Indian equities ended the day flat after a choppy trading session on Friday, as the stimulus measures failed to improve sentiment. Making matters worse were news of rising tensions between US and China. The 50-share Nifty ended the day 5.9 points lower to close at 9136.85, while the Sensex declined 25.16 points or 0.08% to close at 31,097.73. The benchmarks so far in May have declined by 7.3% to 7.7%, respectively. Foreign portfolio investors (FPIs) continued to sell equities on Friday, offloading shares worth $314.58 million. On the other hand, domestic institutional investors bought equities worth $161.44 million.
The benchmark indices turned volatile during the last hour of trade where they went into the positive territory briefly but ended the day flat. The benchmarks are ending the week in the negative for the second straight week. Sorbh Gupta, associate fund manager, Quantum Mutual Fund, said, “The rally in April did not reflect the economic reality. However, as and when the corporate results come out and management commentary becomes more meaningful, the market will start having more realistic reactions.”
Finance minister Nirmala Sitharaman in the third tranche of fiscal stimulus announcements targeted the agriculture, fisheries and allied sectors. So far, the finance minister has announced measures targeted at MSMEs, non-banking finance companies, migrant workers, as well as street vendors. The equity markets have had a tepid response to the measures announced so far. According to experts, there aren’t many measures in the current fiscal stimulus package to incite a big response from the market.
“The measures may not do much to cheer up the markets besides the measures on NBFCs that would help ease their stress,” said Sorbh Gupta. According to him, the current government has historically focused on supply side issues and the announced fiscal stimulus has done the same which may not lead to creation of demand. He explained that the economy may witness a natural revival of demand.
On the NSE, the F&O segment saw thin volumes worth Rs 5.61 lakh crore against the six month average of Rs 14.21 lakh crore. The cash market saw volumes worth Rs 43,660.14 crore against the six month average of Rs 40,898 crore. Indian benchmarks underperformed most global benchmarks during the day’s trading session. Asian markets started the day on a positive note extending the gains made by Dow Jones due to the opening up of the US economy after the lockdown. They, however, made cautious gains on rising US -China tensions. The benchmarks in Singapore, South Korea and Taiwan were up by 0.05% to 0.3%. The markets in China and Hong Kong were down by 0.07% and 0.14% respectively. European markets were positive with the bourses in France, United Kingdom and Germany up by 0.3% to 1.27% respectively. Dow Jones Mini futures were down by 243 points after the Trump administration moved to block semiconductor shipments to China-based telecom giant Huawei.
Banking stocks were at the forefront of selling on Friday with Nifty Bank down by 1.23%. The biggest losers among the banking stocks were Bank of Baroda, Federal Bank, Bandhan Bank, Axis Bank and RBL Bank, declining by 3.7%, 3.52%, 3.42%, 3.27% and 2.7%, respectively.
According to a report by ICICI Securities, as the fear of income loss rises, the skewed asset allocation of the Indian households towards largely illiquid physical assets (95% of assets in property, vehicles, machinery, gold, among others) could incrementally shift towards relatively liquid and safe assets. “We believe financial intermediaries in sectors such as insurance and banks with strong brand loyalty, proven retail franchise, strong execution and clean balance sheets should benefit in current environment,” said ICICI Securities in its report.
The biggest losers on Nifty were Mahindra and Mahindra, Zee Entertainment, Axis Bank, Bharti Infratel and UPL which were down by 4.6%, 3.6%, 3.27%, 3.15% and 3%. The gainers on Nifty were Vedanta, Bharti Airtel, BPCL, Asian Paints and Tata Steel that went up by 3.8%, 2.7%, 2.62%, 2.14% and 1.7%, respectively. Sectorally, the biggest losers were Nifty Media, Nifty PSU Bank, Nifty Realty, Nifty Private Bank, and Nifty Bank. The only gainers were Nifty Metal and Nifty FMCG. Among the broader indices, the Nifty Midcap was down by 0.2% whereas Nifty Smallcap traded flat down by 0.03%.