News Analysis

Markets resume bleeding; Sensex falls over half a percent

Updated on 15 May 2019 04:38 PM

After a sigh of relief in the previous trading session, Indian equity benchmarks again bled on Wednesday, with Sensex and Nifty closing lower by losses of over half a percent each. After a firm start, key indices remained positive for the most part of the day, aided by rating agency Crisil’s latest report stating that recovery of stressed assets through Insolvency and Bankruptcy Code (IBC) doubled to Rs 70,000 crore in 2018-19, as against Rs 35,000 crore recovered using other resolution mechanism including Debt Recovery Tribunal (DRT), Securitisation and Reconstruction of Financial Assets (Sarfaesi), Enforcement of Securities Interest Act, and Lok Adalat. The street took encouragement with a private report that the Indian private equity (PE) market remained a hotbed for deal making in 2018 with investments across 793 deals at $26.3 billion, which was the second highest in the last decade in terms of total investment value.

However, the markets turned volatile during late afternoon session, mirroring weak European markets. Markets witnessed heavy selling in last leg of trade which dragged both the major indices near intraday lows, as domestic sentiments got hampered with a private report stating that venture investments in the country declined marginally to $26.3 billion in 2018, even though there was a surge in number of deals announced. Investments by venture capital and private equity funds in the country declined in 2018 from $26.8 billion in the previous year. Besides, market participants also got cautious, after domestic rating agency India Ratings said that a fall in recoveries due to weak property markets in metros, coupled with rising delinquencies has led to weakening of the loans against property (LAP) segment for financiers. It further noted that other segments, especially commercial vehicle loans which were not doing so good recently, are showing signs of improvement.

On the global front, European markets were trading in red, as Finland's economy expanded at a slightly slower pace in the first three months of the year. The preliminary estimates from Statistics Finland showed that gross domestic product grew a seasonally adjusted 0.6 percent quarter-on-quarter following a 0.7 percent increase in the final three months of 2018. Asian markets ended in green, after US President Donald Trump said a settlement is possible with Beijing. Trump said he had a very good dialogue with China and insisted talks between the world's two largest economies had not collapsed. Traders were optimistic, even though China's industrial production and retail sales growth eased in April. The figures from the National Bureau of Statistics showed that industrial production advanced 5.4 percent year-on-year in April, following March's 8.5 percent increase.

Back home, sugar stocks ended mixed, after the US Department of Agriculture (USDA) in its latest report said that India's sugar production is likely to decline 8.4 per cent to 30.3 million tonnes for the second straight year in the 2019-20 marketing year that would begin from October because of likely fall in sugarcane output. The sugar output in the ongoing 2018-19 marketing year (October-September) is pegged at 33 million tonnes, lower than 34.3 million tonnes achieved in the previous year. Further, stocks related to the oil industry remained in focus, as the International Energy Agency (IEA) said that the world's oil supply fell last month, amid rising global tensions as US sanctions on Iran tightened and OPEC+ members produced less crude in line with their pact.

Finally, the BSE Sensex slipped 203.65 points or 0.55% to 37,114.88, while the CNX Nifty was down by 65.05 points or 0.58% to 11,157.00.

The BSE Sensex touched a high and a low of 37,559.67 and 37,047.87, respectively and there were 05 stocks advancing against 26 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.67%, while Small cap index was down by 0.45%.

The few gaining sectoral indices on the BSE were Realty up by 0.24%, IT up by 0.12% and FMCG up by 0.10%, while Metal down by 2.08%, Telecom down by 1.96%, Utilities down by 1.69%, Power down by 1.56% and Industrials down by 1.31% were the top losing indices on BSE.

The top gainers on the Sensex were Bajaj Finance up by 4.11%, ITC up by 1.05%, Kotak Mahindra Bank up by 0.68%, Infosys up by 0.37% and TCS up by 0.01%. On the flip side, Yes Bank down by 8.01%, Tata Motors down by 8.00%, Tata Motors - DVR down by 6.37%, Indusind Bank down by 3.66% and Coal India down by 2.75% were the top losers.

Meanwhile, the Central Board of Direct Taxes (CBDT) has deferred for the second time the requirement for companies to include in their tax audit report the details of Goods and Services Tax (GST) and General Anti-Avoidance Rules (GAAR) till March 31, 2020. Business entities having a turnover of more than Rs 1 crore (or Rs 2 crore if they have opted for presumptive taxation) and professionals with gross receipts of more than Rs 50 lakh have to comply with the tax audit requirements. The due date for its filing is September 30 and if the taxpayer is covered by transfer pricing provisions, the due date is November 30.

The CBDT in an order issued said that the Board has received representations that implementation of reporting requirements under clause 30C (pertaining to GAAR) and clause 44 (pertaining to GST compliance) of the Form No 3CD may be deferred further. It also said that the matter has been examined and it has been decided by the Board that the reporting under clause 30C and clause 44 of the Tax Audit Report shall be kept in abeyance till March 31, 2020.

In July 2018, the I-T department had changed the tax audit form - 3CD, seeking details under GST as well as GAAR, which seeks to prevent companies from routing transactions through other countries to avoid taxes. The changes were to come into effect from August 20, 2018. With stakeholders complaining that the change is onerous and a burden on companies, the CBDT had then deferred the implementation of the change in I-T audit form till March 31, 2019.

The CNX Nifty traded in a range of 11,286.80 and 11,136.95. There were 11 stocks advancing against 39 stocks declining on the index.

The top gainers on Nifty were Bajaj Finance up by 4.52%, Eicher Motors up by 4.23%, UPL up by 1.56%, Bajaj Finserv up by 1.16% and Indian Oil Corporation up by 0.91%. On the flip side, Yes Bank down by 8.66%, Tata Motors down by 7.48%, Zee Entertainment down by 6.84%, JSW Steel down by 4.98% and IndusInd Bank down by 4.07% were the top losers.

European markets were trading in red; UK’s FTSE 100 lost 5.15 points or 0.07% to 7,236.45, France’s CAC fell 24.91 points or 0.47% to 5,316.44 and Germany’s DAX was down by 52.99 points or 0.44% to 11,938.63.

Asian markets ended mostly in green on Wednesday after US President downplayed the scope of the trade war with China and said dialogues would continue. Sentiment was also boosted by hopes of Beijing unveiling more stimulus measures. Chinese shares ended higher as weak data reinforced expectations that the government will launch stimulus measures to support the economy. China's industrial production and retail sales growth eased more-than-expected in April, suggesting weak economic activity at the start of second quarter. Industrial production advanced 5.4 percent year-on-year in April, following March's 8.5 percent increase. The growth rate was forecast to slow moderately to 6.5 percent. Likewise, annual growth in retail sales eased to 7.2 percent from 8.7 percent a month ago. Sales were expected to expand 8.6 percent. Further, Japanese shares ended higher on expectations that Beijing will boost stimulus spending and bank lending to boost slowing growth.

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