Post Session: Quick Review

Friday turned out to be a disappointing day of trade for Indian equity benchmarks with frontline gauges settling below their crucial 17,400 (Nifty) and 58,200 (Sensex) levels. Sentiments remained dampened since beginning of the trade as US inflation soared over the past year at its highest rate in four decades, hammering America's consumers, wiping out pay raises and reinforcing the Federal Reserve's decision to begin raising borrowing rates across the economy. Traders also remain worried with Former Reserve Bank of India Governor D Subbarao's statement that 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.

Selling was both brutal and wide based as none of sectoral indices on BSE were spared. Counters, which featured in the list of worst performers, include IT, technology and consumer durables. Broader markets too clobbered out of shape and ended with cut of around two percent each. Market participants continued selling risky assets after Finance Minister Nirmala Sitharaman has said that the Indian economy suffered the biggest contraction due to the COVID-19 pandemic, but the government has been able to contain retail inflation at 6.2 percent. She said the Budget for the 2022-23 fiscal year, stands for continuity, brings stability to the economy along with predictability of taxation. She also said that the Indian economy suffered Rs 9.57 lakh crore loss due to the pandemic, compared to a loss of Rs 2.12 lakh crore during the global meltdown in 2008-09.

Weak opening in European counters too dampened sentiments with major European markets trading sharply lower amid bets for more aggressive interest rate hikes by the Federal Reserve. Asian markets too ended mostly in red with Chinese markets ending with a cut of over half a percent lower as Zhenro Properties shares fell heavily on redemption worries. Back home, Sector wise, Textile industry remain in focused, as India Ratings and Research (Ind-Ra) has said that reduction in impact of Covid-19's third wave, as well as accelerated re-opening activities, will boost textile demand in next financial year (FY23). It cited that reduction in logistics issues for export demand will aid in keeping healthy demand. 

The BSE Sensex ended at 58152.92, down by 773.11 points or 1.31% after trading in a range of 57914.10 and 58447.15. There were 3 stocks advancing against 27 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index tumbled 1.99%, while Small cap index was down by 1.97%. (Provisional)

The top losing sectoral indices on the BSE were IT down by 2.64%, TECK down by 2.52%, Consumer Durables down by 2.48%, Realty down by 2.22% and Telecom down was by 1.91%, while there were no gainers on the BSE sectoral front. (Provisional)

The few gainers on the Sensex were Indusind Bank up by 0.64%, NTPC up by 0.29% and Tata Steel up by 0.22%. On the flip side, Tech Mahindra down by 3.03%, Infosys down by 2.91%, HCL Tech down by 2.40%, Power Grid Corporation down by 2.34% and SBI down by 2.29% were the top losers. (Provisional)

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 ended at 17374.75, down by 231.10 points or 1.31% after trading in a range of 17303.00 and 17454.75. There were 6 stocks advancing against 44 stocks declining on the index. (Provisional)

The top gainers on Nifty were Indian Oil Corporation up by 1.79%, NTPC up by 0.51%, Indusind Bank up by 0.48%, Tata Steel up by 0.28% and ITC up by 0.09%. On the flip side, Grasim Industries down by 3.39%, Tech Mahindra down by 3.05%, Infosys down by 2.82%, HCL Tech down by 2.24% and UPL down by 2.19% were the top losers. (Provisional)

European markets were trading lower, UK’s FTSE 100 decreased 71.74 points or 0.94% to 7,600.66, France’s CAC slumped 107.56 points or 1.51% to 6,993.99 and Germany’s DAX was down by 171.21 points or 1.11% to 15,319.23.

Asian markets settled mostly lower on Friday, followed by overnight sell-off in Wall Street as surging US inflation fuelled worries about bets for more aggressive interest rate hikes by the Federal Reserve. Data showed that consumer prices surged an annual 7.5 percent last month, marking the biggest annual increase in inflation in 40 years. Meanwhile, St. Louis Federal Reserve President James Bullard said the data had made him dramatically more hawkish and he would prefer a 50-bps rate hike in March and wants a full percentage point of interest rate hikes by July 1. Chinese markets closed lower as Shares and bonds of Chinese property developer Zhenro Properties declined heavily on redemption worries. Japanese markets were closed for National Foundation Day holiday.