Nifty end lower ahead of August FO expiry; weak global cues weigh on sentiment

Domestic equities witnessed fresh spell of selling on August 28 as weak global sentiment kept investors away from riskier equities, a day ahead of the expiry of August series of futures and options contracts.

Deepening inversion of the US bond yield aggravated worries of a looming recession in the US which made investors worried when the sentiment is already fragile due to trade tension between the US and China and the sluggish pace of global economic growth.

Ajay Srivastava of Dimensions Corporate Financial Services told CNBC-TV18 that today’s sell-off is partly led by global developments.

“Domestic investors are neither selling nor buying, it’s all FII activity. Advice is to sit tight for now,” he said.

An uptick in global crude oil prices and rupee’s fresh fall against the US dollar also weighed on investor sentiment.

Back home, despite the stimulus by the government and RBI’s hefty dividend, concerns over weakness in the economy seem to not fade away.

After Moody’s Investors Service, rating agency India Ratings and Research also has projected a dimmer picture of India’s growth during the current financial year. The Fitch Group company expects GDP growth for the financial year 2019-20 to tumble to a six-year low at 6.7 percent, compared to the earlier estimates of 7.3 percent.

According to the rating agency, FY20 will be the third consecutive year of subdued growth primarily driven by a slowdown in consumer demand and uneven monsoon.

Snapping the winning streak of three consecutive sessions, the BSE Sensex closed 189 points, or 0.50 percnt, lower at 37,451.84, with 23 stocks in the red.

Nifty50 closed with a loss of 59 points, or 0.53 percent at 11,046.10 with 13 stocks up and 37 down.

BSE Midcap and Smallcap indices underperformed benchmark Sensex, closing with losses of 0.92 percent and 0.64 percent, respectively.

Rupee’s weakness helped IT stocks as HCL Technologies, Infosys, Tech Mahindra and Tata Consultancy Services ended the day among the gainers in the Sensex kitty.

On the other hand, Yes Bank, Vedanta, Tata Steel, ONGC, Tata Motors and Maruti Suzuki featured among the top losers in the Sensex index.

Most sectoral indices on BSE closed in the red. BSE Metal fell 3.40 percent, ending as the top sectoral loser, followed by BSE Auto which fell 1.91 percent and BSE Power which declined 1.52 percent. However, BSE Realty and BSE IT climbed 1.86 percent and 1.27 percent, respectively.

Top news of the day:

The Supreme Court has granted interim protection to senior Congress leader and former union minister P Chidambaram from arrest, in a case being probed by Enforcement Directorate in INX media case. Proceedings will continue tomorrow.

Cabinet meeting today: FDI in retail, FPI surcharge rollback to be among top agenda.

Pakistan has closed three international air routes for India till Saturday.

The Supreme Court has said that a five-judge Constitution bench will hear pleas against the abrogation of Article 370 in October.

India Ratings has cut FY20 GDP forecast, said stimulus by FM would not revive growth.

Stocks in news:

Shares of Yes Bank fell 7.47 percent to close at Rs 59.50 on BSE after Moody’s downgraded lender’s credit rating with a negative outlook, citing lower-than-expected capital raising. Moody’s Investors Service said it has downgraded bank’s long- term foreign-currency issuer rating to Ba3 from Ba1.

Shares of IDBI Bank plunged 9.17 percent to Rs 26.75 after global rating agency S&P placed it on Credit Watch saying that it is uncertain whether the lender will be able to meet capital requirements.

Shares of Maruti Suzuki India ended at Rs 6,094.90, down 2.90 percent, after reports emerged that Toyota and Suzuki entered into a capital alliance agreement. Toyota is planning to acquire 4.9 percent stake in Suzuki worth ¥96 billion. Likewise, Suzuki plans to acquire a stake in Toyota worth ¥48 billion, CNBC TV18 reported.

Shares of Kalpataru Power Transmission lost 5.33 percent to end the day at Rs 448.75 after the company said that the World Bank had issued it a notice over alleged irregularities in its Africa business.

Shares of Coffee Day Enterprises remained locked in 5 percent lower circuit at Rs 82.75 after media reports indicated that private equity (PE) player TPG Capital is planning to take over the firm for about Rs 4,000 crore. The valuation set by the PE firm is much lower than what late founder VG Siddhartha was seeking.

Shares of RBL Bank plunged 12.09 percent to close at Rs 313.65. The stock plunged on concerns of the bank’s high exposure to the CCD group which, as per media reports, is likely to be taken over by TPG Capital at a lower valuation.

Shares of Hindustan Unilever (HUL) declined 1.82 percent to Rs 1,827.75 amid reports that the company cut prices of some of its soaps by as much as 30 percent in a bid to cope with weak demands amid tough competition.

Global markets:

World stocks nudged down as deepening inversion of the US bond yield curve a day earlier threw up reminders of looming recession risks, sending investors towards safe havens such as the Japanese yen and precious metals, Reuters reported.

Stocks in Asia ended mixed. Shanghai composite declined 0.29 percent while Hang Seng index fell 0.19 percent.

Nikkei 225 added 0.11 percent to close at 20,479.42 while the Topix closed at 1,490.35. Kospi closed 0.86 percent higher at 1,941.09. Australia’s S&P/ASX 200 rose 0.45 percent to 6,500.60.

Technical view:

Nifty formed a negative candle on the daily chart. “This indicates a near term down reversal in the market. The key overhead resistance of 11,150 levels (resistance as per the concept of change in polarity) is weighing high on the market,” said Nagaraj Shetti, Technical Research Analyst, HDFC securities.

Technically, today’s weakness in the Nifty could indicate a short term reversal in the market. There is a possibility of some more weakness in the next one-two sessions. But, the expected decline is unlikely to damage the recent uptrend status of the Nifty. Important supports to be watched around 10,900-850, where one may expect reliable upside bounce from the lows, the analyst added.Subscribe to Moneycontrol Pro and gain access to curated market data, trading recommendations, stock analysis, investment ideas and insights from market gurus. Now, get Moneycontrol PRO for 1 year at Rs 289. Use code FREEDOM.