Benchmarks trade deeply in red in early deals after positive start

Indian equity benchmarks made slightly positive start on Tuesday but soon slipped below neutral lines and extended their losses. markets are trading lower with cut of over half a percent each in early deals on account of selling in most of the sector indices led by, Industrials and Consumer discretionary. Early support came in as rating agency Crisil’s report that corporate profits rose 15 per cent to touch an all-time high in the September quarter as margins widened on softer input costs and better utilistaion levels. But, rising corona virus cases dampened sentiments in markets. With 19,174 fresh Covid-19 cases, India's caseload now stands at 10,075,422. The country's death toll has mounted to 146,145. Market participants turned cautious as Maharashtra government imposed a curfew from 11 pm to 6 am in all municipal corporations from December 22 till January 5, 2021. The decision has been taken in view of the emergence of new strains of coronavirus in the UK.

On the global front, Asian markets were trading lower though the downside remained limited after US stocks recovered from an early plunge to finish on a flat note overnight on optimism about Congress passing a new stimulus bill. China's market dropped after the Trump administration published a list of Chinese and Russian companies with alleged military ties that restrict them from buying a wide range of US goods and technology.

Back home, aviation stocks were in focus, a day after the government banned flights from the UK till December 31 over a new fast-spreading strain of the coronavirus in that country. In scrip specific development, Tata Motors came under pressure amid report that it would increase the prices of its commercial vehicle with effect from January 1, 2021.

The BSE Sensex is currently trading at 45239.99, down by 313.97 points or 0.69% after trading in a range of 45203.39 and 45938.40. There were 7 stocks advancing against 23 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index declined 2.21%, while Small cap index was down by 2.68%.

The only gaining sectoral index on the BSE was IT up by 0.16%, while Energy down by 2.27%, Industrials down by 2.13%, Consumer discretionary down by 2.03%, Capital Goods down by 1.87%, Auto down by 1.73% were the top losing indices on BSE.

The top gainers on the Sensex were HDFC up by 0.95%, HCL Technologies up by 0.56%, TCS up by 0.54%, Power Grid up by 0.49% and Infosys up by 0.44%. On the flip side, ONGC down by 2.78%, Bajaj Finance down by 2.64%, Indusind Bank down by 2.07%, Mahindra & Mahindra down by 2.06% and Reliance Industries down by 1.96% were the top losers.

Meanwhile, the economic think-tank NCAER, in its mid-year review of the Indian economy, has said that India's Gross Domestic Product (GDP) growth is likely to turn positive at 0.1 per cent in the October-December (Q3) quarter, after witnessing a contraction in the first half of the current financial year. It also forecast 2 per cent growth in the fourth quarter (January-March 2021). It noted that the overall contraction in the current fiscal is likely to be contained at 7.3 per cent. Besides, India's economy contracted by 23.9 per cent in the first quarter of the current fiscal on the account of the impact of the coronavirus pandemic. The contraction narrowed to 7.5 per cent in the second quarter.

The mid-year review report said ‘The sharp recovery of GDP in Q2, the bowstring effect, was a welcome surprise. We have accordingly revised our forecast of annual contraction to (-) 7.3 per cent. The revised growth forecasts for Q3 and Q4 are 0.1 per cent and 2 per cent respectively’. Earlier, the NCAER had estimated the GDP contraction for the full year at 12.6 per cent. It further said the ongoing recovery notwithstanding, the long term effect of sharp contraction in 2020-21 is likely to be long-lasting.

The think-tank said the economy will have to grow at more than the previous trend rate for it to catch up with its pre-pandemic growth path. It also said ‘Conventional macroeconomic policies alone will not do. These will have to be supported by deep and wide ranging reforms, especially in the financial sector, power and foreign trade’. it noted ‘Additional reforms in health, education, labour and land are also urgent, but these will require close coordination between the Centre and states in a spirit of cooperative federalism since these are in the main State subjects in the 7th Schedule of the Constitution’.

NCAER also estimated that the combined fiscal deficit of the Centre plus states will amount to over 14 per cent of GDP for the full financial year after factoring in the projected 7.3 per cent economic contraction. It said ‘Taken together with RBI liquidity infusion of well over 6 per cent of GDP, this translates to a very significant total stimulus that compares well with most emerging market economies’. It added nevertheless, the fiscal stimulus could have been much more effective on several counts.

The CNX Nifty is currently trading at 13220.20, down by 108.20 points or 0.81% after trading in a range of 13211.55 and 13446.75. There were 7 stocks advancing against 43 stocks declining on the index.

The top gainers on Nifty were HCL Technologies up by 0.59%, Power Grid up by 0.43%, TCS up by 0.36%, Tech Mahindra up by 0.30% and Divis Lab up by 0.27%. On the flip side, Tata Motors down by 3.92%, Bajaj Finance down by 3.17%, IOC down by 2.58%, ONGC down by 2.50% and Hero MotoCorp down by 2.46% were the top losers.

Asian markets were trading in red; Nikkei 225 declined 148.08 points or 0.55% to 26,566.34, Straits Times lost 8.49 points or 0.30% to 2,838.03, Hang Seng fell 22.35 points or 0.08% to 26,284.33, Taiwan Weighted decreased 14.38 points or 0.10% to 14,370.58, KOSPI slipped 5.24 points or 0.19% to 2,773.41, Jakarta Composite plunged 38.76 points or 0.63% to 6,126.86 and Shanghai Composite was down by 6.74 points or 0.20% to 3,413.83.