTSE 100 lost 19.84 points or 0.27% to 7,216.84, France’s CAC fell 0.56 points or 0.01% to 5,152.63 and Germany’s DAX was down by 21.70 points or 0.19% to 11,278.10.

Asian markets ended in green on Monday after reports that United States-China trade talks will continue in Washington this week. After five days of negotiations in Beijing, a statement from the White House noted that high level US-China trade talks last week led to ‘progress between the two parties’, but ‘much work remains’. Japanese shares ended higher as risk appetite buying underpinned after better than expected domestic core machinery orders and growing expectations that the latest Sino-US talks would ease trade tensions between the two economic superpowers. The Cabinet Office said that the value of core machine orders in Japan eased 0.1 percent month on month in December, exceeding expectations for a decline of 1.0 percent following a flat reading in November. Further, Chinese shares hit over six-month high after US President Donald Trump indicated he might extend the tariff deadline for a deal. Positive bank lending data also bolstered investor confidence in the economy.

Asian Indices

Last Trade           

Change in Points

Change in %

Shanghai Composite

2,754.36
71.97
2.68

Hang Seng

28,347.01
446.17
1.60

Jakarta Composite

6,497.82
108.73
1.70

KLSE Composite

1,692.74

3.91

0.23

Nikkei 225

21,281.85
381.22
1.82

Straits Times

3,265.97
26.23
0.81

KOSPI Composite

2,210.89
14.80
0.67

Taiwan Weighted

10,145.28
80.50
0.80
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