Post Session: Quick Review

Indian equity benchmarks failed to hold on to their initial gains to end near intraday lows with frontline gauges settling with a cut of over a percentage point, as investors assessed the impact of the Omicron variant of Covid-19 that has spread to 25 countries, including India. Markets started the session on an optimistic note as traders took support with the Centre for Monitoring Indian Economy’s statement that the index of consumer sentiment for rural India inched up by 0.3% for the week ended November 28 while the index for consumer expectation went up by 1.3%, a much lower jump compared to weeks before the announcement of the repeal of farm laws. Sentiments also got relief with a private survey showing activity in India’s dominant services sector continued to grow at a robust pace in November 2021 supported by a strong recovery in domestic demand, but elevated price pressures remained a major concern. The Services Purchasing Managers' Index, compiled by IHS Markit, eased to 58.1 in November from 58.4 in October, but November’s rate of growth was the second-best in over a decade and well above the 50-mark separating growth from contraction for a fourth straight month.

However, markets took U-turn as traders turned pessimistic with private report increasing its current account deficit (CAD) forecast to 1.9 per cent of GDP at $60 billion for 2021-22 as compared to $45 billion earlier, following the record $23.27 billion trade deficit in November. It said trade deficit -- the difference between a country's imports and exports -- has been rising and remains sticky, driven by weaker exports, surging domestic activity and higher commodity prices. Markets extended losses amid uncertainty surrounding the Omicron variant. India reported its first two cases of the Omicron coronavirus variant on Thursday. Sentiments also remained dampened after a private report highlighted a curious case of increase in aggregate bank deposits followed by subsequent slump in alternate fortnights, which is quite a contrarian trend. As per the provisional data released by RBI for the fortnight ended 19 November 2021, all scheduled commercial banks' (ASCB) aggregate deposits have slumped by Rs 2.7 lakh crore during the fortnight. This slump in deposits follows an abrupt increase by Rs 3.3 lakh crore during the previous fortnight ended 5 November 2021.

On the global front, European markets made a positive start despite lingering worries about the spread of the new coronavirus variant. Asian markets ended mixed as investors shrugged off concerns about China after ride-hailing giant Didi Global announced plans to take its shares off the New York Stock Exchange (NYSE).

Back home, traders shrugged off report that the Naukri JobSpeak index recorded a 26 per cent year-on-year (YoY) growth in November on the back of increased retail fervour, festive hype and the opening up of educational institutes. Meanwhile, Star Health will cut the offer for sale portion of its IPO after the offering received a tepid response in its subscription period ending yesterday. The IPO of the country’s largest private health insurance firm was not fully subscribed by the close of bidding on Thursday, signalling that demand for IPOs in India could be waning. It was subscribed at just 79%, getting bids worth $427.37 million, despite it extending the subscription period for its offering.

The BSE Sensex ended at 57696.46, down by 764.83 points or 1.31% after trading in a range of 57640.57 and 58757.09. There were 5 stocks advancing against 25 stocks declining on the index. (Provisional)

The broader indices were trading mixed; the BSE Mid cap index was down by 0.01%, while Small cap index up by 0.33%. (Provisional)

The few gaining sectoral indices on the BSE were Capital Goods up by 0.76%, Industrials up by 0.30% and Basic Materials up by 0.22%, while Energy down by 2.30%, Bankex down by 1.00%, FMCG down by 1.00%, Healthcare down by 0.79% and Utilities down by 0.79% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Larsen & Toubro up by 0.79%, Indusind Bank up by 0.69%, Ultratech Cement up by 0.35%, Tata Steel up by 0.20% and TCS up by 0.05%. On the flip side, Power Grid Corporation down by 4.03%, Reliance Industries down by 2.80%, Asian Paints down by 2.14%, Kotak Mahindra Bank down by 2.02% and Tech Mahindra down by 1.81% were the top losers. (Provisional)

Meanwhile, crisil in its latest report stated that the public Capex cycle has turned the corner with the Central and states capital expenditure nearly crossing FY20 levels, growing faster than the gross domestic product rate. It added that this indicating durable recovery to the pre-pandemic levels. While the Central Capex has already crossed the pre-pandemic trendline, states too should do so if the budgetary targets are met, which implies that the pandemic did not cause a major permanent loss in the government Capex in terms of trend.

