Market Mantra: Bulls Set To Come Back To The Ring, Again
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| Photo: Sapient Wealth Advisers & Brokers |
Indian equity benchmarks crashed as blue chip stocks came under heavy selling pressure, yesterday. The barometer index, the S&P BSE Sensex, fell 806.47 points or 2.24% to 35,169.16, as per the provisional closing data. The Nifty 50 index fell 309.85 points or 2.85% to 10,548.40, as per the provisional closing data. Gains in ICICI Bank and Larsen & Toubro supported bourses at lower levels.
Falling rupee and surging crude prices put pressure on shares. India imports majority of its crude requirements and a surge in crude raises concerns on fiscal deficit, inflation and gives lesser room for the government to boost growth through spending on infrastructure. A weak rupee raises the cost of importing crude oil.
Negative global cues also spoiled sentiment. Investors were cautious ahead of the outcome of Reserve Bank of India (RBI)'s three-day Monetary Policy Committee (MPC) meeting tomorrow, 5 October 2018. The resolution of the MPC will be unveiled at 14:30 IST on 5 October 2018.
Among secondary equity barometers, the BSE Mid-Cap index fell 1.93%. The BSE Small-Cap index fell 2.07%.
The market breadth, indicating the overall health of the market, was weak. On BSE, 779 shares rose and 1885 shares fell. A total of 138 shares were unchanged.
Shares of oil marketing companies slumped after Finance Minister Arun Jaitley announced to cut fuel price by Rs 2.5 per litre. Government has cut excise on petrol and diesel by Rs 1.5 per litre. Oil marketing companies have been asked to bear remaining burden of Re 1 per litre.
Indian Oil Corporation (down 10.57%), BPCL (down 10.89%) and HPCL (down 12.23%), crashed. Reliance Industries (down 7.03%), Hero MotoCorp (down 5.45%), Adani Ports & Special Economic Zone (down 4.17%), ONGC (down 3.74%) and Sun Pharmaceutical Industries (down 3.7%), were the major Sensex losers.
In the foreign exchange market, the rupee edged lower against the dollar. The partially convertible rupee was hovering at 73.70, compared with its close of 73.34 during the previous trading session. Rupee hit a record low of 73.815 yesterday.
In the global commodities markets, Brent for December 2018 settlement was down 25 cents at $86.04 a barrel. The contract had risen $1.49 a barrel or 1.76% to settle at $86.29 a barrel during the previous trading session.
Meanwhile, India's service sector continued to expand during September, but at a marginal rate amid reports of underwhelming market demand. The seasonally adjusted Nikkei India Services Business Activity Index recorded 50.9 during September. That was down from 51.5 in August and the lowest reading in the current four-month sequence of rising activity.
The seasonally adjusted Nikkei India Composite PMI Output Index also recorded a fall during September. Posting a level of 51.6, the index was down from 51.9 in August and at its lowest level in four months. That was despite a slight improvement in the manufacturing sector, where output growth strengthened to a solid pace.
Investors will be closely watching the outcome of Reserve Bank of India (RBI)'s three-day Monetary Policy Committee (MPC) meeting today, 5 October 2018. The resolution of the MPC will be unveiled at 14:30 IST today, 5 October 2018.
Trading of Nifty 50 index futures on the Singapore stock exchange indicates that the Nifty could fall 53 points at the opening bell.
Overseas, Asian stocks were trading lower after US equities fell to a three-week low amid the surge in bond yields. US stocks dropped yesterday, 4 October 2018 as the rout in Treasuries that took yields to multiyear highs fueled a repricing of risk assets.
The trading activity on that day showed that the foreign portfolio investors (FPIs) sold shares worth a net Rs 2760.63 crore yesterday, 4 October 2018, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) bought shares worth a net Rs.1823.59 crore yesterday, 4 October 2018, as per provisional data.
On the macro front, giving a boost to farmers' income, the Cabinet Committee on Economic Affairs chaired by the Prime Minister Narendra Modi has approved the increase in the Minimum Support Prices (MSPs) for all Rabi crops for 2018-19 to be marketed in 2019-20 season. The farmer friendly initiative will give additional return to the farmers of Rs 62,635 crore by way of increasing MSP of notified crops to at least 50% return over cost of production and will aid in doubling farmers' income. The increase in the MSPs of wheat has been raised by Rs105 per quintal, safflower by Rs 845 per quintal, barley by Rs 30 per quintal, masur (lentil) by Rs 225 per quintal, gram by Rs 220 per quintal and rapeseed & mustard by Rs 200 per quintal is another major step in this regard, the Ministry of Agriculture & Farmers Welfare said in a statement yesterday, 3 October 2018.
