Wednesday's session saw Indian benchmark indices complete a hat-trick of disappointing performances and reaching the finishing line only after collapsing by over a percent. Investors remained worried about the faster growth prospect in the United States in absence of a big fiscal stimulus from President Donald Trump, political uncertainties in Europe and a possible reversal of the easy money policy by the European Central Bank. Metals, oil and auto stocks were prominent losers as the commodity rally halted on fears the US growth prospects now looks dim if Trump fails to come up with an expansionary fiscal policy. On the domestic front, sentiments got undermined by the private report that India's GDP growth is expected to slow to 6.7% in the January-March quarter of this fiscal year as overall activity is yet to bounce back to levels seen prior to demonetisation. According to the report, a pick-up in headline CPI inflation, better global conditions (exports) and narrowing interest rate differentials (with the US) have lowered the probability of a rate cut and increased the probability of a hike. Market participants remained cautious over the reports that the government wants to tighten even further the proposed Budget measure aimed at discouraging black money through restrictions on cash transactions to Rs 2 lakh from Rs 3 lakh. The government also plans to make inclusion of the Aadhaar ID mandatory in applications for permanent account number (PAN) cards. However, Investors failed to get any sense of relief with Finance Minister Arun Jaitley's statement that the government is hoping to implement the Goods and Services Tax (GST) by July 1, after the enabling Bills get Parliament nod in the current budget session. The Union Cabinet earlier this week approved four GST related bills -- The Central Goods and Services Tax Bill 2017 (The CGST Bill), The Integrated Goods and Services Tax Bill 2017 (The IGST Bill), The Union Territory Goods and Services Tax Bill 2017 (The UTGST Bill) and the Goods and Services Tax (Compensation to the States) Bill 2017 (The Compensation Bill).
On the global front, Asian markets ended lower on Wednesday as growing doubts about Donald Trump's economic growth agenda prompted investors to dump risky assets and to rush to safe havens such as gold and government bonds. Further, Japanese shares extended losses after Kyodo News, citing a Japan government source, reported that North Korea may have launched several missiles on Wednesday morning. Investors largely shrugged off better-than-expected Japanese trade data for February and the BoJ's minutes from the January policy meeting. Meanwhile, European Markets fell to a two-week low, extending losses from the previous session as weighed down by basic resources stocks.
Back home, the benchmark got off to a somber opening, extending the downtrend for the third straight session as pessimistic sentiments prevailed across Asian markets. Thereafter, the key indices failed to show any kind of fervor due to lack of encouraging leads. The key gauges suffered a setback in late afternoon trades as investors took to across the board risk aversion after a weak European market opening. Eventually, the NSE's 50-share broadly followed index Nifty, took a cut of about a percent to settle below the crucial 9050 support level, while Bombay Stock Exchange's Sensitive Index, Sensex slipped by over three hundred points and closed below the psychological 29,200 mark. Moreover, the broader markets too failed to show any kind of fervor and closed with losses of around a percent.
Finally, the BSE Sensex decreased 317.77 points or 1.08% to 29167.68, while the CNX Nifty was down by 91.05 points or 1% to 9,030.45.
The BSE Sensex touched a high and a low of 29341.41 and 29137.48, respectively and there were 6 stocks on gainers side as against 24 stocks on the losers side on the index.
The broader indices ended in red; the BSE Mid cap index declined 0.95%, while Small cap index was down by 0.90%.
The top losing sectoral indices on the BSE were Telecom down by 2.09%, Consumer Durables down by 1.94%, Auto down by 1.58%, FMCG down by 1.51% and Industrials down by 1.33%, while there no gainers on BSE sectoral front.
The top gainers on the Sensex were Lupin up by 0.81%, Wipro up by 0.79%, Cipla up by 0.52%, Sun Pharma up by 0.31% and Dr. Reddy’s Lab up by 0.14%. On the flip side, Bharti Airtel down by 3.18%, Tata Motors down by 2.84%, ITC down by 2.75%, ICICI Bank down by 2.42% and Bajaj Auto down by 2.01% were the top losers.
Meanwhile, stepping up its efforts to provide operational flexibility to multinational companies (MNCs) and their Indian subsidiaries, the Reserve Bank of India has amended the extant hedging guidelines. The move will provide flexibility for booking derivative contracts to hedge the currency risks arising from current account transactions of Indian subsidiaries of MNCs.
RBI in its new guidelines has said that the transactions under the facility will be covered under a tripartite agreement involving the Indian subsidiary, its non-resident parent / treasury & the bank and added that this agreement will include the exact relationship of the Indian subsidiary or entity with its overseas related entity, relative roles and responsibilities of the parties and the procedure for the transactions, including settlement.
To avail of the facility, a non-resident entity will have to be incorporated in a country that is member of the Financial Action Task Force (FATF) or member of a FATF-Style Regional body. Besides, the non-resident entity can approach a bank directly which handles the foreign exchange transactions of its subsidiary for booking derivative contracts to hedge the currency risk of and on the latter's behalf. The guidelines further stated that the Indian subsidiary will be responsible for compliance with the rules, regulations and directions issued under FEMA and any other laws applicable to the transactions in India.
The CNX Nifty traded in a range of 9,072.90 and 9,019.30. There were 11 stocks in green as against 40 stocks in red on the index.
The top gainers on Nifty were Lupin up by 1.27%, HCL Tech up by 1.25%, Cipla up by 0.62%, BPCL up by 0.60% and Dr. Reddy's Laboratories up by 0.50%. On the flip side, Bharti Airtel down by 3.40%, ITC down by 2.95%, Tata Motors down by 2.80%, Hindalco down by 2.55% and ICICI Bank down by 2.52% were the top losers.
The European markets were trading in red; UK’s FTSE 100 decreased 64.83 points or 0.88% to 7,313.51, Germany’s DAX decreased 84.35 points or 0.71% to 11,877.78 and France’s CAC decreased 39.66 points or 0.79% to 4,962.77.
Asian equity markets ended in red on Wednesday after Wall Street suffered its worst day this year on worries about whether President Donald Trump will be able to deliver his promises on reforming regulations, increasing infrastructure spending and lowering corporate taxes. Trump told House Republicans on Tuesday that they could lose re-election in the 2018 midterms if they vote against the GOP health care bill planned for Thursday. It is feared that a failure to approve the Obamacare replacement plan could endanger more of Trump's legislative and policy agenda. Chinese stocks closed modestly lower, dragged down by banks and property developers, amid worries over tightening liquidity in the banking system. Further, Japanese shares ended lower as reports of North Korean missile launch and worries that Trump will struggle to deliver promised tax cuts sent the yen soaring to strongest levels since November. Investors largely shrugged off better-than-expected Japanese trade data for February and the BoJ’s minutes from the January policy meeting.
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