It said if the budgetary targets for Capex are met by both the Centre and states this fiscal, the pre-pandemic decadal trend for the overall Capex will be revisited, and added that despite a tight fiscal position, the Central Capex grew 31 per cent over the last fiscal and if the trend is maintained, it is set to overshoot by 12 per cent pre-pandemic trend level, and for the states it expects them to meet 80-85 per cent of their Capex target. The budget targets a 26 per cent increase over the revised estimates of the last fiscal and if this is met, Central Capex could outpace the pre-pandemic decadal trend by 12 per cent. Put another way, Central Capex will have to grow 19 per cent in the second half year-on-year to achieve that.

The report noted the pandemic-related spending and the simultaneous decline in their revenue have led to higher fiscal deficits and debt levels, with the Central fiscal deficit widening to 9.4 per cent of GDP in fiscal 2021 from 4.6 per cent in fiscal 2020. The combined deficit had crossed the 13 per cent mark in FY21. Despite this, the Central Capex was 31 per cent higher than that of fiscal 2021, while the states saw a modest rise in fiscal 2020. It can be noted that the state Capex is typically 1.4 times higher than Central Capex, thereby playing the predominant role in infrastructure building. In the first half of the current fiscal, the Centre spent 41 per cent of its budgeted target for the entire year.

On the other hand, the states spent 29 per cent of their targets (based on data available for 16 major states -- Andhra, Bihar, Chhattisgarh, Gujarat, Haryana, Jharkhand, Karnataka, Kerala, MP, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Telangana, and UP -- which account for 80 per cent of state Capex). The Central Capex during April-October was Rs 2.5 lakh crore, or 28 per cent higher year-on-year, and represented 46 per cent of the budgeted spend for the full fiscal. Notably, it is 26 per cent higher than the pre-pandemic level or fiscal 2020. Sector-wise, the Capex was higher over H1 of fiscals 2020 and 2021, in road transport and highways, railways, housing, telecommunication and health.

The CNX Nifty ended at 17196.70, down by 204.95 points or 1.18% after trading in a range of 17180.80 and 17489.80. There were 12 stocks advancing against 38 stocks declining on the index. (Provisional)

The top gainers on Nifty were UPL up by 2.08%, BPCL up by 1.86%, ONGC up by 1.32%, Indian Oil Corporation up by 1.28% and Larsen & Toubro up by 0.67%. On the flip side, Power Grid Corporation down by 3.92%, Reliance Industries down by 3.00%, Kotak Mahindra Bank down by 2.55%, Tech Mahindra down by 2.23% and Asian Paints down by 2.21% were the top losers. (Provisional)

European markets were trading higher, UK’s FTSE 100 rose 10.72 points or 0.15% to 7,139.93, France’s CAC added 13.35 points or 0.20% to 6,809.10 and Germany’s DAX was up by 33.79 points or 0.22% to 15,296.90.

Asian markets settled mostly higher on Friday, tracking gains in Wall Street overnight as the US President Joe Biden's administration unveiled its plan for battling Covid-19 this winter, and on expectations that the Omicron variant of Covid-19 would prove to be milder than previous strains. Seoul shares gained as health authorities strengthened virus curbs to contain the spread of the Omicron virus variant. Japanese shares rose as the yen weakened, while a survey showed the services sector in the country expanded at a faster pace in more than two years in November on a jump in new business, signalling stronger consumer confidence as the corona-virus pandemic subsided. Chinese shares improved after the latest survey from Caixin showed the services sector in the country continued to expand in November, albeit at a slower pace with a PMI score of 52.1, down from 53.8 in October.