Benchmarks trade lower in early deals; Nifty below 17,350 mark

Indian equity benchmarks started the session slightly in red on Thursday ahead of long weekend and weakness in global peers. Markets extended their losses and are trading lower in early deals due to selling in Realty, Consumer Durables and Energy stocks. Sentiments got dulled with a report by India Ratings and Research stating that India Inc resorted to salary cuts to protect their profits in the June quarter, as revenues came under pressure due to the second pandemic wave that affected nearly the entire country. It added the weak wage growth will prove to be a drag on the overall economic recovery in the medium term as it will affect household consumption. Traders took note of report that Mumbai has recorded 530 new cases of Covid-19: the highest since mid-July. However, loses remained capped as S&P Global Ratings said India is expected to post strong economic growth in the coming quarters, even as inflation, led by food prices, is likely to remain elevated. It said the economy is expected to clock 9.5 per cent growth in the current fiscal year, followed by 7 per cent expansion in the next year.

On the global front, most of the Asian markets are trading lower following the broadly negative cues overnight from Wall Street, amid concerns that the rapid spread of the delta variant of the corona virus may slow the global economic recovery. The US Federal Reserve's Beige Book said US economic growth downshifted slightly to a moderate pace in early July through August.

Back home, the textile industry stocks were in focus as the Union Cabinet approved the production-linked incentive (PLI) scheme for textiles for a budgetary outlay of Rs 10,683 crore to boost domestic manufacturing of man-made fibres (MMF), garments, and technical textiles. In scrip specific development, UCO Bank traded higher as the Reserve Bank removed the Bank from its Prompt Corrective Action Framework (PCAF) following improvement in various parameters and a written commitment that the state-owned lender will comply with the minimum capital norms.

The BSE Sensex is currently trading at 58148.88, down by 101.38 points or 0.17% after trading in a range of 58129.45 and 58270.49. There were 10 stocks advancing against 20 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index lost 0.11%, while Small cap index was up by 0.18%.

The top gaining sectoral indices on the BSE were Power up by 0.44%, Utilities up by 0.33%, Telecom up by 0.21%, Industrials up by 0.21%, Metal up by 0.17%, while Realty down by 0.82%, Consumer Durables down by 0.43%, Energy down by 0.37%, Healthcare down by 0.36%, Consumer discretionary down by 0.24% were the top losing indices on BSE.

The top gainers on the Sensex were Nestle up by 0.71%, Bharti Airtel up by 0.55%, Kotak Mahindra Bank up by 0.50%, Tata Steel up by 0.23% and NTPC up by 0.22%. On the flip side, Axis Bank down by 0.96%, Tech Mahindra down by 0.74%, Titan Company down by 0.68%, Ultratech Cement down by 0.64% and Bajaj Auto down by 0.61% were the top losers.

Meanwhile, India Ratings and Research (IndRa) in its latest report has said that India Inc resorted to salary cuts to protect their profits in the June quarter, as revenues came under pressure due to the second pandemic wave that affected nearly the entire country. The weak wage growth will prove to be a drag on the overall economic recovery in the medium term as it will affect household consumption.

It said an environment of pandemic-led uncertainty and elevated inflation could impact the level of spending and hence the overall demand. It mentioned the analysis is based on a study of the standalone financials of 2,036 non-financial corporates. The entire sample set has been divided into eight buckets according to the size of the annual revenue in FY19.

It said while the resilience of corporates is encouraging, the adverse effect of pressure on employee cost is a cause for concern. This could be a result of job loss or salary cut or both. Half of the 2,036 companies have reported negative growth in labour costs in Q1FY22 compared to the preceding Q4FY21. It added while there is some seasonality in employee costs, it is also true that the June quarter is always a better quarter than the March quarter owing to the disbursement of various performance-based payments linked to the previous fiscal.

The CNX Nifty is currently trading at 17314.90, down by 38.60 points or 0.22% after trading in a range of 17307.00 and 17353.70. There were 16 stocks advancing against 34 stocks declining on the index.

The top gainers on Nifty were Tata Motors up by 2.18%, Nestle up by 0.76%, ONGC up by 0.59%, Kotak Mahindra Bank up by 0.46% and Bharti Airtel up by 0.46%. On the flip side, SBI Life Insurance down by 3.69%, Hero MotoCorp down by 1.16%, Shree Cement down by 0.99%, Axis Bank down by 0.98% and UPL down by 0.91% were the top losers.

Asian markets are trading mostly in red; Nikkei 225 declined 207.78 points or 0.69% to 29,973.43, Hang Seng slipped 398.11 points or 1.51% to 25,922.82, Taiwan Weighted fell 18.68 points or 0.11% to 17,251.81 and KOSPI plunged 35.41 points or 1.12% to 3,127.58. On the other hand, Straits Times rose 6.06 points or 0.20% to 3,075.00, Jakarta Composite added 5.04 points or 0.08% to 6,031.06 and Shanghai Composite was up by 3.40 points or 0.09% to 3,678.59.