Local equities continue to sink in red

Indian equity benchmarks continued to trade in red zone in afternoon session, with Sensex and Nifty trading below 48,900 and 14,800 levels, respectively. Sentiments were dampened as Moody’s cut India’s gross domestic product (GDP) forecast for FY22 to 9.3 per cent from the earlier projection of 13.7 per cent and has ruled out a sovereign rating upgrade - at least for now. Adding more pessimism, domestic rating agency Care Ratings revised its GDP growth forecast for the current fiscal to 9.2 per cent from 10.2 per cent it had estimated earlier. This is the fourth revision by the rating agency in its GDP growth forecast for FY2021-22 since March this year. On March 24 this year, it had projected GDP growth for FY22 at 11-11.2 per cent but revised downwards forecast to 10.7 per cent on April 5 and further to 10.2 per cent on April 21. On the global front, Asian markets were trading mostly lower as investors were concerned over a potential spike in inflation, while rising COVID-19 cases and curbs in other parts of the region further dampened sentiment.

The BSE Sensex is currently trading at 48875.84, down by 285.97 points or 0.58% after trading in a range of 48629.38 and 49171.28. There were 6 stocks advancing against 24 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index lost 0.13%, while Small cap index was up by 0.13%.

The top gaining sectoral indices on the BSE were Utilities up by 1.53%, Power up by 1.47%, PSU up by 1.22%, Capital Goods up by 1.12% and Industrials was up by 0.77%, while IT down by 0.84%, Bankex down by 0.67%, TECK down by 0.66%, Energy down by 0.55% and Consumer Durables was down by 0.52% were the top losing indices on BSE.

The top gainers on the Sensex were NTPC up by 2.80%, Power Grid up by 2.60%, Larsen & Toubro up by 1.66%, SBI up by 0.75% and Asian Paints was up by 0.61%. On the flip side, Hindustan Unilever down by 2.47%, Mahindra & Mahindra down by 2.17%, Tech Mahindra down by 2.14%, Kotak Mahindra Bank down by 1.86% and Indusind Bank was down by 1.68% were the top losers.

Meanwhile, ICRA has said the mining and construction equipment (MCE) industry is likely to grow by 15-20 per cent in the calendar year (CY) 2021 but stressed that the economy, in the grip of a pandemic, could throw up sudden negative surprises. The first quarter of 2021 is estimated to have reported a strong equipment demand growth of 45-50 per cent. It said following a 10-12 per cent contraction in CY2020, dragged down primarily by the 39 per cent decline in H1 CY2020, the MCE industry is poised to grow by 15-20 per cent in CY2021 (5-10% in FY2022).

However, the economy in the grip of a pandemic could throw up sudden negative surprises, as witnessed in April 2021, when demand was relatively subdued. While overall equipment demand will be strong in 2021, partly due to the low base of 2020, volatility in demand is likely, with a strong first quarter, a relatively subdued second quarter in the grip of the second wave, and the emission related pre-buy pick-up and post-buy slump in the third and fourth quarter of 2021. While the second wave throws up challenges, particularly in the manpower-intensive construction sector, ICRA said that it expects a better prepared ecosystem, buffered by ample liquidity to limit stoppage of work, provided the lockdowns are limited to a relatively narrow window and are more localised, preventing a massive wave of reverse migration.

Pavethra Ponniah, Vice-President and Co-Group Head, ICRA said ‘On the contrary, demand can be hit by the Covid second wave restricting mobility and equipment utilisation for a prolonged period, which in turn could result in an increase in delinquencies and lender pull-back and a likely equipment price increase of 5-10% for the emission norm change’. Dealer checkpoints predict a more subdued 0-5 per cent volume growth in FY'22 against ICRA's expectations of a 5-10 per cent volume growth.

That said, given the current uncertainty in the market, following the huge surge in COVID-19 cases in the recent weeks, ICRA believes that ground touch points are heavily clouded by the immediate term. Continuing with the 15-20 per cent growth expected in 2021, ICRA said that it expects demand growth to sustain in 2022 and 2023, before declining in 2024 pre-and post-the general elections during April-May 2024.

The CNX Nifty is currently trading at 14770.90, down by 79.85 points or 0.54% after trading in a range of 14695.10 and 14824.05. There were 12 stocks advancing against 38 stocks declining on the index.

The top gainers on Nifty were Tata Motors up by 3.68%, NTPC up by 2.88%, Power Grid up by 2.86%, Larsen & Toubro up by 1.98% and Coal India was up by 1.12%. On the flip side, SBI Life Insurance down by 2.69%, Hindustan Unilever down by 2.47%, Mahindra & Mahindra down by 2.26%, Tech Mahindra down by 2.10% and Shree Cement was down by 1.87% were the top losers.

Asian markets were trading mostly lower; Taiwan Weighted dropped 680.76 points or 4.11% to 15,902.37, Straits Times trembled 20.60 points or 0.66% to 3,123.67, Nikkei 225 slipped 461.08 points or 1.61% to 28,147.51and KOSPI was down by 47.77 points or 1.49% to 3,161.66. On the flip side; Hang Seng increased 119.67 points or 0.43% to 28,133.48 and Shanghai Composite was up by 17.96 points or 0.52% to 3,459.81.