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Published on 12/08/2020 5:35:23 PM | Source: LKP Securities Ltd

Markets pare losses to end with minor cut - LKP Securities

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

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Markets pare losses to end with minor cut

Indian equity benchmark indices pared most of their early losses to settle with minor cut on Wednesday, as investors stayed cautious ahead of the CPI inflation data for July which will be released later in the day. Key indices made gap-down opening, following lackluster macroeconomic data and concerns over rising coronavirus cases. Government data showed India's industrial production declined by 16.6 per cent in June, on account of disruption in normal business activity following the outbreak of coronavirus pandemic. Some cautiousness also prevailed in the markets with a private report that the MSMEs will take at least 7-8 months to recover from the impact of COVID-19 pandemic, and the recovery rate of an enterprise will depend on factors like its rate of digitisation and the sector in which it is operating. Traders also reacted negatively to Fitch Ratings’ statement that the Reserve Bank's scheme to allow lenders to recast loans will extend uncertainty over the banking sector's asset quality. According to Fitch, the scheme could open a window for banks to build capital buffers while putting off full recognition of COVID-19 pandemic's impact on loan portfolios, but is reminiscent of a strategy adopted over 2010-2016 that delayed and exacerbated problems for banks.

However, markets managed to cut most of losses in final hour of session, on the back of largely positive cues from global peers. Traders also found some solace with a private report that the Department of Promotion of Industry and Internal Trade (DPIIT) has proposed short- and-long-term measures to turn India into a manufacturing hub for auto components and air conditioning. Some respite also came amid private report stating that the Indian export sector is likely to witness a sharper recovery curve September-October onwards, which could be further strengthened by the holiday season in western countries in the following months. The third in a three-part series, Drip Capital's working paper says that improvements in the June export numbers are definitely early signs of recovery in the economy.

On the global front, Asian markets ended mostly in green on Wednesday, as Russia's announcement that its coronavirus vaccine has been approved was offset by worries about political holdup in Washington over coronavirus relief. European markets were trading mostly in green, after data showed factory output in the euro zone grew for the second straight month in June, following a marked relaxation of the coronavirus containment measures. Industrial output grew 9.1 percent on month, slower than the 12.3 percent rise in May and the 10 percent rise economists' had forecast. Meanwhile, data from the Office for National Statistics showed the U.K. economy contracted for the second straight time in the second quarter amid the coronavirus pandemic although there was some pick up in June after government relaxed restrictions on movement. Gross domestic product contracted by 20.4 percent sequentially in the second quarter, following a 2.2 percent drop in the first quarter.

Back home, on the sectoral front, stocks related to agriculture sector were in focus with farmers' body FAIFA stating that the Rs 1-lakh crore Agriculture Infrastructure Fund launched by the government will be crucial in enhancing contribution of the agriculture sector to the country's GDP, especially at a time when it is expected to add to economic stability amid the coronavirus-induced slowdown. There was some reaction in rail-related stocks after the Railways stated that all regular passenger train services will remain suspended till further notice, although 230 special trains will continue to be in service.

Finally, the BSE Sensex lost 37.38 points or 0.10% to 38,369.63, while the CNX Nifty was down by 14.10 points or 0.12% to 11,308.40.

The BSE Sensex touched high and low of 38,414.37 and 38,125.81, respectively and there were 13 stocks advancing against 17 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.26%, while Small cap index was down by 0.02%.

The top gaining sectoral indices on the BSE were Auto up by 1.94%, Consumer discretionary up by 0.83%, Utilities up by 0.68%, Power up by 0.67% and IT up by 0.53%, while Healthcare down by 1.46%, Consumer Durables down by 0.85%, Metal down by 0.81%, Realty down by 0.75% and Telecom down by 0.47% were the top losing indices on BSE.

The top gainers on the Sensex were HCL Technologies up by 4.86%, SBI up by 4.23%, Tech Mahindra up by 2.57%, Maruti Suzuki up by 1.25% and Mahindra & Mahindra up by 0.86%. On the flip side, Kotak Mahindra Bank down by 2.10%, Sun Pharma down by 1.67%, Bajaj Finserv down by 1.27%, Larsen & Toubro down by 1.25% and Bajaj Finance down by 1.10% were the top losers.

Meanwhile, Government e Marketplace (GeM) CEO Talleen Kumar has said that the potential of GeM is that the platform can handle transactions worth $100 billion per annum, given the fact that 18 percent to 20 percent of the country's Gross Domestic Product (GDP) goes into procurement expenses. He noted that the portal, launched in August 2016, has so far handled transactions of Rs 1,800 crore, processing 1.5 lakh orders. He added that the GeM, a portal floated for government offices to buy goods and services, is a part of the 'Vocal for Local' initiative of the Centre. 

Kumar said that the platform has been proved to be effective for sellers as they are able to do business during COVID times. He also said the platform is a move towards transparency and has been appreciated by several other countries. He noted that the present version of GeM will be upgraded after enhancing the system and a unified procurement system will be put in place. He also said that vendors in the country are scattered and GeM will bring them on a single platform, adding that this will also lead to better price discovery.

GeM CEO further said that GeM will be integrated with the railway procurement system which will make the supply chain more efficient. He also said GeM will also use artificial intelligence and data analytics for evaluation of sellers who are coming on the platform.

The CNX Nifty traded in a range of 11,322.00 and 11,242.65 and there were 23 stocks advancing against 27 stocks declining on the index.

The top gainers on Nifty were HCL Technologies up by 4.66%, SBI up by 4.33%, Tech Mahindra up by 2.84%, Eicher Motors up by 2.74% and Tata Motors up by 2.21%. On the flip side, Cipla down by 2.06%, Kotak Mahindra Bank down by 2.06%, Sun Pharma down by 2.04%, Britannia Industries down by 1.66% and Dr. Reddy's Laboratories down by 1.56% were the top losers.

European markets were trading mostly in green; UK’s FTSE 100 increased 66.87 points or 1.09% to 6,221.21 and France’s CAC rose 20.72 points or 0.41% to 5,048.71, while Germany’s DAX decreased 3.27 points or 0.03% to 12,943.62.

Asian markets ended mostly higher on Wednesday due to positive corona-virus vaccine news from Russia. Though, some gains were capped in line with overnight declines in Wall Street markets as investors worried about the prospects for a broad corona virus relief package. Japanese shares ended higher as a weaker yen boosted shares of exporters. Though, Chinese shares ended lower after Chinese central bank (PBOC) data showed the country's bank extended CNY 992.7 billion loans in July, down sharply from 1.81 trillion yuan in June and falling short of expectations. But, broad credit and liquidity growth quickened as the central bank sought to support a gradual economic recovery.

 

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