Markets erase opening gains; trade flat in volatile session

Indian equity benchmarks made positive start on Thursday tracking gains in global markets. But, soon domestic indices erased all the gains and turned volatile to trade flat in early deals ahead of weekly expiry of index futures and option contracts. Some sectors in market were witnessing selling pressure on account of profit-booking after strong up move in the last two sessions. Traders turned cautious amid reports of foreign fund outflows. Foreign institutional investors (FIIs) net sold shares worth Rs 579.27 crore, as per provisional data available on the NSE. Though, downside remained capped as traders took some support with Pradeep Multani, President of PHD Chamber of Commerce and Industry’s statement that the accommodative policy stance at this juncture would not only pave the way for a double digit GDP growth in the current year 2021-22, but will also help in creating a strong, sustainable and vibrant economy going forward. Besides, as per a private report, India's outbound goods shipments rose 44.24% year-on-year in the first week of December, led by a jump in exports of petroleum products, gems and jewellery and engineering goods. Merchandise exports were $8.5 billion during December 1-7.

Most of the Asian markets traded higher following the broadly positive cues overnight from Wall Street, with investors weighing the effectiveness of existing vaccines against the Omicron variant of the coronavirus. Pfizer and BioNTech said early lab studies showed a third dose of their Covid-19 vaccine neutralises the variant. Back home, insurance industry stocks were in focus as data from Irdai showed the gross direct premium written by non-life insurance companies rose by 5.5 per cent to Rs 15,743.22 crore in November. In scrip specific development, United Breweries remained in limelight as it approached the appellate tribunal NCLAT against Rs 751.8 crore penalty imposed on the company by the fair trade regulator CCI for alleged cartelisation in the sale and supply of beer.

The BSE Sensex is currently trading at 58641.51, down by 8.17 points or 0.01% after trading in a range of 58498.95 and 58889.96. There were 11 stocks advancing against 19 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.16%, while Small cap index was up by 0.54%.

The top gaining sectoral indices on the BSE were Energy up by 1.15%, Telecom up by 0.55%, Oil & Gas up by 0.48%, Capital Goods up by 0.36%, Healthcare up by 0.33%, while Realty down by 0.66%, Bankex down by 0.56%, Metal down by 0.46%, Auto down by 0.20%, Utilities down by 0.15% were the top losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 1.50%, Dr. Reddy's Lab up by 0.96%, Asian Paints up by 0.78%, Sun Pharma up by 0.65% and Larsen & Toubro up by 0.58%. On the flip side, HDFC Bank down by 1.04%, TCS down by 0.79%, NTPC down by 0.79%, Titan Company down by 0.75% and Tata Steel down by 0.75% were the top losers.

Meanwhile, defending the central bank's more-than-anticipated dovish stance wherein the MPC unanimously voted to continue with an accommodative policy, Reserve Bank of India (RBI) Governor Shaktikanta Das has said that ‘our overarching policy focus and priority now is supporting growth’ amid the threat of a third wave of COVID-19 and the legroom a cooling inflation print offers. But, he also said ‘maintaining price stability is also our concern along with financial stability as we are an inflation-targeting central bank’. The RBI's Monetary Policy Committee (MPC) left the key policy rates unchanged for the ninth time in a row. The repo rate was left at 4 per cent, which was on expected lines, while the reverse repo, which has been the effective policy rate since the pandemic hit in March 2020, was kept unchanged at 3.35 per cent.

Das said retail inflation is likely to ease to around 5 per cent next fiscal on the back of government measures to ease supplies, reduction in fuel prices and prospects of good crops. For FY22, retail inflation is pegged at 5.3 per cent and should inch down to 4 - 4.3 per cent by end-FY23. He added that reduction in excise duty and VAT on petrol and diesel will bring about a ‘durable reduction in inflation’ by way of direct effect as well as indirect effect through lower transportation cost. Despite sounding cautious about the possible impact of the Omicron variant, the central bank chose to keep its growth forecast unchanged at 9.5 per cent for the current fiscal (6.6 per cent in Q3 and 6 per cent in Q4). However, it added that recovery is not yet strong enough to be self-sustaining as activities of only a few key sectors have reached pre-pandemic levels, while the more important consumer demand and private capex are still a far cry.

He admitted that the economy is facing several challenges in terms of market volatility, rising crude oil and commodity prices and supply side disruptions like container and chips shortages. He said ‘and we've factored in all these while remaining accommodative in our policy stance.’ On whether the RBI is risking losing its inflation fight as it continues to provide liquidity to an already fund-flushed market, Das said looking at the surging inflation in various major advanced economies amid the Omicron threat, ‘being cautious was the best option left for us’.

The CNX Nifty is currently trading at 17472.40, up by 2.65 points or 0.02% after trading in a range of 17423.20 and 17543.25. There were 22 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were BPCL up by 2.56%, Reliance Industries up by 1.47%, UPL up by 1.35%, Dr. Reddy's Lab up by 1.01% and IOC up by 0.87%. On the flip side, JSW Steel down by 1.48%, HDFC Bank down by 1.05%, TCS down by 0.78%, NTPC down by 0.75% and Tata Steel down by 0.73% were the top losers.

Asian markets are trading mostly in green; Straits Times rose 8.95 points or 0.29% to 3,138.72, Hang Seng surged 221.76 points or 0.92% to 24,218.63, Taiwan Weighted advanced 26.20 points or 0.15% to 17,858.62, KOSPI gained 10.01 points or 0.33% to 3,011.81, Jakarta Composite added 1.81 points or 0.03% to 6,605.61 and Shanghai Composite was up by 37.47 points or 1.03% to 3,675.04, while Nikkei 225 fell 65.40 points or 0.23% to 28,795.22.