Mumbai: It is the second session of the new year and the benchmark indices are in a downtrend. The S&P BSE Sensex has slipped below its crucial support placed at 36,000 in intraday trade and ended below it.
The Nifty50 is not far behind. It has broken below Tuesday’s intraday low of 10,807 to hit a fresh low of 10,781 before regaining some strength on Wednesday. The index managed to close with losses of over a percent and below 10,800.
The S&P BSE Sensex saw a steep drop of over 500 points in intraday trade while Nifty50 saw a cut of 1 percent to trade below 10,800.
Technically, a close below 10,800 could put further pressure on the index, suggest experts.
“On the downside, index has support at 10,800-10,777 zones. Till it holds above 10,777 zones, overall bias could remain positive to range bound while a decisive move above 10,985 could start the fresh up move towards 11,176 levels,” Chandan Taparia, Associate Vice President, Analyst-Derivatives, Motilal Oswal Financial Services told Moneycontrol.
Here is a list of top five factors which could be weighing on D-Street:
Weak Asian Cues:
Overnight, US markets were closed while most of the Asian markets resumed trading on Wednesday after the New Year holiday. The cues were not supportive from the beginning of the session as most of the Asian markets were trading with a negative bias.
The Shanghai blue-chip index quickly shed 1.2 percent and South Korea fell 1.5 percent. Japan’s Nikkei was closed for a holiday.
China Slowdown weigh on metal stocks:
The S&P BSE Metal index slipped more than 2 percent in the second half of the trading session weighed down by losses in Vedanta, JSW Steel, Tata Steel, Hindalco on concerns of a slowdown in China.
China’s factory activity contracted for the first time in 19 months in December as domestic and export orders continued to weaken, a private survey showed, pointing to a rocky start for the world’s second-largest economy in 2019, Reuters reported.
The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) for December, released on Wednesday, fell to 49.7 from 50.2 in November, marking the first contraction since May 2017.
“Aluminium demand growth in 2019 is pegged at 2.5-3.5% YoY. However, weak Chinese demand in H2CY18 and further uncertainties expected in CY19 remain a cause of concern,” Edelweiss Securities said in a report.
“Driven by an expected deficit of ~2mt (~3% of overall demand), we see limited downside for LME Al prices. If costs dip post Alunorte resuming full production and/or thermal coal prices receding, LME Al prices could come under pressure,” it said.
CLSA has downgraded the metal sector which is also acting as an overhang for the sector. Deteriorating Chinese demand outlook is likely to weigh on commodity prices, it said.
The global investment bank slashed FY20-21 EPS estimates by 9-38 percent factoring in lower commodity prices and a stronger rupee.
Auto stocks under pressure:
The S&P BSE Auto index slipped over 2 percent weighed down by losses in Eicher Motors, M&M, TVS Motor, Tata Motors, Hero MotoCorp, as well as Ashok Leyland.
For Eicher Motors, December 2018 dispatches decline steeply by 13 percent on a YoY basis to 58,278 units. The numbers are below our estimates of 65,000 units and also sharply below market expectations.
Ashok Leyland December 2018 sales at 15,493 units have declined 20 percent YoY and are broadly in-line with our estimates of 15,950 units.
Hero MotoCorp December 2018 sales stood at 453,985 units, down 4 percent YoY and marginally below our estimates of 465,000 units. Increased competitive pressures and high channel inventory due to a weak festive season sales lead to the decline.
Indian manufacturing growth slows:
Indian manufacturing activity expanded at a slower pace in December as growth in new orders and output waned, despite factories cutting their prices, a private survey showed on Wednesday.
The Nikkei Manufacturing Purchasing Managers’ Index, compiled by IHS Markit, declined to 53.2 in December, below November’s 54.0 reading and a Reuter’s poll median of 53.6.
December saw the weakest increase in input costs for nearly three years, giving factories room to cut their prices for the first time since July 2017, Reuters reported.
GST collections drop for December:
Revenue collection from Goods and Services Tax (GST) fell to Rs 94,726 crore in December from Rs 97,637 crore a month ago, as per data released by the Finance Ministry on January 1.
Out of the total collection, Central GST (CGST) was Rs 16,442 crore, with states garnering Rs 22,459 crore State GST (SGST). At least Rs 7,888 crore was received as cess, with Rs 47,936 crore collected as Integrated GST (IGST), which is levied on the inter-state supply of goods and services and is divided between states and the Centre.
The government has set a target of over Rs 12 lakh crore for the financial year 2018-19, which can be achieved if the average monthly mop up is around Rs 1 lakh crore, as compared with Rs 89,885 crore in 2017-18.
