Benchmarks trade lower with around 1% cut in early deals

Indian equity benchmarks made gap-down opening on Tuesday tracking sell-off in the Asian peers. Markets are trading in red terrain with cut of around a percent each in early deals. Selling in banking, metal and auto stocks weighted down on the domestic indices. Rising coronavirus cases in the country also dampened sentiments in the markets. India has recorded over 28,000 new cases in a day to take its total number of Covid-19 cases to 907,645. This is the third consecutive day when India has recorded over 28,000 new cases. Adding more concern, the government data showed retail inflation increased to 6.09% in June, mainly on account of higher prices of food items. As per the data, food inflation in June increased to 7.87%. Besides, investors are eyeing the wholesale inflation data to be out later in the day. Market participants largely overlooked Niti Aayog Vice Chairman Rajiv Kumar’s statement that there is a need to translate the coronavirus-led pandemic situation into an opportunity to meet the sustainable development goals.

On the global front, all the Asian markets are trading lower following the mostly negative cues overnight from Wall Street after California Governor Gavin Newsom rolled back the state's reopening following a recent spike in coronavirus cases. Worries about the rising number of coronavirus cases globally and renewed US-China tensions dampened investor sentiment. The White House has rejected China's expansive claims in the South China Sea.

Back home, aviation stocks were trading lower with the International Air Transport Association’s (IATA) statement the passenger demand for air travel will contract by 49% this year for Indian carriers in comparison to last year due to the Covid-19 crisis. In scrip specific developments, Wipro gained ahead of its Q1 earnings results. On the other hand, Vodafone Idea was trading in red. The company has moved the telecom tribunal, challenging the sector regulator's July 11 order blocking its RedX premium tariff plan.

The BSE Sensex is currently trading at 36358.68, down by 335.01 points or 0.91% after trading in a range of 36339.07 and 36538.10. There were 7 stocks advancing against 23 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index lost 0.56%, while Small cap index was down by 0.46%.

The top gaining sectoral indices on the BSE were Telecom up by 0.45%, Healthcare up by 0.40%, IT up by 0.25%, TECK up by 0.24%, Oil & Gas up by 0.14%, while Bankex down by 1.78%, Metal down by 1.42%, Auto down by 1.26%, Power down by 0.99%, Consumer Durables down by 0.92% were the top losing indices on BSE.

The top gainers on the Sensex were HCL Technologies up by 0.82%, Bharti Airtel up by 0.63%, Nestle up by 0.57%, Infosys up by 0.50% and ITC up by 0.48%. On the flip side, Indusind Bank down by 3.82%, HDFC down by 3.33%, Bajaj Finserv down by 2.48%, Axis Bank down by 2.28% and HDFC Bank down by 1.96% were the top losers.

Meanwhile, Fitch Ratings in its latest report has said that a near-term recovery for India's non-banking financial institutions (NBFIs) is not probable, as the sector continues to wrestle with the fallout of coronavirus pandemic. It said ‘we believe the significant economic disruption and prevailing uncertainty caused by the pandemic will impede a return to a more normal operating environment for NBFIs, with consequences for new loan disbursements, asset quality and provisioning, sector profitability, and funding conditions.’

The rating agency has predicted that uncertainty stemming from tepid consumer demand and a sustained high level of coronavirus infections are likely to hurt the gradual economic reopening that has shown improved collections and funding availability since June 2020. It also said construction finance could witness downsizing amid delayed construction activity and lower unit sales. Other segments that may also witness consolidation, should the downturn persist, include infrastructure finance, low-yielding corporate loans as well as loans against property in urban areas. It, however, said that NBFIs in India are highly differentiated, and some lending segments will benefit from a quicker recovery.

According to the report, those in gold-backed loan sector could see an earlier revival due to lower ticket sizes, greater market confidence in the loan collateral and a more robust outlook for the rural sector, where many larger gold lenders are focused. It also noted that other commercial segments, such as commercial vehicle finance, should see a gradual pickup as freight demand improves. Fitch also expects India's GDP to remain weak in the next quarter or two, contracting by 5 percent in the fiscal year ending March 2021 (FY21) before recovering to 8 percent growth in FY22.

The CNX Nifty is currently trading at 10706.00, down by 96.70 points or 0.90% after trading in a range of 10703.05 and 10755.65. There were 13 stocks advancing against 37 stocks declining on the index.

The top gainers on Nifty were Dr. Reddy’s Lab up by 0.78%, HCL Technologies up by 0.78%, Nestle up by 0.65%, UPL up by 0.61% and Cipla up by 0.60%. On the flip side, Indusind Bank down by 3.84%, HDFC down by 3.24%, Zee Entertainment down by 2.76%, Bajaj Finserv down by 2.46% and Axis Bank down by 2.25% were the top losers.

All the Asian markets are trading in red; Nikkei 225 declined 208.44 points or 0.91% to 22,576.30, Straits Times slipped 17.02 points or 0.65% to 2,614.06, Hang Seng dropped 436.16 points or 1.69 % to 25,335.96, Taiwan Weighted fell 32.80 points or 0.27 % to 12,178.76, KOSPI weakened 13.90 points or 0.64 % to 2,172.16, Jakarta Composite lost 4.59 points or 0.09 % to 5,059.86 and Shanghai Composite was down by 37.99 points or 1.10 % to 3,405.30.