Sensex, Nifty remain lower in late morning session

Indian equity benchmarks remained lower in late morning session, with both Sensex and Nifty trading in red, on the back of negative cues from other Asian markets.Traders were worried, after industry body FIEO said that bilateral trade with Afghanistan has been impacted and Indian exporters are concerned about their payments as banking services and remittances may face restrictions due to the ongoing situation in that country. Besides, industry bodies said that exclusion of pharma goods from the export promotion scheme RoDTEP will adversely impact the sector's competitiveness. The government announced rates of tax refunds under the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme for 8,555 products, such as marine goods, yarn and dairy items, to boost exports.

On the global front, Asian markets were trading mostly in red, after China maintained its benchmark loan prime rates, as widely expected, on Friday. The one-year loan prime rate was maintained at 3.85 percent and the five-year loan prime rate at 4.65 percent. The one-year and five-year loan prime rates were last lowered in April 2020. The one-year loan prime rate was cut by 20 basis points and five-year rate by 10 basis points in April 2020.

The BSE Sensex is currently trading at 55371.83, down by 257.66 points or 0.46% after trading in a range of 55013.98 and 55495.60. There were 8 stocks advancing against 22 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.29%, while Small cap index was down by 1.21%.

The only gaining sectoral index on the BSE was FMCG up by 0.34%, while Metal down by 5.04%, Basic Materials down by 2.76%, Realty down by 2.34%, Healthcare down by 1.78% and PSU down by 1.74% were the top losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 2.55%, Asian Paints up by 2.40%, Bajaj Finance up by 2.07%, HDFC up by 0.51% and Bajaj Finserv up by 0.33%. On the flip side, Tata Steel down by 5.80%, Sun Pharma down by 3.27%, Dr. Reddy's Lab down by 3.04%, Kotak Mahindra Bank down by 2.59% and Larsen & Toubro down by 2.18% were the top losers.

Meanwhile, considering the surprisingly faster recovery after the second wave of COVID, higher exports and sufficient rainfall, India Ratings and Research (Ind-Ra) has revised upwards its 2021-22 (FY22) GDP growth forecast to 9.4 per cent. The rating agency had earlier expected the economy to grow by 9.1 per cent in a scenario where vaccinating all the adults gets pushed back to March 2022 and 9.6 per cent if the government achieves its target of rendering vaccine doses by December. It added that the government is likely to miss its target, and vaccinating all adults will get spilled over to March, but revised upwards the growth forecast.

Ind-Ra’s principal economist and director of public finance, Sunil Kumar Sinha explained that the recovery in June and July from the after-effects of the second wave of the pandemic has been surprisingly fast, calling it as one of the main reasons for the revision. Additionally, the global markets are also doing good as the COVID threats ebb leading to higher exports in India, while the south west monsoon has revived which increases the prospects on the rural economy front, Sinha said, pointing that these factors prompted the new growth estimate. The Reserve Bank of India has maintained its estimate of 9.5 per cent growth for 2021-22 while other analysts’ estimates vary from 7.9 per cent to double digit.

However, Sinha made it clear that the high growth number is driven by low base (the economy had contracted by 7.6 per cent in FY21), and even after the growth, the actual size of the economy will be just at par with the one in pre-COVID times. He also flagged concerns on rising inequalities in the society, saying the pandemic has pushed large number of people back into poverty. He added ‘Whatever recovery we talk about now will be a ‘k-shaped’ recovery’. Usually, a ‘k-shaped’ recovery refers to only a few people benefitting from the growth while the ones on the downward slope go down faster, just as the shape of the alphabet.

He said private consumption has been the biggest driver for the economy, contributing 58 per cent of the GDP, but the same has not been growing as fast as it used to. Additionally, he also pointed out that over the last few years, a higher part of the consumption has happened by dipping into savings or through leverage which is visible through higher pick-up in personal loans. The rating agency expects the nominal GDP growth to come at 15.6 per cent and the average retail inflation at 5.6 per cent. It, however, feels that RBI will look through the surge in inflation and keep on prioritizing growth because of the central bank’s view that the price rise is due to transitory factors, and maintain status quo on rates in the remaining fiscal year.

The CNX Nifty is currently trading at 16455.80, down by 113.05 points or 0.68% after trading in a range of 16376.05 and 16509.55. There were 10 stocks advancing against 40 stocks declining on the index.

The top gainers on Nifty were Hindustan Unilever up by 2.48%, Asian Paints up by 2.48%, Bajaj Finance up by 2.07%, Britannia up by 0.56% and HDFC up by 0.53%. On the flip side, Tata Steel down by 5.87%, JSW Steel down by 5.84%, Hindalco down by 4.18%, UPL down by 3.35% and Sun Pharma down by 3.25% were the top losers.

Asian markets were trading mostly in red; Hang Seng decreased 576.73 points or 2.28% to 24,739.60, Nikkei 225 slipped 224.13 points or 0.82% to 27,057.04, Shanghai Composite declined 57.40 points or 1.66% to 3,408.15 and KOSPI fell 27.31 points or 0.88% to 3,070.52. On the flip side, Jakarta Composite soared 18.74 points or 0.31% to 6,011.06, Straits Times advanced 23.75 points or 0.77% to 3,110.72 and Taiwan Weighted strengthened 59.76 points or 0.36% to 16,435.16.