Benchmarks trade in red terrain in morning deals

Indian equity benchmarks erased initial gains and were now trading in red terrain in morning deals, amid negative signals from other Asian markets. Traders turned cautious with a private report that the current price situation leaves hardly any scope for rationalisation of GST rates on goods and services. Some concern also came as research and ratings agency CRISIL in its latest study has said increased cost of solar modules and steel combined with higher logistics cost will impact 5 giga watt (GW) solar capacity under implementation in the private sector. Traders overlooked a private report stated that India’s economy is expected to have grown at 9.2 per cent in the fiscal ended March 2022, after having contracted by 7.3 per cent in the previous financial year, aided by resilience in the rural economy, uptick in bank credit and rising GST collections.

On the global front, Asian markets are trading mostly in red after minutes from the Federal Reserve's early May meeting showed a majority backing half-percentage-point rate hikes in June and July, and as persistent concerns over global growth sapped confidence. Back home, Paper industry’s stocks remained in focus as Indian Paper Manufacturers Association (IPMA) said exports of paper and paperboard from India jumped nearly 80 per cent in FY 2021-22, touching a record Rs 13,963 crore. There were some reaction in jewelry industry stocks as the RBI came up with norms for facilitating physical import of gold through India International Bullion Exchange IFSC (IIBX) or similar authorised exchange by Qualified Jewellers in India.

The BSE Sensex is currently trading at 53503.10, down by 246.16 points or 0.46% after trading in a range of 53480.90 and 54102.36. There were 14 stocks advancing against 16 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell 1.25%, while Small cap index was down by 2.00%.

The top gaining sectoral indices on the BSE were Bankex up by 0.37%, IT up by 0.18% and TECK up by 0.16%, while Power down by 2.77%, Utilities down by 2.74%, Telecom down by 2.39%, Realty down by 2.12% and Industrials down by 1.95% were the losing indices on BSE.

The top gainers on the Sensex were HDFC Bank up by 1.08%, Axis Bank up by 0.86%, TCS up by 0.76%, Infosys up by 0.75% and ICICI Bank up by 0.74%. On the flip side, Asian Paints down by 3.87%, ITC down by 2.81%, Bajaj Finance down by 2.50%, Bajaj Finserv down by 2.15% and Larsen & Toubro down by 1.80% were the top losers.

Meanwhile, Research and ratings agency CRISIL in its latest study has said increased cost of solar modules and steel combined with higher logistics cost will impact 5 giga watt (GW) solar capacity under implementation in the private sector. It mentioned ‘A sharp increase in the prices of solar modules and commodities such as steel, together with rising freight costs, will pull down the return on equity (ROE) of nearly a fifth of the 25 GW (gigawatt) private solar capacity. This capacity of almost 5 GW, was mostly bid out between October 2020 and December 2021 and currently under implementation.’

These projects may see their ROE falling by as much as 140-180 basis points to around 7%. It added that these projects, totalling nearly 5 GW, were bid at relatively low tariffs of less than Rs 2.35 per kilowatt hour (kWh), at a time when module prices were softening and commodity prices benign.

It stated the remaining 80% of projects under implementation (20 GW) will also be hit, but their comparatively higher tariffs and partial cover on cost of modules will limit the impact to 60 - 80 basis points. Most of these projects are in advanced stages of implementation and have imported or tied up some proportion of modules at prices below the current level. Besides, it added solar modules contribute in the range of 55-60 per cent to the cost of a solar project, and prices of the same have increased 40 per cent from January last year to March 2022. Steel contributes 5-10 per cent to the total cost of a solar project, while its rates have risen by 25 per cent during the said period.

The CNX Nifty is currently trading at 15915.55, down by 110.25 points or 0.69% after trading in a range of 15910.75 and 16129.90. There were 15 stocks advancing against 35 stocks declining on the index.

The top gainers on Nifty were Infosys up by 0.88%, HDFC Bank up by 0.87%, Axis Bank up by 0.85%, ICICI Bank up by 0.74% and TCS up by 0.71%. On the flip side, Adani Ports &SEZ down by 4.46%, BPCL down by 4.06%, UPL down by 3.91%, Divi's Lab down by 3.90% and Asian Paints down by 3.70% were the top losers.

Asian markets are trading mostly in red; Taiwan Weighted dropped 108.59 points or 0.67% to 15,995.44, Nikkei 225 slipped 41.14 points or 0.15% to 26,636.66, Hang Seng decreased 25.47 points or 0.13% to 20,145.80 and KOSPI fell 4.48 points or 0.17% to 2,612.74.

On the flip side, Shanghai Composite gained 20.35 points or 0.65% to 3,127.81 and Straits Times advanced 26.02 points or 0.82% to 3,205.60.