Domestic indices trade under pressure amid global sell-off

Indian equity benchmarks made gap-down opening on Friday following weakness in global markets. Domestic indices are trading deeply in red with cut of over a percent each in early deals due to selling in all the sector indices except metal. IT, TECK and Consumer Durables indices were leading the losers on the BSE sectoral front. Some cautiousness came in as Former Reserve Bank of India Governor D Subbarao said the concern today was that the low interest rates and the enormous liquidity available in the system could potentially disrupt financial stability. He added that the challenge for central banks and for the Reserve Bank of India was to juggle between maintain price stability, supporting growth and employment, preserving financial stability and all this in a globalised world. Traders overlooked Finance minister Nirmala Sitharaman’s statement that India is the fastest growing economy despite the pandemic and asserted that the government managed the economy well.

On the global front, Asian markets are trading mostly lower following the broadly negative cues overnight from Wall Street, as traders reacted to data from the U.S. that showed a bigger than expected increase in U.S. consumer price growth, fueling concerns that the Federal Reserve will increase interest rates more aggressively to fight elevated inflation. Traders also remained worried and cautious amid the rapid spread of the coronavirus Omicron variant in most countries and the likely economic impact. The Japanese stock market is closed for National Foundation Day holiday.

Back home, textile industry stocks were in focus as India Ratings and Research (Ind-Ra) said reduction in impact of Covid-19's third wave, as well as accelerated re-opening activities, will boost textile demand in FY23. In scrip specific developments, Hero MotoCorp fell on reporting a 37 percent fall in Q3 net profit. However, Mahindra and Mahindra was trading marginally higher. The company's Q3 profit soared 2.5 times, helped by one-time gains.

The BSE Sensex is currently trading at 58226.79, down by 699.24 points or 1.19% after trading in a range of 58125.27 and 58447.15. There were 3 stocks advancing against 27 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.76%, while Small cap index down by 0.65%.

The only gaining sectoral indices on the BSE was Metal up by 0.25%, while IT down by 2.34%, TECK down by 2.08%, Consumer Durables down by 1.52%, Realty down by 1.06%, Capital Goods down by 0.92% were the top losing indices on BSE.

The only gainers on the Sensex were Mahindra & Mahindra up by 0.59%, Tata Steel up by 0.16% and Indusind Bank up by 0.06%. On the flip side, Infosys down by 2.76%, Tech Mahindra down by 2.71%, Wipro down by 2.61%, Titan Company down by 2.02% and HCL Technologies down by 1.83% were the top losers.

Meanwhile, the Reserve Bank of India's (RBI) Governor Shaktikanta Das has said the Monetary Policy Committee continuing with the accommodative policy stance and this was the prime reason for not hiking the reverse repo rate at recent policy review. Das also said that the weighted average rate for reverse repo moved up to 3.87 per cent on February 4, as against 3.37 per cent in August 2021, hinting that the narrowing of the rate corridor -- the difference between the repo at which it lends and the reverse repo at which it absorbs excess funds from banks -- has already happened courtesy the RBI’s liquidity measures.

Das said that the rates represent a particular stance with regard to the monetary policy and the committee decided to continue with the accommodative stance. He said ‘When the stance continues, we did not see any reason to make any changes or tamper with the rates’. On the issue of other central banks’ actions, Das said monetary authorities across the world are in ‘divergent’ modes as guided by their individual domestic situations, and added that the RBI has also kept the domestic requirements in mind before arriving at the decision.

Additionally, he said the character of inflation – which continues to be high in India and is likely to test the upper tolerance of RBI soon – is different from the ones in other economies. He said the RBI is not ‘falling behind the curve’ given the domestic situation on inflation and growth. About inflation projections, he sounded confident about the 4.5 per cent estimate for FY23, saying the same has been arrived at after a lot of rigour and also considering the worst case scenarios. He noted the projections are ‘realistic’ and also keep in mind that the ‘credibility’ of the central bank is at stake.

On growth, he said the process is positive and the momentum is indeed picking up, but the GDP growth figure has an impact of the base effects due to which the number may look high or low. He welcomed the budget for taking a calibrated stance by focusing on capital expenditure given difficulties such as challenges on private consumption, and also continuing on the fiscal consolidation path as earmarked earlier. He highlighted that the monetary and fiscal policies will be working in a coordinated manner, and the former will not pass on the baton to the latter and stand still.

The CNX Nifty is currently trading at 17405.95, down by 199.90 points or 1.14% after trading in a range of 17371.05 and 17454.75. There were 9 stocks advancing against 41 stocks declining on the index.

The top gainers on Nifty were Hindalco up by 0.97%, BPCL up by 0.97%, IOC up by 0.92%, Mahindra & Mahindra up by 0.75% and Tata Steel up by 0.40%. On the flip side, Infosys down by 2.73%, Tech Mahindra down by 2.62%, Wipro down by 2.41%, Titan Company down by 1.93% and Bajaj Finance down by 1.89% were the top losers.

Asian markets are trading mostly in red; Hang Seng fell 1.32 points or 0.01% to 24,923.03, Taiwan Weighted declined 55.66 points or 0.30% to 18,282.39, KOSPI lost 8.20 points or 0.30% to 2,763.73 and Jakarta Composite was down by 27.92 points or 0.41% to 6,795.72. On the other hand, Straits Times rose 3.64 points or 0.11% to 3,431.64 and Shanghai Composite was up by 11.80 points or 0.34% to 3,497.71.