Published on 27/02/2020 4:51:27 PM | Source: LKP Securities Ltd

Weakness persists over D-Street for 5th straight day amid coronavirus jitters - LKP Securities

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

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Weakness persists over D-Street for 5th straight day amid coronavirus jitters

Weakness persisted over the Dalal Street for the 5th straight day on Thursday, amid rising fears of the coronavirus outbreak. After a negative start, indices remained lackluster throughout the day, amid a private report that the Gross Domestic Product (GDP) growth will stay flat at 4.5 per cent in the October-December 2019. It also said that India faces the risk of getting impacted by coronavirus epidemic economically because of its high reliance on Chinese imports for various goods. Traders also remained cautious with reports that foreign institutional investors sold equities worth Rs 3,336.60 crore on February 26, however domestic institutional investors bought shares worth Rs 2,785.67 crore on the same day.

However, in the second half of the trading day, key benchmarks trimmed most of their losses to end the session off day’s low points. Recovery in the markets was on the back of the Finance Minister Nirmala Sitharman’s statement that the government is keeping a close watch on the impact of coronavirus outbreak on the Indian economy and various options are being gauged at various levels. Some support also came amid reports that India added more than three dollar billionaires every month in 2019, taking the tally to 138 that has helped the country to feature at the third position globally. China and the US occupied the first and second spot with 799 and 626 billionaires, respectively.

On the global front, European markets were trading in a negative territory, after Finland's consumer confidence decreased at a softer pace in February. The survey data from Statistics Finland showed that the consumer sentiment index rose to -4.5 in February from -4.6 in January. In December, the score was -4.2. Asian markets ended mostly lower, as Hong Kong unveiled a record high budget deficit for the next fiscal year as the government plans to implement counter-cyclical measures of a massive scale of over HK$120 billion to kickstart the economy that sunk into recession after political unrest, and whose outlook is further damped by the coronavirus outbreak.

Back home, the automobile industry stocks ended lower, amid credit rating agency, Moody's Investors Service’s report stating that car sales in India are expected to be relatively flat this year after plunging 11.8 per cent in 2019 amid slowing economic growth. Further, the textile sector stocks remained in watch, as the Cabinet Committee on Economic Affairs (CCEA) given its consent to set up a National Technical Textiles Mission which aims at positioning the country as a global leader in technical textiles. The mission, announced in Union Budget 2020, will have an outlay of Rs 1,480 crore and have an implementation period of four years - FY 2020-21 to 2023-24.

Finally, the BSE Sensex slipped 143.30 points or 0.36% to 39,745.66, while the CNX Nifty was down by 45.20 points or 0.39% to 11,633.30.

The BSE Sensex touched high and low of 39,947.80 and 39,423.27, respectively and there were 10 stocks advancing against 20 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.65%, while Small cap index was down by 0.83%.

The only gaining sectoral indices on the BSE were Consumer Durables up by 0.70% and Healthcare up by 0.20%, while Realty down by 2.09%, PSU down by 1.37%, Oil & Gas down by 1.26%, Metal down by 0.94% and TECK down by 0.93% were the losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 3.68%, Titan up by 1.87%, Axis Bank up by 1.17%, Asian Paints up by 0.97% and Maruti Suzuki up by 0.77%. On the flip side, ONGC down by 2.61%, HCL Tech down by 2.25%, Mahindra & Mahindra down by 2.01%, SBI down by 1.92% and Indusind Bank down by 1.71% were the top losers.

Meanwhile, Former NITI Aayog Vice Chairman Arvind Panagariya has said that India's economic slowdown has appeared to have bottomed out and now country’s economy needs to be opened up if it wants to realize the ambition of a 10 percent growth rate. He said India's GDP growth is expected to be 6 percent in the next fiscal year (FY21) and then it will get back to 7-8 percent which has been the case in the last 15-16 year period. He added 'in the second half of the current fiscal year, which would be ending on March 31, we should see some bit of recovery, not a big one but certainly the second half (of the fiscal year) should look better than the first half.'

Panagariya noted that since about 2003, India has been growing at an average rate of about 7 percent and the first five years of the Modi government was characterised by 7.5 percent growth on an average. Emphasising that the Indian economy can do a lot better no doubt, he said that the main factor which led to the slowdown has to do with the financial markets and that translated into weakening of the balance sheets of both the banks as well as the corporates.

Former Chairman further said that if a country with a 500 million-people strong labour force cannot compete in the labour intensive products, it points to the fact that something is fundamentally wrong with the way some of the degradation in the system is. So, he said ‘one has to go to the root cause what is causing it and remove those obstacles, hurdles and not try to give them some advantage by putting in tariffs. That only is encouraging inefficiency and small plants’. He also pointed out that one of India's big problems is that there is too much pre-occupation with small and micro and small enterprises.

The CNX Nifty traded in a range of 11,663.85 and 11,536.70. There were 15 stocks advancing against 35 stocks declining on the index.

The top gainers on Nifty were Sun Pharma up by 3.55%, Britannia up by 1.93%, Titan up by 1.86%, Axis Bank up by 1.08% and Grasim Industries up by 1.08%. On the flip side, Wipro down by 3.52%, JSW Steel down by 3.03%, ONGC down by 3.03%, IOC down by 2.49% and Zee Entertainment down by 2.33% were the top losers.

European markets were trading in red; UK’s FTSE 100 decreased 110.00 points or 1.56% to 6,932.47, France’s CAC decreased 86.70 points or 1.53% to 5,597.85 and Germany’s DAX decreased 217.13 points or 1.7% to 12,557.75.

Asian markets ended mostly lower on Thursday as investors concerned about the global economic impact of a rapidly spreading corona virus. Market sentiment weakened further amid ongoing warnings from firms that supply chains are being disrupted by measures to contain the new virus, which has spread to more than 30 countries. Japanese shares ended lower amid the safe-haven yen strengthened. Though, Chinese shares ended higher as the country reported fewer deaths due to the corona virus and China's central bank (PBoC) said that it would ensure ample liquidity through targeted reserve requirement ratio (RRR) cuts in appropriate time to support the economy.


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