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Bears in full control of Dalal Street on Friday; Nifty plunges below 9,750 level

Friday turned out to be a nightmarish session of trade for Indian equity benchmarks with frontline gauges shaving off over a percentage point. Domestic equities witnessed a huge bloodbath, as bears took charge resulting key indices fell below their psychologically important 31,300 (Sensex) and 9,750 (Nifty) levels, respectively, as stock markets across the world went into a tailspin amid an ongoing escalation in tensions between the US and North Korea. Markets made a pessimistic start, as traders remained concerned over SEBI’s crackdown on shell companies and a stand-off in the Doklam area of the Sikkim sector between Indian and Chinese troops. Sentiments also remained dampened with report that the Reserve Bank of India (RBI) has halved its dividend payout to the government to Rs 30,659 crore for the fiscal ended June 2017. Last fiscal, the RBI had transferred Rs 65,876 crore surplus as dividend to the government. This would potentially impact the government’s fiscal math this financial year, which is under pressure due to state-run banks’ sluggish earnings growth.

Markets tried to pare some of their losses but another wave of selling in second half of trade dragged markets to intraday lows. Sentiments weighed on report that there were downside risks to India’s projected growth of 6.75-7.5 percent growth in 2017-18, the finance ministry’s Mid-Term Economic Survey said in a guarded forecast, indicating that multiple pain points continue to hinder growth in the broader economy amid an uncertain fiscal outlook. The second part of the Economic Survey for 2016-17, which besides giving an overview of India’s economy, was also critical about ad hoc state-sponsored farm loan write-offs to deal with rural distress. Separately, flows from foreign portfolio investors into India have slowed of late as rich valuations and delay in corporate earnings recovery have reduced their appetite for domestic stocks.

Global cues too dampened sentiments with European stocks trading in red in early deals putting them on track for their worst week this year as ratcheting political tensions dented equities worldwide. Asian markets ended in red terrain, hit by tough language between North Korea and Washington that has sparked safe haven demand.

Back home, selling was both brutal and wide-based, as none of sectoral indices on BSE, barring Consumer Durables and Healthcare, were spared. Counters, which featured in the list of worst performers, include metal, auto and public sector undertakings. PSU Banking sector slumped after State Bank of India (SBI) reported its earnings for the quarter ended June which was a mixed bag. The net profit came above estimates but asset quality remains a drag. Besides, the FICCI-IBA survey also highlighted that banks with operations in India witnessed a significant rise in non-performing assets during the first half of 2017. Tyre stocks remained buzzing with ICRA’s latest report that tyre volume demand is expected to grow by seven to eight per cent during FY18 and FY19 on the back of higher OEM demand and stable replacement demand.

The NSE’s 50-share broadly followed index Nifty declined by around one hundred and ten points to end below its psychological 9,750 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex was down by around three hundred and twenty points to end below its crucial 31,300 mark. The broader markets too witnessed selling pressure and ended the session in red. The market breadth was in the favour of decliners, as there were 980 shares on the gaining side against 1,558 shares on the losing side, while 129 shares remain unchanged.

Finally, the BSE Sensex tumbled 317.74 points or 1.01% to 31,213.59, while the CNX Nifty was down by 109.45 points or 1.11% to 9,710.80.

The BSE Sensex touched a high and a low of 31,379.20 and 31,128.02, respectively and there were 7 stocks on gaining side as against 24 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index shed 0.20%, while Small cap index was down by 0.23%.

The only gaining sectoral indices on the BSE were Consumer Durables up by 0.33% and Healthcare was up by 0.22%, while Metal down by 3.63%, Auto down by 1.51%, PSU down by 1.50%, Realty down by 1.32% and Basic Materials was down by 1.30% were the top losing indices on BSE.

The top gainers on the Sensex were Dr. Reddy’s Lab up by 3.20%, Tata Motors - DVR up by 1.50%, Lupin up by 0.71%, Wipro up by 0.66% and Axis Bank up by 0.63%. On the flip side, SBI down by 5.36%, Mahindra & Mahindra down by 3.20%, Reliance Industries down by 2.37%, Larsen & Toubro down by 2.30% and NTPC down by 2.20% were the top losers.

Meanwhile, Minister of State for Petroleum and Natural Gas Dharmendra Pradhan has said that the government is planning to bring a new bio-fuel policy for encouraging its use in transport fuel that will catalyse Rs 1 lakh crore of investment in the entire value chain. He also noted that this will be in line with the government’s commitment to cut down emission and bring down the overall oil import bill.

The Petroleum Minister has pointed out that India imports 80 percent of its crude oil needs and use of biofuel extracted from non-edible oils will help meet the target of reducing imports by 10 percent by 2022. He also said that India's top three state-owned oil companies have committed approximately $2 billion investment in research and development (R&D) on biofuels. He added that they will soon take to the Cabinet a biofuel policy that will provide for investment climate, incentives, government role and commercial returns for developers.

Adding further, Pradhan said that the new policy will help develop a biofuel economy worth Rs 1 lakh crore in the next two years. He also said that the government has already asked state oil companies to set up ethanol plants at 12 locations over the coming year. He noted that promoting biofuels creates jobs, fosters economic growth, supports farmers and helps improve energy security for the country. He added that ways are being explored on conversion of urban, rural waste to fuel and use of waste/barren lands for cultivation of feedstock for 2G biofuels.

The CNX Nifty traded in a range of 9,771.65 and 9,685.55. There were 15 stocks in green as against 35 stocks in red, while one stock remained unchanged on the index.

The top gainers on Nifty were Dr. Reddy’s Lab up by 3.43%, Aurobindo Pharma up by 2.88%, GAIL India up by 1.08%, Axis Bank up by 0.87% and Tata Motors - DVR up by 0.79%. On the flip side, Hindalco down by 7.14%, Vedanta down by 6.59%, SBI down by 5.58%, Bank of Baroda down by 4.18% and Bosch down by 3.91% were the top losers.

European markets were trading in red; UK’s FTSE 100 declined 78.98 points or 1.07% to 7,310.96, France’s CAC decreased 55.38 points or 1.08% to 5,059.85 and Germany’s DAX was down by 34.76 points or 0.29% to 11,979.54.

Asian equity markets closed lower on Friday as the escalation in tensions surrounding North Korea continued to push investors towards safe-haven assets such as the Japanese yen, the Swiss franc and gold. Hong Kong shares fell, dragged down by a sell-off in internet-related shares and fears over the impact of rising tensions between the United States and North Korea. Meanwhile, China stocks stumbled as a growing war of words between the United States and North Korea combined with profit-taking in cyclical sectors to send shares down for the week. Seoul shares ended lower amid selling by foreign investors following Trump's fresh warning to North Korea. The Japanese market was closed in observance of the Mountain Day holiday.

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