Published on 22/09/2020 1:13:54 PM | Source: LKP Securities Ltd

Markets remain under bear`s grip - LKP Securities

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

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Markets remain under bear’s grip

In line with Asian peers, the Indian equity benchmarks continued to show a sluggish trend in afternoon session, with Sensex and Nifty trading below their psychological levels of 37,800 and 11,200, respectively. The sentiments were under pressure with CARE Ratings’ a multi-sector survey showed that business activity is unlikely to touch pre-COVID-19 levels before March 2021, and there is a need for the government to step in and give a push to the economy as it has not done enough till now. Traders took note of Federation of All India Farmer Associations’ (FAIFA) statement that the newly passed farm bills will give farmers the freedom to trade across states and empower them to turn into traders of their own produce and be in control of the process. Weak broader indices along with heavy sell off at realty, capital goods and industrials counters dragged the markets lower.

On the global front; Asian markets were trading in red amid worries about surge in COVID-19 cases in several countries across Europe and the potential for the renewal of restrictions on activity, as well as uncertainty over a fresh round of government relief, dulled investor sentiments. Back home; in scrip specific developments; Future Enterprises touched lower circuit on the BSE and Shree Renuka Sugars zoomed after Wilmar Sugar Holdings hikes stake in the company .

The BSE Sensex is currently trading at 37761.75, down by 272.39 points or 0.72% after trading in a range of 37531.14 and 38209.97. There were 11 stocks advancing against 19 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index lost 1.43%, while Small cap index was down by 1.63%.

The few gaining sectoral indices on the BSE were Telecom up by 0.59%, TECK up by 0.23% and IT was up by 0.22%, while Realty down by 2.73%, Capital Goods down by 2.39%, Industrials down by 2.35%, Oil & Gas down by 2.01%, Consumer Discretionary was down by 1.76% were the top losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 1.65%, Tech Mahindra up by 1.15%, HCL Tech up by 1.15%, Ultratech Cement up by 1.15% and TCS was up by 1.11%. On the flip side, Maruti Suzuki down by 2.67%, Larsen & Toubro down by 2.18%, ONGC down by 2.04%, Bajaj Finance down by 1.62% and Reliance Industries was down by 1.62% were the top losers.

Meanwhile; India Ratings and Research (Ind-Ra) in its latest report has said that cement demand is expected to decline by 10 to 15 percent year-on-year in the Q2 (July-September) of FY21. It also said rural demand will continue to outperform urban demand and companies having higher individual home builder exposure will remain better placed. However, it said that an increase in incidences of Covid-19 in eastern and central regions, and the recurrent state lockdowns can impact the demand recovery. It also said floods in the eastern and central regions in the seasonally weak Q2 will also weigh on the demand. It added that the western region remains the worst hit due to higher dependence on urban demand and a severe Covid-19 impact.

As per the report, cement demand recovered quickly to 79 percent of last year's volumes in May and 93 percent in June led by a strong rural demand aided by three consecutive good monsoons, adequate availability of local labor, and lower spread of Covid-19 than in urban areas. However, it said the recovery has slowed down since mid-July with lockdowns imposed by several states and fading of pent-up demand resulting in a 13.5 percent year-on-year decline in the month. It stated that the capacity utilisations of listed entities fell sharply to 51 percent in Q1 due to the lockdown impacting demand. With the expected decline of 10 to 15 percent in Q2, the capacity utilization is likely to remain below 60 percent.

The report further said most of the ongoing capital expenditure (capex) is witnessing delays of three to six months due to labor shortage and cash conservation which may get prolonged for another such period. However, it expects around 65 percent of the announced capex for FY21 to come on stream (around 20 million tonnes expected in FY21), given that much of this is in advanced stages.

The CNX Nifty is currently trading at 11161.20, down by 89.35 points or 0.79% after trading in a range of 11084.65 and 11302.20. There were 14 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were Grasim Industries up by 1.69%, Bharti Airtel up by 1.61%, Cipla up by 1.50%, Ultratech Cement up by 1.29% and TCS was up by 1.14%. On the flip side, Zee Entertainment down by 5.51%, Adani Ports & SEZ down by 4.04%, GAIL India down by 3.91%, Bharti Infratel down by 3.36% and Tata Motors was down by 3.02% were the top losers.

Asian markets were trading lower; Hang Seng decreased 215.39 points or 0.9% to 23,735.30, Shanghai Composite declined 24.38 points or 0.74% to 3,292.56, KOSPI fell 56.79 points or 2.38% to 2,332.60, Jakarta Composite lost 44.85 points or 0.9% to 4,954.51, Taiwan Weighted dropped 149.61 points or 1.17% to 12,645.51 and Straits Times was down by 19.85 points or 0.8% to 2,465.86.


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