Indices end flat on Tuesday

Indian equity benchmarks ended flat with positive bias on Tuesday. After making cautious start, key gauges gained some strength and managed to keep their head above water in first half of trading session, as Finance Minister Nirmala Sitharaman announced a Rs 73,000 crore package, including advance payment of a part of wages to central government employees and cash in lieu of LTC, to stimulate consumer demand and investment in the economy damaged by the coronavirus pandemic. Some support also came as the RBI raised banks' maximum aggregate retail exposure limit to entities with turnover up to Rs 50 crore to Rs 7.5 crore, up from Rs 5 crore, in a bid to increase credit flow to small businesses. Market participants also took a note of the Federation of Indian Chambers of Commerce and Industry (FICCI) -- President Sangita Reddy’s statement that there is a need for convergence between self-reliance and globalisation, while sustainability and diversity would remain as cornerstones of future growth. She said the Indian industry would achieve faster growth and development under.

However, key gauges wiped out gains and turned highly volatile in second half of trading session, as traders reacted to muted domestic macro-economic data. Amid continuing rise in food prices, the inflation based on the Consumer Price Index (CPI) jumped to an eight-month high of 7.34 per cent in September. The retail inflation had stood at 6.69 percent in August, while it was 3.99 per cent in September last year. Besides, with lower output of manufacturing, mining and power generation sectors, industrial production, measured on the basis of Index of Industrial Production (IIP), declined by 8 percent in August. The IIP had contracted by 1.4 percent in August 2019. Some concern also came as the stalemate over compensating states for the shortfall in Goods and Services Tax (GST) collections continued with a meeting of the GST Council ending without reaching any consensus. The panel, which is the highest decision-making body on indirect taxes, for the second time in a week failed to reach a consensus on the Centre's proposal of states borrowing against future GST collections to make up for the shortfall.

On the global front, Asian markets ended mostly in green, as investors remained hopeful that the United States would soon pass a coronavirus relief package. Some support also came as data showed the country's trade balance surplus unexpectedly narrowed in September. China's exports continued to expand as global industrial operations resumed gradually and imports rebounded in September, driven by robust domestic demand. European markets were trading lower, as a second wave of coronavirus cases in Europe raised questions about the sustainability of economic recovery. German investor sentiment fell by more than expected in October, raising uncertainty about the outlook for Europe's largest economy. Meanwhile, Johnson & Johnson's move to pause its Covid-19 clinical trials also raised doubts about the timeline of a vaccine.

Finally, the BSE Sensex rose 31.71 points or 0.08% to 40,625.51, while the CNX Nifty was up by 3.55 points or 0.03% to 11,934.50.

The BSE Sensex touched high and low of 40,786.82 and 40,461.97, respectively and there 10 stocks advancing against 19 stocks declining, while 1 stock remain unchanged on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.29%, while Small cap index was down by 0.12%.

The top gaining sectoral indices on the BSE were Energy up by 1.54%, IT up by 1.46%, TECK up by 1.04%, Power up by 0.67% and Metal up by 0.64%, while Healthcare down by 1.23%, Consumer Durables down by 1.18%, Finance down by 0.98%, Bankex down by 0.79% and Auto down by 0.55% were the top losing indices on BSE.

The top gainers on the Sensex were HCL Technologies up by 3.94%, Kotak Mahindra Bank up by 2.40%, Infosys up by 2.27%, Reliance Industries up by 1.95% and Ultratech Cement up by 1.80%. On the flip side, Titan Company down by 2.18%, Sun Pharma down by 2.07%, ICICI Bank down by 1.91%, Bajaj Finance down by 1.56% and SBI down by 1.51% were the top losers.

Meanwhile, In order to stimulate consumer demand and investment in the economy, which has been hit hard by the coronavirus pandemic, Finance Minister Nirmala Sitharaman has announced a Rs 73,000 crore package, including advance payment of a part of wages to central government employees and cash in lieu of leave travel concession (LTC). She said as much as Rs 11,575 crore would be paid as LTC allowance and advance to central government and PSU employees on the condition that they spend on non-essential goods before March 31. 

The minister further said states would separately be eligible to get Rs 12,000 crore in 50-year interest-free loans for capital expenditure, while the Union government will spend an additional Rs 2,500 crore toward capital expenditure on roads, defence infrastructure, water supply and urban development. She said all these measures are likely to create an additional demand of Rs 73,000 crore and the proposals would stimulate demand in a fiscally prudent way. She added that the government, which had in May announced a Rs 20 lakh crore 'Aatmanirbhar Bharat' stimulus package, is pushing ahead with a full opening to try to boost the economy ahead of the usually high-spending festival season.

Sitharaman said the government will give its employees income tax-exempt cash vouchers in lieu of their entitled travel allowances this year. This cash will have to be spent on buying goods that attract 12 per cent or more GST -- a condition which eliminates the possibility of the cash being spent on essential items. She noted that Central public sector enterprises and banks will also follow the cue and give cash in place of LTC as travelling during the pandemic is near to impossible. Additionally, she said the government will as a one-time measure give Rs 10,000 salary loan to all its officers and employees as festival advance. These two measures are expected to create a consumer demand of about Rs 28,000 crore.

The CNX Nifty traded in a range of 11,988.20 and 11,888.90 and there were 22 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were HCL Technologies up by 4.05%, Infosys up by 2.46%, Kotak Mahindra Bank up by 2.15%, Reliance Industries up by 1.88% and Ultratech Cement up by 1.73%. On the flip side, Cipla down by 3.58%, Titan Company down by 2.58%, Adani Ports & SEZ down by 2.53%, Divis Lab down by 2.24% and ICICI Bank down by 2.13% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 23.60 points or 0.39% to 5,977.78, France’s CAC fell 14.36 points or 0.29% to 4,964.93 and Germany’s DAX was down by 40.09 points or 0.31% to 13,098.32.

Asian markets closed mostly higher on Tuesday, tracked by Wall Street's overnight gains on the back of a renewed tech rally and expectations of a corona virus relief package. Though, hopes for a vaccine for the corona virus were shaken after Johnson & Johnson said the Company had temporarily paused further dosing in all its Covid-19 vaccine candidate clinical trials including the Phase 3 ENSEMBLE trial due to an unexplained illness in a study participant. Chinese shares ended higher after China reported its exports jumped nearly 10% in dollar terms in September as its economy recovered from the pandemic. Japanese shares ended higher after reports that Japanese Prime Minister Yoshihide Suga will order his government to compile extra economic stimulus measures as early as in November. Trading in Hong Kong was suspended due to Typhoon Nangka.