NEW DELHI: Domestic stocks are likely to see a muted start as uncertainty over global economic recovery due to a spike in virus cases and fresh escalation in China-US tensions threaten to halt the bulls on their tracks. Global stock indices and oil prices fell in early trade on Tuesday. Nifty futures trading in Singapore hinted at a tepid start for Dalal Street.
Here’s breaking down the pre-market actions.
STATE OF THE MARKETS
SGX Nifty signals negative start
Nifty futures on the Singapore Exchange traded 37 points, or 0.35 per cent lower at 10,774, in signs that Dalal Street was headed for a negative start on Tuesday.
Tech View: Nifty50 gives up at the 200-day SMA
Nifty50 on Monday saw profit booking at the 200-day simple moving average (SMA) hurdle, as it cut substantial intraday gains to end half-a-per cent higher. The index now needs to hold above 10,700-level to extend its move towards 11,000 level. A key support exists at 10,650 level
Asian shares off to a weak start
Japan’s Nikkei 225 index was down 0.58 per cent or 131.39 points at 22,653.35 in early trade. Hong Kong’s Hang Seng slipped 0.42 per cent, or 108.96 points, to 25,663.16. CHina’s benchmark Shanghai Composite index fell 0.24 per cent, or 8.26 points, to 3,435.02.
Oil slips on demand recovery fears
Oil prices fell around 2 per cent in early trade on Tuesday on worries that new clampdowns on businesses to stem surging coronavirus cases in California and other U.S. states could threaten the nascent recovery in fuel demand. US WTI crude futures slid 84 cents, or 2.1 per cent, to $39.26 a barrel, while Brent crude futures fell 77 cents, or 1.8 per cent to $41.95 a barrel.
US stocks end mixed
Wall Street’s major averages erased strong earlier gains to finish mixed as investors focused on a continued spike in coronavirus infections in the United States.On Monday, the Dow Jones Industrial Average rose 10.50 points, or 0.04 per cent, to 26,085.80. The S&P 500 dropped 29.82 points, or 0.94 per cent, to 3,155.22. The Nasdaq Composite Index shed 226.60 points, or 2.13 per cent, to 10,390.84.
Rossari IPO subscribed 60% on Day 1
The initial public offer of specialty chemicals manufacturer Rossari Biotech was subscribed 60 per cent on the first day of bidding on Monday. The IPO received bids for 49,30,030 shares against the total issue size of 81,73,530 shares. The initial public offer comprises a fresh issue of Rs 50 crore and an offer for sale of over 1 crore equity shares including anchor portion of 35,02,940 equity shares.
DIIs sell Rs 1,486 cr worth of stocks
Net-net, foreign portfolio investors (FPIs) were buyers of domestic stocks to the tune of Rs 221.76 crore, data available with NSE suggested. DIIs were net sellers to the tune of Rs 1,485.59 crore, data suggests.
Rupee: The rupee settled on a flat note at 75.19 against the US dollar on Monday amid high volatility in the domestic equity market.
10-year bonds: India 10-year bond yield rose 0.45 per cent to 5.78 after trading in 5.77-5.78 range.
DATA/EVENTS TO WATCH
Q1 Earnings: Century Textiles I Delta Corp I Hind Copper I ICRA I MindTree I Oberoi Realty I RIIL I Wipro
China June Balance of Trade (08.30 am)
Japan May Industrial Production (10.00 am)
Britain May Balance of Trade (11.30 am)
Britain May Industrial Production (11.30 am)
India June WPI Inflation YoY (12.00 pm)
ECB Bank Lending Survey (01.30 pm)
Euro Area May Industrial Production (02.30 pm)
US June Inflation Rate (06.00 pm)
Opec Monthly Report
US-China tension escalates … Relations between the US and China were further strained with Washington rejecting Beijing’s claims in the South China Sea. That reversed a previous policy of not taking sides in territorial disputes in the region and escalated tensions on yet another front. Beijing criticised the move as inciting tensions in the region, which highlighted an increasingly testy relationship. US Secretary of State Mike Pompeo said China has offered no coherent legal basis for its ambitions in the South China Sea and for years has been using intimidation against other coastal states.
