Benchmarks trade lower in early deals after positive start

Indian equity benchmarks made positive start on Tuesday as the country reported a decline in new coronavirus cases for the third day running. But, soon markets lost their ground and slipped into red territory on account of selling in Energy, FMCG and Consumer Durables stocks. Though, broader indices – BSE mid and small cap were outperforming larger peers with gains of around half a percent each. Traders turned concerned with the data compiled by the Centre for Monitoring Indian Economy (CMIE) showing that the second wave of the coronavirus pandemic and the resultant curbs have pushed India’s unemployment rate to a four-month high of 7.97%. Adding more pessimism, domestic agency India Ratings and Research expects the overall recovery path to be pushed back for most of the service-oriented sectors to FY22, owing to a major supply-side disruption from the second wave of COVID-19 infections.

On the global front, most of the Asian markets were trading lower following the mixed cues overnight from Wall Street as traders remain worried about the pace of global economic recovery amid a renewed spike in coronavirus cases in the region, with restrictions and lockdowns in several areas. Markets in China and Japan are closed for holidays.

Back home, industry body CII has urged the government to take strongest national steps including curtailing economic activity to contain the spike in COVID-19 cases in the country. In scrip specific developments, Tata Chemicals slumped after reporting a 58 percent year-on-year decline in its FY21 consolidated net profit. However, Adani Ports gained ahead of its earnings release later in the day.

The BSE Sensex is currently trading at 48597.44, down by 121.08 points or 0.25% after trading in a range of 48521.85 and 48996.53. There were 14 stocks advancing against 16 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.48%, while Small cap index was up by 0.58%.

The top gaining sectoral indices on the BSE were PSU up by 1.24%, Metal up by 1.15%, Realty up by 0.78%, Oil & Gas up by 0.70%, Utilities up by 0.63%, while Energy down by 0.58%, FMCG down by 0.44%, Consumer Durables down by 0.23%, IT down by 0.17%, TECK down by 0.13% were the top losing indices on BSE.

The top gainers on the Sensex were ONGC up by 1.30%, SBI up by 1.14%, ICICI Bank up by 1.05%, Axis Bank up by 1.03% and Bajaj Finance up by 0.88%. On the flip side, Reliance Industries down by 1.36%, Hindustan Unilever down by 1.28%, Titan Company down by 1.03%, HDFC Bank down by 0.92% and HDFC down by 0.72% were the top losers.

Meanwhile, domestic agency India Ratings and Research in its latest report has said that it expects the overall recovery path to be pushed back for most of the service-oriented sectors to FY22, owing to a major supply-side disruption from the second wave of COVID-19 infections. It also expects the impact of the pandemic to spill over in FY23, with moderation in growth given a slowdown in consumption and investment demand outlook and smoothening out of supply chain issues.

It said ‘Although debt restructurings have been availed by a relatively a smaller number of entities in FY21, given other forms of fiscal or monetary support from the government such as Emergency Credit Line Guarantee Scheme, FY23 is likely to test the credit profiles of entities with a pre-existing debt-heavy balance sheet or those facing ongoing stress on cash flows.’ Besides, it expects an overall median growth of 6% for corporates in FY22 over FY20 and 21.2% over FY21. This is an increase from the agency’s earlier estimate of a median growth of 4.4%.

Also as per the agency’s assessment the discretionary spends have been worst hit. Realty, commercial retail is likely to be below expectation, given concerns about the impact of the pandemic on the upcoming providers of office space who are likely to struggle, as office offtake may be under pressure due to the continued prevalence of work-from-home culture. It noted sectors linked to consumer discretionary expenditure and exports are likely to witness a lower-than-expected improvement. Within these sectors, airlines, real estate residential and hotels would be the most severely impacted and may not see recovery until second half of FY22.

The CNX Nifty is currently trading at 14616.35, down by 17.80 points or 0.12% after trading in a range of 14580.15 and 14723.40. There were 26 stocks advancing against 24 stocks declining on the index.

The top gainers on Nifty were Hindalco up by 2.95%, UPL up by 1.97%, Coal India up by 1.55%, IOC up by 1.48% and ONGC up by 1.44%. On the flip side, Hindustan Unilever down by 1.30%, Reliance Industries down by 1.30%, Shree Cement down by 1.26%, Wipro down by 1.10% and HDFC Bank down by 0.86% were the top losers.

Asian markets were trading mostly in red; Straits Times declined 5.17 points or 0.16% to 3,179.59, Taiwan Weighted slipped 238.86 points or 1.39% to 16,983.49, KOSPI fell 7.63 points or 0.24% to 3,119.57 and Jakarta Composite was down by 13.42 points or 0.23% to 5,939.18, while Hang Seng rose 64.18 points or 0.23% to 28,421.72.