Domestic indices end lower on weak global cues

Indian equity benchmarks took a breather and ended in negative territory on Thursday, owing to a sell-off in counters such as Ultratech Cement, Mahindra & Mahindra, HDFC Bank, and Indusind Bank. The benchmarks staged a gap down opening, on sell-off in the global peers. Rising coronavirus cases also impacted the sentiments in the markets. Trade sentiment remained cautious with private report stated that the public health crisis due to the COVID-19 pandemic has emerged as the top threat for Indian corporates, while cyber attacks and data frauds loom equally large. Some anxiety also came with former Deputy Governor of RBI Viral Acharya’s statement that revising up inflation bands for the central bank will hurt the poor. He also said India has to devise ways of pushing up growth in a structural manner and not by ‘pump-priming’ measures like easy credit and easy liquidity.

However, in the late afternoon session, Indian equities managed to recover from the lowest point of the day, as the Asian Development Bank (ADB) raised the growth forecast for India in the current fiscal year to minus 8 percent from the minus 9 percent projection in September while keeping the outlook for the next fiscal year at 8 percent. At the same time, it said economic activity in developing Asia is forecast to contract by 0.4 percent this year before picking up to 6.8 percent in 2021 as the region moves toward recovery from the effects of the coronavirus disease (COVID-19) pandemic. Some respite also come as the Union Cabinet approved Rs 22,810 crore outlay for a new employment scheme that aims at encouraging businesses to do fresh hiring.

On the global front, Asian markets ended mostly lower on Thursday as Brexit negotiations reached stalemate and U.S. lawmakers failed to come to agreement over a proposed stimulus package. Meanwhile, the Bank of Japan said that producer prices in Japan were down 2.2 percent on year in November, in line with expectations following the 2.1 percent decline in October. Export prices were flat on month and down 2.1 percent on year in November, while import prices rose 0.5 percent on month and plummeted 10.6 percent on year. European markets were trading higher, as focus shifted towards a European Central Bank meeting later in the day amid expectations the central bank will increase and extend its pandemic bond-buying program. Besides, data from the Office for National Statistics revealed the U.K. economy expanded for the sixth straight month in October but the pace of growth moderated as expected. Gross domestic product climbed 0.4 percent month-on-month, slower than the 1.1 percent growth seen in September. This was the sixth consecutive monthly growth.

Finally, the BSE Sensex fell 143.62 points or 0.31% to 45,959.88, while the CNX Nifty was down by 50.80 points or 0.38% to 13,478.30.

The BSE Sensex touched high and low of 46,043.97 and 45,685.87, respectively and there were 12 stocks advancing against 18 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.57%, while Small cap index was down by 0.65%.

The top gaining sectoral indices on the BSE were FMCG up by 2.69%, Realty up by 0.54%, Telecom up by 0.28% and Metal up by 0.26%, while Basic Materials down by 1.35%, Power down by 1.07%, Auto down by 0.98%, Energy down by 0.84% and Utilities down by 0.73% were the losing indices on BSE.

The top gainers on the Sensex were Nestle up by 4.17%, ITC up by 3.58%, Hindustan Unilever up by 2.61%, Kotak Mahindra Bank up by 1.13% and Larsen & Toubro up by 0.78%. On the flip side, Ultratech Cement down by 3.27%, Mahindra & Mahindra down by 2.50%, HDFC Bank down by 1.42%, Indusind Bank down by 1.34% and Axis Bank down by 1.10% were the top losers.

Meanwhile, terming the current 4 percent midpoint on price-rise as a ‘reasonable target’, former Deputy Governor of RBI Viral Acharya has said that revising up inflation bands for the central bank will hurt the poor. He also said India has to devise ways of pushing up growth in a structural manner and not by ‘pump-priming’ measures like easy credit and easy liquidity. It can be noted that revising up the inflation target can help the RBI deliver more rate cuts to address the concerns on growth.

Acharya has stated that fearing inflation to go up higher in the immediate future, the RBI opted for a status quo in rates at recently bi-monthly policy review, the third consecutive time that it has chosen this route despite the GDP in contraction mode. He noted that those pitching for a 6 percent inflation should get into poor man's shoes for a day to see how price rise pinches and finally impacts his consumption.  He said ‘when food and fuel are actually at very very high levels of inflation, not just broadbased inflation which is also high in India at present, actually these people (poor) have to seriously constrain their consumption basket’.

He further said ‘my sense is that unfortunately the story of growth and inflation trade-off in india has become one of the rich and the urban economy, its actually not paying enough attention to ensuring that the basic levels of (poor man's needs).’ It can be noted that the present 4 per cent target with a 2 percentage point leeway on either side is coming to an end in March. He added that the actual inflation has been overshooting for the last few months, leading to the status quo in rates by the RBI, which is disappointing many pro-growth voices.

The CNX Nifty traded in a range of 13,503.55 and 13,399.30 and there were 20 stocks advancing against 30 stocks declining on the index.

The top gainers on Nifty were Nestle up by 4.16%, ITC up by 3.77%, Britannia Industries up by 3.14%, Hindustan Unilever up by 2.39% and Adani Ports & SEZ up by 1.70%. On the flip side, UPL down by 11.29%, Ultratech Cement down by 3.32%, Shree Cement down by 2.79%, Tata Motors down by 2.60% and Mahindra & Mahindra down by 2.42% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 42.17 points or 0.64% to 6,606.46, France’s CAC increased 24.63 points or 0.44% to 5,571.45 and Germany’s DAX increased 27.05 points or 0.2% to 13,367.31.

Asian markets ended mostly lower on Thursday as Brexit negotiations reached stalemate and US lawmakers failed to come to agreement over a proposed stimulus package. Japanese shares ended lower amid stalled US stimulus talks and worries about rising coronavirus cases in the US. Further, Seoul stocks ended lower on massive selling by foreign investors amid uncertainties over the quadruple expiration of key stock derivatives, including Kospi-tracking options and futures. Chinese shares ended little changed after S&P Dow Jones Indices said it would remove a total of 21 Chinese companies from its equities and bond indexes.