Markets remain volatile in late morning session

Indian equity benchmarks remained volatile in late morning session, with both Sensex and Nifty now trading in red terrain. Negative cues from other Asian markets impacted domestic sentiments. Traders were cautious, as smaller non-banking finance companies (NBFCs) have written to the Reserve Bank requesting liquidity support as they continue to face challenges in raising funds. In a letter addressed to RBI Governor Shaktikanta Das, Finance Industry Development Council (FIDC), a representative body of NBFCs, said the announcements made on May 5 by the central bank have addressed liquidity needs of small microfinance institutions MFIs, but NBFCs have missed out.

On the global front, Asian markets were trading mostly in red, after Japan's gross domestic product contracted an annualized 5.1 percent in the first quarter of 2021. The Cabinet Office said in Tuesday's preliminary report that missed expectations for a decline of 4.6 percent following the downwardly revised 11.6 percent increase in the previous three months (originally 11.7 percent). On a quarterly basis, GDP sank 1.3 percent - again missing expectations for a drop of 1.2 percent following the 2.8 percent increase in the three months prior.

The BSE Sensex is currently trading at 50103.79, down by 89.54 points or 0.18% after trading in a range of 50015.57 and 50279.01. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.69%, while Small cap index was up by 0.65%.

The top gaining sectoral indices on the BSE were Realty up by 1.96%, Power up by 1.46%, Utilities up by 1.02%, Healthcare up by 1.00% and IT up by 0.65%, while Auto down by 0.60%, Telecom down by 0.59%, Bankex down by 0.53%, Oil & Gas down by 0.28% and Metal down by 0.20% were the top losing indices on BSE.

The top gainers on the Sensex were Tech Mahindra up by 1.71%, Nestle up by 1.70%, Sun Pharma up by 1.18%, Power Grid up by 1.05% and Ultratech Cement up by 0.89%. On the flip side, Mahindra & Mahindra down by 1.66%, ONGC down by 1.55%, Bajaj Finserv down by 1.48%, Bajaj Finance down by 1.06% and HDFC Bank down by 1.01% were the top losers.

Meanwhile, amid strong second wave of COVID-19 and rising cases in the hinterland, rating agency Crisil has said that the domestic tractor sales volume growth is likely to be at 3-5 per cent this fiscal. This is despite the forecast of a normal monsoon auguring well for farm incomes and therefore tractor demand. Domestic tractor volumes logged a whopping 27 per cent year-on-year growth last fiscal to a record 9 lakh units. The already high base of last fiscal and severity of the second wave preclude significant tractor volume growth this fiscal.

Crisil Ratings Director Gautam Shahi said ‘Several states have imposed lockdowns recently, and crucially, rural India has been less insulated this time around. Maharashtra, Uttar Pradesh, Haryana, Karnataka, Madhya Pradesh and Rajasthan, which account for over 50 per cent of tractor volumes, have seen a surge in infections’. The growth in the previous fiscal was driven by strong government spend on rural schemes and an increase in farm incomes, supported by good monsoons. Moreover, rural India was less impacted by the pandemic last fiscal and farmers redirected savings from spending on marriages, etc., towards tractor purchases.

Noting that part of the good augury is expected to continue with a forecast of a well-distributed and normal monsoon (98 per cent of the long period average) this year, too, the agency said ‘This should benefit farm incomes and help sustain demand for tractors’. An all-time high rabi-sowing and expected good Kharif season, driven by healthy reservoir levels, will be supportive, too. Additionally, increased government spending in rural India and prospects of higher minimum support prices for 2021-22, should buoy rural incomes.

Also, non-agricultural tractor demand (20-25 per cent of demand), which moderated last fiscal, is expected to recover, supported by a recovery in rural infrastructure and mining activities compared with last fiscal. According to the rating agency, although tractor players generally enjoy good pricing power, they are expected to absorb a part of the cost inflation given the sudden surge in steel prices. For the road ahead, the agency said the monitorables include the surge in COVID-19 infections and its spread to the hinterland, the progress and spread of monsoon, and their impact on rural demand.

The CNX Nifty is currently trading at 15082.40, down by 25.70 points or 0.17% after trading in a range of 15049.65 and 15133.40. There were 29 stocks advancing against 21 stocks declining on the index.

The top gainers on Nifty were UPL up by 2.22%, Shree Cement up by 1.62%, Cipla up by 1.42%, Nestle up by 1.42% and Tech Mahindra up by 1.27%. On the flip side, Tata Motors down by 4.35%, Mahindra & Mahindra down by 1.59%, ONGC down by 1.55%, Bajaj Finserv down by 1.50% and Bajaj Finance down by 1.12% were the top losers.

Asian markets were trading mostly in red; Shanghai Composite declined 14.63 points or 0.41% to 3,514.38, Straits Times trembled 19.56 points or 0.62% to 3,123.07, Jakarta Composite lost 62.11 points or 1.06% to 5,772.28 and Nikkei 225 slipped 462.86 points or 1.63% to 27,943.98. On the flip side, Taiwan Weighted strengthened 26.86 points or 0.17% to 16,172.84.