Local indices settle lower on Wednesday

Indian equity benchmarks retreated from the record highs and settled lower on Wednesday, as heavyweight stocks such as ITC, Reliance Industries and Bajaj Finance witnessed sharp profit booking. That apart, weak global cues heavily weighed on the investor sentiment. Markets were trading flat for most part of the day, as traders were cautious with the World Bank in its Global Economic Prospects report has stated that India's economy is estimated to contract by 9.6 per cent in the fiscal year 2020-21 (FY21), reflecting a sharp drop in household spending and private investment. Report said that the informal sector, which accounts for four-fifths of employment, has been subject to severe income losses during the COVID-19 pandemic. In India, the pandemic hit the economy at a time when growth was already decelerating. Traders also took note of a Reserve Bank paper stating that an increase in credit may not always find its way towards investments as business entities may use credit lines to finance their current liabilities.

Benchmarks added losses in late afternoon session, after India's services sector activity expanded at a slower pace in December as rates of growth in sales eased to a three-month low and staff hiring came to a halt amid weak business optimism. The seasonally adjusted India Services Business Activity Index fell from 53.7 in November to 52.3 in December. The index was above the critical 50 mark that separates growth from contraction for the third month in a row during December, but pointed to the slowest pace of expansion in the three-month sequence. However, markets managed to trim some losses as some optimism remained among traders with the Finance Ministry’s report that approval of the long-awaited COVID-19 vaccine provides strength to the optimism on both health and economic fronts, despite continuing surge in global cases and the potential challenge of a mutant strain.

On the global front, Asian markets ended mostly lower on Wednesday amid rising U.S.-China tensions and ahead of the results of two key Senate runoffs in Georgia that will determine how much U.S. President-elect Joe Biden can push through Democrats' agenda. The Trump administration has signed an executive order banning transactions with eight Chinese apps, saying they are a threat to U.S. national security. Adding to market uncertainty was the New York Stock Exchange's back-and-forth deliberations over whether to delist Chinese stocks on security grounds. Besides, the latest survey from Jibun Bank revealed that the services sector in Japan contracted at a faster rate in December, with a PMI score of 47.7, down slightly from 47.8 in November. However, the latest survey from Caixin showed the services sector in China continued to expand in December, albeit at a slower pace, with a services PMI score of 56.3, down from 57.8 in November. The composite index fell to 55.8 from 57.5 in November. European markets were trading higher after Democrats won one hotly contested U.S. Senate race in Georgia and pulled ahead in a second, raising hopes for larger stimulus in the world's largest economy.

Finally, the BSE Sensex fell 263.72 points or 0.54% to 48,174.06, while the CNX Nifty was down by 53.25 points or 0.38% to 14,146.25.

The BSE Sensex touched high and low of 48,616.66 and 47,864.14, respectively and there were 14 stocks advancing against 16 stocks declining on the index.

The broader indices ended mixed; the BSE Mid cap index rose 0.39%, while Small cap index was down by 0.14%.

The top gaining sectoral indices on the BSE were Utilities up by 2.19%, Metal up by 2.14%, Telecom up by 1.79%, Basic Materials up by 1.58% and Power up by 1.51%, while Energy down by 2.00%, FMCG down by 1.24%, IT down by 1.00%, TECK down by 0.63% and Healthcare down by 0.41% were the top losing indices on BSE.

The top gainers on the Sensex were Power Grid up by 4.34%, Bharti Airtel up by 2.28%, ONGC up by 2.11%, Ultratech Cement up by 1.95% and ICICI Bank up by 1.80%. On the flip side, ITC down by 2.86%, Reliance Industries down by 2.64%, Bajaj Finance down by 1.82%, Axis Bank down by 1.48% and HCL Technologies down by 1.36% were the top losers.

Meanwhile, the Finance Ministry in its monthly economic report has said that approval of the long-awaited COVID-19 vaccine provides strength to the optimism on both health and economic fronts, despite continuing surge in global cases and the potential challenge of a mutant strain. It noted that the effective management of COVID-19 spread despite the festive season and onset of the winter season, combined with sustained improvement in high-frequency indicators and V-shaped recovery along with easing of lockdown restrictions distinguish Indian economy as one riding against the COVID-wave.

According to the report, India has been successful in bending the COVID-curve till now, with reducing weekly/daily infections, rising recovery rate (now at around 95 percent) and one of the world's lowest case fatality rates. The downside risk, however, remains due to the spread of the UK variant and fatigue from social distancing guidelines. It added that the emphasis on continued observation of 'COVID appropriate' behaviour with the due exercise of caution and surveillance needs to be sustained.

Sharing improvement in some of the high-frequency data, the report said the sustained spurt in commercial and industrial activity was further corroborated by continued growth in PMI manufacturing, power demand, persistent improvement in E-way bills generated and highway toll collection rising above pre-COVID levels. It also said monthly GST collections attained their record levels in December. The gross GST revenue collected in December 2020 was Rs 1,15,174 crore, the highest since the introduction of Goods and Services Tax from July 1, 2017.  

The CNX Nifty traded in a range of 14,244.15 and 14,039.90 and there were 23 stocks advancing against 27 stocks declining on the index.

The top gainers on Nifty were Power Grid up by 4.39%, Hindalco up by 3.68%, GAIL India up by 3.56%, Shree Cement up by 3.20% and Bharti Airtelup by 2.77%. On the flip side, ITC down by 2.98%, Reliance Industries down by 2.60%, Axis Bank down by 1.90%, Bajaj Finance down by 1.89% and HCL Technologies down by 1.66% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 146.72 points or 2.22% to 6,758.97, France’s CAC increased 46.55 points or 0.84% to 5,611.15 and Germany’s DAX increased 123.76 points or 0.91% to 13,774.98.

Asian markets ended mostly lower on Wednesday amid lingering Sino-US tensions. US President Donald Trump's administration has signed an executive order banning transactions with eight Chinese owned apps, saying they considered to be a threat to US national security. Further, Democratic candidate Raphael Warnock won Georgia’s Senate runoffs on Wednesday. The general thinking is that a US Democratic sweep could make it easier for President-elect Joe Biden to higher corporate tax rates, tougher regulation on businesses and other potentially profit-crimping changes from Washington; while it would also be easier for Biden to pass big fiscal spending. Japanese shares declined with investors concerned over the economic impact from the month-long state of emergency planned by the government to fight a surge in corona virus cases. Though, Chinese shares ended higher after a private sector survey showed China's services sector activity continued to expand in December, albeit at a slower pace.