On the economic front, the provisional figures of Direct Tax collections up to September, 2018 (Half-yearly figures) show that gross collections are at Rs.5.47 lakh crore which is 16.7% higher than the gross collections for the corresponding period of last year. It is pertinent to mention that gross collections of the corresponding period of F.Y. 2017-18 also included extraordinary collections under the Income Declaration Scheme(IDS), 2016 amounting to Rs. 10,254 crore (Third and last installment of IDS), which does not form part of the current year's collection.
Refunds amounting to Rs 1.03 lakh crore have been issued during April, 2018 to September, 2018, which is 30.4% higher than refunds issued during the same period in the preceding year. Net collections (after adjusting for refunds) have increased by 14% to Rs. 4.44 lakh crore during April, 2018 to September, 2018. The net Direct Tax collections represent 38.6% of the total Budget Estimates of Direct Taxes for F.Y. 2018-19 (Rs 11.50 lakh crore).
So far as the growth rate for Corporate Income Tax (CIT) and Personal Income Tax (PIT) is concerned, the growth rate of gross collections for CIT is 19.5% while that for PIT (including STT) is 19.1%. After adjustment of refunds, the net growth in CIT collections is 18.7% and that in PIT collections is 14.9%.
An amount of Rs 2.10 lakh crore has been collected as Advance Tax, which is 18.7% higher than the Advance Tax collections during the corresponding period of last year. The growth rate of Corporate Advance Tax is 16.4% and that of PIT Advance Tax is 30.3%.
Jerome Powell, the US Fed chairman, said that the bank was a "long way" from neutral on interest rates. The comments pushed the dollar to an 11-month high against the Japanese yen.
In Europe, the focus is on Italian politics. Prime Minister Giuseppe Conte said on Wednesday that the government deficit will be decreased in the next three years, despite the surge planned for 2019.
In US, Private-sector employment soared in September, as employers added 230,000 jobs, according to Automatic Data Processing Inc. Separately, the final reading on the services sector from IHS Markit fell to 53.5 in September from 54.8, while the Institute for Supply Management's reading on the non-manufacturing sector came in at 61.6.
Wall Street got an early lift after a report in Italian daily newspaper Corriere della Sera that the government may yield ground in a budget standoff with the EU, which could lessen the odds of a clash between the country and the bloc.
According to the report, Italy's budget deficit target will be set at 2.4% of GDP in 2019, but decline to 2.2% in 2020 and 2.0% in 2021. Italian officials had previously clashed with Brussels over the budget deficit target, which exceeded EU rules and stoked fears of another crisis in the region. A resolution in Italy would mean one less potential risk to watch out for.
Now there are at least 4- points are worth considering, today:
- A surge in USB Treasury yields has prompted a rise in government bond yields across the globe. Euro zone bond yields rose sharply, tracking their U.S. counterparts, while the "trans-Atlantic spread" between US & German 10-year bond yields hit a 3-decade high of around 275 bps. Theoretically, the higher the current rate of inflation and the higher the (expected) future rates of inflation, the higher the yields will rise across the yield curve, as investors will demand this higher yield to compensate for inflation risk. Thus this brings before the US inflation fears and probably a continuation of the current US interest rate graph.
- Oil prices fell as the prospect of increased crude production from Saudi Arabia and Russia prompted profit-taking the day after futures hit four-year highs on a boost from imminent U.S. sanctions on OPEC's No. 3 producer Iran.
- There are also worries about non-banking financial companies even though the country's largest lender SBI had assured lending support to the NBFC sector.
- The Reserve Bank of India has given upfront guidance of its planned bond purchases under the open market operation in the month of October. In a statement before debt markets opened for trade, the central bank said it would infuse Rs.36,000 crore via bond purchases this month. This would be done via three auctions in the second, third and fourth weeks of October. The specific securities for buybacks will be notified later, the RBI said. The announcement is based on an “assessment of the durable liquidity needs going forward and the seasonal growth in currency in circulation observed in build-up to the festive season...” said the RBI.
This gives conclusion at the end, that though the Indian markets are likely to fall initially, it is likely to stabilize at the end of the trading day. I am expecting the Nifty and Sensex to close either flat or in Green at the end of the day. The traders are suggested to come out of their overnight Short Positions slowly and can take intraday longs. The Nifty levels and other stock related details will ONLY be sent to the Premium Members. You can join me in Twitter: suman2009s
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