Published on 19/05/2020 6:22:39 PM | Source: LKP Securities Ltd

Markets Snap Three - Day Losing Streak - LKP Securities

Posted in Market Outlook| #Market Outlook #LKP Securities Ltd

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Indian equity benchmarks gave up most of their gains in last leg of trade to come off their intraday high points but still managed to end with decent gains, tracking positive global cues amid optimism about a potential vaccine for the coronavirus. Key indices began the session with a gap-up open, as traders took encouragement with Minister for MSMEs and road transport and highways Nitin Gadkari’s statement that the recent steps announced by the government to boost liquidity and credit flows would also bolster the purchasing power of the people via employment creation and help accelerate the wheels of the economy. Traders took note of Expenditure secretary TV Somanathan’s statement that this is a challenging year for the central government due to the serious revenue impact of the coronavirus crisis, but added that the Centre had no plan of carrying out poorly calibrated expenditure cuts. 

Both indices gave up more than of intraday gains in late trade, as traders got wary with a private report stating that American brokerage Goldman Sachs expects the Indian economy to contract by 5 per cent in FY21, making it the worst performance by the country ever. The brokerage said the GDP will contract by a mind-boggling 45 per cent in the June quarter as compared to the January-March period on an annualised basis, because of the continuing lockdown which is chilling economic activity, before recovering later. Some concern also came as the rating agency Moody's Investors Service in its latest report stated that the measures announced for financial institutions as part of Rs 20 lakh crore-economic package will help ease their asset risk, but will not fully offset the negative impact from the COVID-19 outbreak. 

On the global front, Asian markets ended higher on Tuesday, following sharp gains on Wall Street as the U.S. economy continued to slowly reopen and drug maker Moderna announced positive early results from a potential COVID-19 vaccine. European markets were trading lower as investors fretted about renewed U.S.-China tensions and a gloomy economic outlook. Underlying sentiment, however, remained supported somewhat after Germany and France joined forces to push for a €500bn EU recovery fund that would offer grants to European Union regions and sectors hit hardest by the pandemic. Back home, power stocks were in focus with global ratings agency Standard & Poor's (S&P) statement that the government's stimulus measures will only provide a temporary lifeline to state-owned power distribution companies as the coronavirus pandemic has increased liquidity pressure for these firms. Construction equipment industry also was in watch, as Rating agency ICRA in its latest report has said that the construction equipment industry, which was already going through a slowdown due to headwinds on several fronts before coronavirus (Covid-19) outbreak, is likely to witness a 15-20 percent fall in revenues in calendar year (CY) 2020, impacted by the extended the ongoing nationwide lockdown.

Finally, the BSE Sensex gained 167.19 points or 0.56% to 30,196.17, while the CNX Nifty was up by 55.85 points or 0.63% to 8,879.10.

The BSE Sensex touched high and low of 30,739.96 and 30,116.82, respectively and there were 22 stocks advancing against 8 stocks declining on the index.

The broader indices ended mixed; the BSE Mid cap index rose 0.52%, while Small cap index was down by 0.20%.

The top gaining sectoral indices on the BSE were Telecom up by 10.41%, TECK up by 2.49%, Power up by 2.26%, Utilities up by 1.97% and Auto up by 1.17%, while Capital Goods down by 1.38%, Energy down by 1.33%, Realty down by 0.60%, Bankex down by 0.13%, Industrials down by 0.12% were the top losing indices on BSE. 

The top gainers on the Sensex were Bharti Airtel up by 11.34%, ONGC up by 5.76%, Ultratech Cement up by 3.96%, ITC up by 3.74% and Power Grid up by 2.33%. On the flip side, Indusind Bank down by 2.39%, Reliance Industries down by 2.26%, Larsen & Toubro down by 2.09%, SBI down by 1.64% and Hindustan Unilever down by 1.56% were the top losers.

Meanwhile, few days after the government’s stimulus package, the rating agency Moody's Investors Service in its latest report has said the measures announced for financial institutions as part of Rs 20 lakh crore-economic package will help ease their asset risk, but will not fully offset the negative impact from the COVID-19 outbreak.

On MSME package, Moody's noted that the sector was already under stress before coronavirus outbreak and further slowdown in economic growth will lead to more liquidity woes. With regard to measures for NBFCs, it said the support is far lower than the immediate liquidity requirements of those companies and the sector will continue to pose risks to the banks.

Further, the rating agency said that amongst the measures, the most significant is the government guaranteed, automatic and uncollateralised loans to MSMEs. It underlined that such loans will help improve MSMEs’ near-term liquidity and ease asset risks for the banks and NBFCs who are the key lenders to the sector.
However, the report said the MSME sector was already under financial strain before the outbreak of the coronavirus because of the gradual slowdown in India's economic growth over the past 18 months. As a consequence, it has limited capacity to weather another economic shock.

The CNX Nifty traded in a range of 9,030.35 and 8,855.30 and there were 36 stocks advancing against 14 stocks declining on the index.

The top gainers on Nifty were Bharti Airtel up by 10.81%, Adani Ports &SEZup by 9.00%, ONGC up by 5.69%, Ultratech Cement up by 4.15% and Grasim Industries up by 3.87%. On the flip side, UPL down by 9.78%, Vedanta down by 2.65%, Reliance Industries down by 2.20%, Indusind Bank down by 2.10% and Larsen & Toubro down by 1.52% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 21.47 points or 0.35% to 6,027.12, France’s CAC fell 33.33 points or 0.74% to 4,465.01 and Germany’s DAX was down by 43.19 points or 0.39% to 11,015.68.

Asian markets ended higher on Tuesday, tracking gains on Wall Street overnight as investors cheered on news of potential vaccine for the corona virus after a positive development from a Moderna trial. Drug maker Moderna Inc said its experimental corona virus vaccine showed promising early signs that it can create an immune-system response in the body that could help fend off the new corona virus, according to sampling of data from a small, first human trial of the inoculation. Market sentiment improved further on jump in oil prices as easing of global lockdowns boosted hopes of economic activity and as producers appeared to be following through with planned production cuts. Meanwhile, investors shrugged off weak data showing that Japan's industrial production declined in March as initially estimated. Industrial production fell a seasonally adjusted 3.7 percent month-on-month in March.


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