The market slumped in mid-morning trade, tracking a selloff in global equities. The Nifty traded just above 11600 mark. At 11:17 IST, the barometer index, the S&P BSE Sensex, was down 616.41 points or 1.54% at 38,904.26. The Nifty 50 index was down 194.20 points or 1.64% at 11,616.55.
Sentiment in the global equity market was weak as hopes of steep cuts in interest rates by the US Federal Reserve faded after the world's largest economy posted better-than-expected jobs data Friday.
The India's government's move to increase minimum public shareholding in listed companies also disappointed domestic investors. Finance Minister Nirmala Sitharaman in her maiden Budget speech on Friday, 5 July 2019, urged Sebi to consider increasing the minimum public shareholding in listed firms to 35% from 25%. The proposal is potential negative for MNC and companies with high promoter holding. This proposal could also increase the supply of paper in the market, which would suck money out of secondary market.
The S&P BSE Mid-Cap index was down 1.75%. The S&P BSE Small-Cap index was down 2.4%. Both these indices underperformed the Sensex.
The market breadth was tilted in favour sellers. On the BSE, 402 shares rose and 1707 shares fell. A total of 100 shares were unchanged.
Auto stocks tumbled. Escorts (down 4.54%), Hero MotoCorp (down 4.4%), Ashok Leyland (down 3.16%), TVS Motor Company (down 2.42%), Bajaj Auto (down 2.35%), Eicher Motors (down 2.19%) and Mahindra and Mahindra (down 1.08%) declined.
Maruti Suzuki India was down 3.16%. The company cut its total vehicle production by 15.61% in June 2019 to 1.11 lakh vehicles.
The government has allocated Rs 10,000 crore to the Faster Adoption and Manufacturing of Electric Vehicles (FAME II) scheme on 1 April 2019 for faster adoption of electric vehicles and has announced upfront incentives for electric vehicles.
Phase-II of FAME Scheme, following approval of the Cabinet with an outlay of 10,000 crore for a period of 3 years, has commenced from 1 April 2019. The main objective of the Scheme is to encourage faster adoption of Electric vehicles by way of offering upfront incentive on purchase of Electric vehicles and also by establishing the necessary charging infrastructure for electric vehicles. Only advanced battery and registered e-vehicles will be incentivized under the Scheme with greater emphasis on providing affordable & environment friendly public transportation options for the common man.
Considering India's large consumer base, the government aims to leapfrog and envision India as a global hub of manufacturing of Electric Vehicles. Inclusion of Solar storage batteries and charging infrastructure in the above scheme will boost the government's efforts. The government has already moved GST council to lower the GST rate on electric vehicles from 12% to 5%. Also to make electric vehicle affordable to consumers, the government will provide additional income tax deduction of Rs 1.5 lakh on the interest paid on loans taken to purchase electric vehicles. This amounts to a benefit of around Rs 2.5 lakh over the loan period to the taxpayers who take loans to purchase electric vehicle.
Auto makers have voiced their displeasure about selling electric vehicles in such a short time frame, saying that such a programme would derail growth for the domestic auto industry which is already tackling challenges of BS VI, safety mandates and slowdown.
India Grid Trust was up 1.27% to Rs 87. The company announced that it has completed acquisition of two power transmission assets from Sterlite Power for a value Rs 5,025 crore. The asset acquisition is set to boost India Grid Trust's AUM to Rs 10,660 crore.
Reliance Capital was down 1.05% to Rs 61.4 after CARE Ratings revised its ratings to 'credit watch with negative implications' on company's long term debt program, market linked debentures and subordinated debt. CARE has stated this action is primarily due to likely utilization of part proceeds of divestments to meet the debt guaranteed by Reliance Capital which was not factored earlier.
Pharma stocks declined. IPCA Laboratories (down 2.81%), Wockhardt (down 2.43%), Sun Pharmaceuticals Industries (down 2.05%), Divi's Laboratories (down 1.69%), Cipla (down 1.54%), Piramal Enterprises (down 1.45%), Dr Reddy's Laboratories (down 0.73%), Alkem Laboratories (down 0.69%), Glenmark Pharmaceuticals (down 0.54%), Aurobindo Pharma (down 0.54%), Cadila Healthcare (down 0.5%), GlaxoSmithKline Pharmaceuticals (down 0.42%) and Lupin (down 0.12%) declined.
Solara Active Pharma Sciences was down 0.47% to Rs 443.35. The company announced that Solara Cuddalore facility completed USFDA Inspection with ZERO 483s inspectional observations. The inspection was conducted from 1 July 2019 to 5 July 2019.
Biocon was up 0.4% to Rs 240.7. The company announced that Biocon Sdn Bhd's Insulin Glargine Drug Substance, Drug Product and Device assembly facilities in Malaysia underwent a pre-approval inspection by the U.S. FDA between June 24 and July 5, 2019. The inspection across these 3 units concluded with 12 observations issued on the Form 483. The company further added that it will respond to the FDA with a Corrective and Preventive Action Plan and are confident of addressing these observations expeditiously.
Overseas, Asian stocks tumbled on Monday after a strong jobs report moderated expectations that the US Federal Reserve could soon be making a move on interest rates.
China's foreign exchange reserves expanded slightly to $3.1192 trillion at the end of June, official data showed Monday. The amount increased by $18.2 billion, or 0.6$ from the end of May, according to the State Administration of Foreign Exchange (SAFE).
US stocks closed slightly lower Friday, 5 July 2019, following an unexpectedly strong US payrolls report, reducing the chances of multiple Federal Reserve rate cuts by the end of the year.
On the data front, the US economy added a better-than-expected 224,000 jobs in June, while the unemployment rate ticked up slightly to 3.7% from 3.6%.