Benchmark indices trade lower in early deals; IT, Teck drags markets

In tandem with the bearish global cues on the rising Russian-Ukraine conflict, the domestic benchmark indices extended their previous session’s losses with negative start on Friday. Markets are trading lower with cut of 0.30% each in early deals board based selling in IT and Teck stocks. Though, down side remained capped as rating agency Icra said the government's ambitious production-linked incentive (PLI) scheme will look to unlock manufacturing capacity as well as support in attracting about Rs 4 lakh crore of capital expenditure over the next five years. Meanwhile, Finance Minister Nirmala Sitharaman pitched for expeditious and equitable distribution of vaccines to aid global recovery. Also, she exhorted multilateral financial institutions to step up funding to low and middle-income countries to bolster their preparedness to deal with any pandemic in the future. Such nations, the minister stressed, have inadequate resources to ward off large-scale health emergencies and, therefore, require greater global assistance.

On the global front, Asian markets are trading mixed following the broadly negative cues overnight from Wall Street, amid renewed geopolitical concerns, as the Biden administration has reverted to describing a Russian invasion of Ukraine as ‘imminent’. U.S. President Joe Biden said there was every indication Russia planned to invade Ukraine in the next few days and was preparing a pretext to justify it.

Back home, telecom stocks were in focus as Trai data showed the mobile user count in India fell by 12.8 million in December 2021 compared to the previous month, with Reliance Jio and Vodafone Idea suffering subscriber losses, even as Bharti Airtel added customers. In scrip specific developments, Ambuja Cement fell as its consolidated net profit plunged 55.5 per cent to Rs 430.97 crore in the quarter ended December 2021 when compared with Rs 968.24 crore in the corresponding quarter a year ago. However, Torrent Power was up as rating agency CRISIL upgraded the long term credit rating of non-convertible debentures and long term bank facilities of the company to 'AA+/Stable' from 'AA/Positive' considering continued strong profitability and sustained improvement in the leverage levels.

The BSE Sensex is currently trading at 57718.59, down by 173.42 points or 0.30% after trading in a range of 57488.39 and 57939.65. There were 11 stocks advancing against 19 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell 0.30%, while Small cap index was down by 0.31%.

The top gaining sectoral indices on the BSE were Power up by 0.79%, Utilities up by 0.74%, Capital Goods up by 0.56%, Metal up by 0.36%, Industrials up by 0.13%, while IT down by 0.74%, TECK down by 0.64%, Healthcare down by 0.63%, Telecom down by 0.39%, Energy down by 0.32% were the top losing indices on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 1.11%, Tata Steel up by 0.82%, NTPC up by 0.60%, Maruti Suzuki up by 0.60% and Power Grid up by 0.46%. On the flip side, Wipro down by 1.19%, Infosys down by 0.93%, Nestle down by 0.75%, HCL Technologies down by 0.74% and HDFC Bank down by 0.72% were the top losers.

Meanwhile, rating agency Icra has said that the government's ambitious production-linked incentive (PLI) scheme will look to unlock manufacturing capacity as well as support in attracting about Rs 4 lakh crore of capital expenditure over the next five years. With an aim to boost manufacturing, employment generation, import reduction and exports growth, the PLI scheme covers strategically significant sectors that have seen surging demand (solar, semiconductors/electronics, automobiles etc), and are critical to developing manufacturing capabilities (semiconductors, telecom gears, medical devices).

Rohit Ahuja, Head of Research and Outreach, Icra, said ‘Manufacturing capex forms around 20-25 per cent of the total capex in India currently. The PLI scheme, launched with the aim of incentivising manufacturing, is estimated to attract a capex of approximately Rs 4 lakh crore over the next five years.’ It has the potential to generate employment for millions (skilled and unskilled labour) in India. Also, incremental revenues of Rs 35-40 lakh crore are expected over the next five years due to a reduction in net imports. Sectors under which the PLI scheme has been announced currently constitute 40 per cent of the total imports.

Ahuja said ‘The scheme, spread across 14 sectors, can enhance India's annual manufacturing capex by 15 to 20 per cent from FY23. However, potential challenges are expected from execution delays, increasing funding costs, availability of requisite infrastructure and delays in approvals’. Of the total manufacturing outlay, about 80 per cent is concentrated towards electronics, auto, solar panel manufacturing, of which the focus towards semiconductors/electronics value chain is 50 per cent of the outlay. Incentives are based on incremental production/revenue, spread over five years on an average across sectors.

PLI for semiconductor manufacturing is at Rs 76,000 crore, and aims to make India one of the leading manufacturers globally of this critical component. He said ‘Given the fact that India's dependence on semiconductors is expected to increase substantially, this PLI scheme is critical’. He added ‘Globally, India's manufacturing output as a percentage of GDP is comparable with developed economies like the United States, the European Union and developing economies like Russia and Brazil, however, it is way behind China. Massive opportunity emerging for India, as the world looks to diversify away from China and the PLI scheme is a step in the right direction.’

The CNX Nifty is currently trading at 17252.90, down by 51.70 points or 0.30% after trading in a range of 17219.20 and 17321.65. There were 19 stocks advancing against 30 stocks declining, while 1 stock remain unchanged on the index.

The top gainers on Nifty were Coal India up by 1.29%, Larsen & Toubro up by 1.07%, Tata Steel up by 0.82%, SBI Life Insurance up by 0.79% and UPL up by 0.68%. On the flip side, Cipla down by 1.80%, ONGC down by 1.19%, Divi's Lab down by 1.13%, Infosys down by 1.03% and HCL Technologies down by 1.01% were the top losers.

Asian markets are trading mixed; Nikkei 225 fell 85.11 points or 0.31% to 27,147.76, Hang Seng slipped 107.98 points or 0.44% to 24,684.79, Taiwan Weighted lost 50.48 points or 0.28% to 18,218.09 and KOSPI was down by 4.42 points or 0.16% to 2,739.67. On the other hand, Straits Times added 2.21 points or 0.06% to 3,443.78, Jakarta Composite rose 42.30 points or 0.62% to 6,877.42 and Shanghai Composite was up by 0.52 points or 0.01% to 3,468.56.