Sensex historically delinked from economy… Indian stock market returns have little bearing on the underlying economy if one were to go by statistical correlation and historical examples. For instance, the Sensex delivered 224% return in FY1992, while real GDP stood at a measly 1.12%. When real GDP growth was 8.5% in FY2011, the highest in the last decade, Sensex return that year was 6.6%. In last five financial years, Sensex’s average annual return has been 2.9% compared with average real GDP growth of 6.7%. The BSE500’s correlation was a little stronger in last two decades, but Sensex’s was extremely weak over a 40-year time frame.
Millennial rush spells trouble… The millennial rush into Indian equities in the past three months has created its own set of unique problems for different people. While mutual funds are worried whether it will draw funds out of the industry after equity schemes reported a 95% drop in inflows in June, stock brokerages are facing a problem of plenty, and the prospect of a regulatory glare. Many brokerages are offering innovative products to clients, especially the millennial clients, while some are offering basket services, where a clutch of stocks are available for purchase by the investor. Legal experts say brokerages cannot offer such products without a PMS licence.
Consumer firms hit by fresh lockdown… Large manufacturers and retailers of consumer goods, smartphones and automobiles said sales have declined by about a third in the past week as localised lockdowns have been rolled out across the country to arrest the spread of Covid-19. That’s reversed the gains industry had made in June after the nationwide lockdown imposed in March was eased. Pune and Bengaluru are among the cities going under lockdown.
Inflation accelerated in June… Retail inflation accelerated in June due to higher food, clothing, footwear and intoxicant prices and the jump was above expectations and pointed to price pressures, amid the national lockdown. Data released by NSO on Monday showed inflation as measured by the consumer price index (CPI) rose an annual 6.1% in June, higher than the 5.8% in March. The NSO did not release the overall inflation numbers for two months due to difficulty in getting responses from the field due to the lockdown.
MS downgrade Indian equity…. Morgan Stanley has downgraded its rating on India to ‘equal weight’ in its Asia Pacific ex-Japan and Emerging Market baskets due to the worsening scores on earnings revisions, net margins and asset turnover. “Current earnings revision trends looking worse than peers, while weak net margins and asset turnover trends are partly compensated for by cheap relative valuations,” Morgan Stanley analysts led by the Chief Asia and Emerging Market Strategist Jonathan Garner said in a note dated July 12. This downgrade comes as Indian equities have rallied more than 40% from their March lows.
India not against imports… Commerce and industry minister Piyush Goyal on Monday said India is not against imports and it will need to import certain products as every country can’t produce everything. “We will need to import certain products where we have difficulty. Every country can’t produce everything. Every country can’t be competitive in everything,” Goyal said at a virtual event of the Bombay Chamber of Commerce and Industry.
Banks fund-raise rush raises worry… The rush by Indian banks to raise capital signals an anticipated surge in defaults that will erode capital and crimp growth, according to some analysts, who see bad loans rising by the year end as the coronavirus pandemic and the lockdown effect play out. The banks, which have announced fund-raising plans of more than Rs 1 lakh crore, say it’s just prudence, in line with recent central bank advice. State-run lenders are yet to firm up capital-raising plans in the expectation that the federal government will address this sooner rather than later.
LIC gains market share amid Covid disruption… LIC legacy corporate tie-ups and extensive distribution network have helped it extend dominance through the coronavirus pandemic, with its market share in the new business premium rising to 74% in June from 69% in March. The consolidation in market share is despite the insurance behemoth’s NBP declining by 18% in the first quarter of the fiscal year against the same period last year, IRDAI data showed.
Bharat Bond offers good deal to high earners… Retail investors falling under the lower income-tax brackets could give the upcoming Bharat Bond Exchange Traded Fund’s follow-up offering a miss. Investment advisors said the product is better suited for rich individuals who are looking for liquidity and better taxefficient returns. The offering of this debt fund — the only bond ETF in the country — will open on July 14 for three days. The bond would work well for those in the higher tax brackets and whose annual income exceeds Rs 10 lakh a year as gives both liquidity and tax-efficient returns, they said.
India Inc set for record fund raise… Indian companies are set to raise a record $30-35 billion in share sales this year, an internal estimate by Wall Street bank JP Morgan showed, with local lenders and businesses tapping into global liquidity through qualified institutional placements, rights issues, follow-on public offers and block deals. Although businesses have been disrupted from Tokyo to Toronto since early February due to the protracted lockdowns, Indian companies have already raised about $22 billion so far this year