Equity indices trade deeply in red in early deals; IT, TECK lead losers

Domestic equity indices halted their four-day rally with gap-down opening on Thursday amid global sell-off. Markets are trading deeply in red with cut of over a percent each in early deals due to selling in IT, TECK and Bankex stocks, which are also down by over a percent each. Rising coronavirus cases in the country dampened the sentiments in markets. The Centre said India is witnessing an exponential rise in the number of Covid-19 cases, which is believed to be driven by the Omicron variant. India has reported over 6.3 times rise in Covid-19 cases in the last eight days. The total number of COVID-19 cases rose by 58,097 in the last 24 hours, as per a government update on January 5. Adding more pessimism, ICRA Ratings warned that the third wave of the pandemic, which has seen a massive spike in infections after the more infectious Omicron variant of the coronavirus appeared, is likely to shave 40 bps off the fourth quarter GDP growth that may print in at 4.5-5 per cent.

Sell-off in the Asian counterparts also weighted down on the domestic indices. Most of the Asian markets are trading lower following the broadly negative cues overnight from Wall Street, as traders digested the U.S. Federal Reserve's monetary policy announcement, which indicated the US Fed is preparing to begin reducing the size of its balance sheet soon after raising interest rates. Meanwhile, the services sector in Japan continued to expand in December, albeit at a slower pace, the latest survey from Jibun Bank revealed on Thursday with a services PMI score of 52.1.

Back home, liquor companies stocks were in limelight with report that liquor companies are appealing to state governments to allow them to raise prices amid surging costs of inputs ranging from tamper-proof caps to extra-neutral alcohol, the primary raw material. In scrip specific development, Spandana Sphoorty Financial came under pressure as it reported a net loss of Rs 58.87 crore in September quarter (Q2FY22) on sharp rise in impairments and other provisions. It had posted a net profit of Rs 62.95 crore in Q2FY21.

The BSE Sensex is currently trading at 59541.20, down by 681.95 points or 1.13% after trading in a range of 59352.17 and 59781.86. There were 3 stocks advancing against 27 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell 0.65%, while Small cap index was down by 0.48%.

The only gaining sectoral indices on the BSE were Telecom up by 0.52% and Metal up by 0.45%, while IT down by 1.60%, TECK down by 1.35%, Bankex down by 1.02%, Energy down by 0.98%, Consumer Durables down by 0.80% were the top losing indices on BSE.

The few gainers on the Sensex were Bharti Airtel up by 0.50%, Maruti Suzuki up by 0.42% and Tata Steel up by 0.13%. On the flip side, Tech Mahindra down by 2.06%, HDFC down by 1.98%, HDFC Bank down by 1.83%, Infosys down by 1.75% and HCL Technologies down by 1.70% were the top losers.

Meanwhile, ICRA Ratings has warned that the third wave of the pandemic is likely to shave 40 bps off the fourth quarter Gross Domestic Product (GDP) growth that may print in at 4.5-5 per cent. Third wave of the pandemic has seen a massive spike in infections after the more infectious Omicron variant of the coronavirus appeared. Admitting that it is too early to take a firm view as the third wave has just about started, the agency’s chief economist Aditi Nayar said given the early indications and the speed with which new infections are being reported, it can be surmised that there could be more mobility restrictions that will impact economic activities, especially in contact-intensive sectors.

However, she has retained the ‘full year GDP forecast at 9 per cent, with moderate downside risks’, and said anyways ICRA’s forecast was the lowest among the consensus numbers which vary from 8.5 to 10 per cent, with the RBI pegging it at 9.5 per cent. It is too early to revise the full year GDP growth down given the lack of data on the likely impact of the third wave. Besides, the government spending data for December is not out yet.

The agency has also retained Q3 growth forecast at 6-6.5 per cent, and said many high-frequency indicators have flattened in November, with slack emerging after the festive season and supply disruptions caused by heavy rainfall in the south. Nayar said ‘Our early analysis suggests that the impact of the Omicron wave may be limited to one quarter (Q4) in terms of the duration of the surge in fresh cases, as well as the economic impact given the better preparedness of governments, healthcare system and households.’ She also said given the recent surge in COVID-19 cases and widening of restrictions leading to heightened uncertainty, it is increasingly unlikely that the RBI will commence the much-delayed policy normalisation next month itself, unless inflation provides an acutely negative surprise.

The CNX Nifty is currently trading at 17714.10, down by 211.15 points or 1.18% after trading in a range of 17671.95 and 17797.95. There were 6 stocks advancing against 44 stocks declining on the index.

The top gainers on Nifty were Hindalco up by 2.03%, UPL up by 1.34%, Maruti Suzuki up by 0.63%, Bharti Airtel up by 0.43% and Coal India up by 0.33%. On the flip side, Adani Ports & SEZ down by 2.45%, Tech Mahindra down by 2.35%, HDFC down by 2.27%, HDFC Bank down by 1.93% and Infosys down by 1.87% were the top losers.

Asian markets are trading mostly in red; Nikkei 225 slipped 766.25 points or 2.61% to 28,565.91, Hang Seng fell 84.92 points or 0.37% to 22,822.33, Taiwan Weighted declined 163.30 points or 0.88% to 18,336.66, KOSPI lost 22.31 points or 0.76% to 2,931.66, Jakarta Composite plunged 61.19 points or 0.92% to 6,601.11 and Shanghai Composite was down by 5.68 points or 0.16% to 3,589.50, while Straits Times rose 17.71 points or 0.56% to 3,181.15.