Key gauges end lower on Wednesday

Indian equity benchmarks ended over half a percent lower on Wednesday as investors booked profits at higher levels. Broader markets, midcap and smallcap indices also declined. Key indices opened in the green but soon shed all gains, as some cautiousness prevailed in the markets as a day after reporting less than 50,000 fresh cases, India has now recorded 54,393 in the last 24 hours, taking the country's total coronavirus caseload past 30-million mark. India also recorded a spike in new deaths with 1,129 fatalities being reported yesterday. The death toll now stands at 390,691. Additionally, India’s gene-sequencing consortia has classified the new Delta-plus mutation of coronavirus as a variant of concern, following 22 cases being reported across three states - Maharashtra, Kerala, and Madhya Pradesh. Traders took a note of Care Ratings’ report that notwithstanding the Rs 10,000-crore liquidity infusion through the G-Sap route by the RBI last week and fewer states tapping the bond markets, their cost of borrowing has been heading north, as the coupon hit the highest level since mid-March at 7 percent. At 7 percent, the weighted average yield of state debt has risen by a whopping 44 bps since the first auction of the fiscal on April 8.

Benchmarks added losses in late afternoon session after Moody's Investors Service slashed India's growth projection to 9.6 per cent for 2021 calendar year, from its earlier estimate of 13.9 per cent, and said faster vaccination progress will be paramount in restricting economic losses to June quarter. Earlier this month, Moody's had projected India to clock a 9.3 per cent growth in the current fiscal ending March 2022, but severe second COVID wave has increased risks to India's credit profile and rated entities. Traders were also worried amid reports that the aftermath of the COVID-19 pandemic's second wave has left young Indian professionals and working women increasingly vulnerable to the economic uncertainty. However, downfall remain capped with report stating that Indian companies' market capitalization has grown at the fastest pace last year among major economies despite contraction in GDP. Further, it said retail investors have shown higher interest in markets and their numbers have increased by 1.42 crore in FY21 and another 44 lakh in April and May, wondering if this will be a lasting behavioural change or is transitory.

On the global front, Asian markets ended mostly higher on Wednesday after Fed Chair Jerome Powell's reassurance that the recent inflation rate has grown faster than expected but will likely stabilize down the road helped stabilize U.S. European markets were trading mostly in red as inflation worries overshadowed solid business activity data as well as dovish commentary from Fed officials, including Chairman Jerome Powell. Flash survey data from IHS Markit showed the euro area private sector grew at the fastest rate in 15 years in June as the economy re-opened further from virus-fighting restrictions and vaccine progress boosted confidence. Back home, on the sectoral front, healthcare industry stocks were in focus as ratings agency Crisil said higher occupancy due to surge in COVID-19 cases would help private hospitals post 15-17 per cent revenue growth this fiscal year, a shade higher than what they attained in 2020-21. There was some reaction in oil & gas sector stocks with the government data showing that India's crude oil output fell 6.3 per cent in May after state-owned ONGC produced nearly a tenth less due to cyclone Tauktae.

Finally, the BSE Sensex fell 282.63 points or 0.54% to 52,306.08, while the CNX Nifty was down by 85.80 points or 0.54% to 15,686.95. 

The BSE Sensex touched high and low of 52,912.35 and 52,264.12, respectively and there were 8 stocks advancing against 22 stocks declining on the index.     

The broader indices ended in red; the BSE Mid cap index fell 0.26%, while Small cap index was down by 0.43%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 0.83%, Auto up by 0.49%, Consumer discretionary up by 0.16% while, Oil & Gas down by 1.21%, Utilities down by 1.18%, Metal down by 1.05%, Energy down by 0.97%, TECK down by 0.86% were the top losing indices on BSE.

The top gainers on the Sensex were Maruti Suzuki up by 2.33%, Titan Company up by 1.49%, Bajaj Finserv up by 1.22%, Mahindra & Mahindra up by 0.84% and Ultratech Cement up by 0.69%. On the flip side, Kotak Mahindra Bank down by 1.32%, Larsen & Toubro down by 1.29%, Tata Steel down by 1.23%, TCS down by 1.17% and Axis Bank down by 0.97% were the top losers.

Meanwhile, SBI’s economists said Indian companies' market capitalization has grown at the fastest pace last year among major economies despite contraction in GDP, flagging the risks to financial stability it poses. Further, economists said retail investors have shown higher interest in markets and their numbers have increased by 1.42 crore in FY21 and another 44 lakh in April and May, wondering if this will be a lasting behavioural change or is transitory.

The economists at the country's largest lender attributed the growth in equity markets to lower returns on other financial instruments amid a low rates regime, increase in global liquidity, and even a tendency to spend more time at home because of mobility restrictions which led many to trade more. The 30-share benchmark index BSE has rallied from 28,000 points in early April 2020, to over 52,000 points at present.

The economists warned ‘The rise in the stock market without significant development in the real economy may raise the issue of financial stability which as per our financial stability index shows modest improvement in April 2021, but lower than the peak witnessed in December 2020. However, it is expected to have declined in May 2021.’ It can be noted that in the past, the Reserve Bank has also expressed risks of financial stability because of the fast growth in stock markets. The note said the 30-share benchmark of BSE grew 1.8 times in the last year, which was the fastest among major economies, beating others like benchmarks in Russia (1.64 times), Brazil (1.60) and China (1.59).

A sector-wise analysis of Nifty-50 reveals that financial services are the clear winners with Rs 157 lakh crore increase in their market cap during the past one year. IT is another major sector whose market value has increased significantly, followed by oil and gas, consumer goods, automobiles, metals and pharma.

The CNX Nifty traded in a range of 15,862.95 and 15,673.95 and there were 16 stocks advancing against 34 stocks declining on the index. 

The top gainers on Nifty were Maruti Suzuki up by 2.29%, Titan Company up by 1.48%, Bajaj Finserv up by 1.29%, Mahindra & Mahindra up by 1.01% and ONGC up by 0.98%. On the flip side, Adani Ports & SEZ down by 3.28%, Wipro down by 2.89%, Divi's Lab down by 1.49%, Shree Cement down by 1.42% and JSW Steel down by 1.41% were the top losers.

European markets were trading mostly in red; France’s CAC decreased 21.60 points or 0.33% to 6,589.90 and Germany’s DAX decreased 57.11 points or 0.37% to 15,579.22, while UK’s FTSE 100 increased 27.17 points or 0.38% to 7,117.18.

Asian markets ended mostly higher on Wednesday tracking overnight gains in Wall Street after US Fed Chair Jerome Powell reiterated that inflation pressures will be temporary and stressed that the US Fed will do everything to support the economy for as long as it takes to complete the recovery. Chinese shares ended higher with healthcare companies after China's National Medical Products Administration (NMPA) said it has approved the first CAR-T cell therapy in the Country. Japanese shares finished higher despite a survey showed the manufacturing sector in the country expanded at a slower pace in June, while services continued to shrink amid measures to contain the coronavirus.