Benchmarks fall for third straight day

Falling for the third straight day, Indian equity benchmarks ended volatile session marginally in red amid largely weak global markets as investors remained cautious ahead of the crucial Federal Reserve meeting outcome. Markets started the day on a negative note, as retail inflation stayed above the Reserve Bank’s upper tolerance level of 6 per cent for the fifth month in a row, though it eased to 7.04 per cent in May from April's near-eight-year high of 7.79 percent, mainly on account of softening food and fuel prices as the government as well as the RBI stepped in to control spiralling price rise by way of duty cuts and repo rate hike. Traders were concerned with continued selling by foreign investors. Foreign institutional investors (FIIs) have net sold Rs 4,164.01 crore worth of shares on June 13, as per provisional data available on the NSE.

However, key gauges erased early losses and traded marginally higher in morning deals, as traders found some support with India Exim Bank stating that the country's total merchandise exports are likely to be at $117.2 billion in the first quarter of FY23, as compared to the total merchandise exports of $95.5 billion in the corresponding quarter of the previous year. Some optimism also came as ICRA Ratings’ report stated said that non-banking financial companies (NBFCs) and housing finance Companies (HFCs) witnessed an improvement in their asset quality in the fourth quarter of FY22 (Q4FY22) as the impact of the Omicron variant of Covid-19 was minimal and the slippage from the restructured book was lower.  But, key indices failed to hold gains and ended lower as India’s wholesale price index (WPI) based inflation rate rose to the highest level in the current 2011-12 series at 15.88% in May 2022 as against 15.08% in April. The number has remained in double digits for the fourteenth consecutive month. The higher inflation can be attributed to a surge in vegetable prices and supply-side disruptions caused by the Russia-Ukraine war.

On the flip side, Asian markets ended mixed on Tuesday on fears that aggressive rate tightening by the Federal Reserve would push the world's largest economy into recession. With inflation running well ahead of the Fed's 2 percent goal, investors wonder whether the U.S. central bank will announce a bigger rate move during the two-day meeting that concludes Wednesday. European markets were trading lower as investors await this week's Fed and BoE meetings. The Bank of England is seen raising interest rates by a modest 25 basis points on Thursday despite Monday's data showing a contraction in the country's GDP in April. Back home,  coal industry stocks were in focus with report that India’s coal import is likely to decline by 11.4 per cent to 186 million tonnes (MT) in the current financial year, even as the state-owned firm has issued import tenders to source the dry fuel from overseas. Stocks related to IT sector were in focus as report said that the government's spending on information and technology will grow 12.1 per cent to $9.5 billion in 2022.

Finally, the BSE Sensex fell 153.13 points or 0.29% to 52,693.57 and the CNX Nifty was down by 42.30 points or 0.27% to 15,732.10.    

The BSE Sensex touched high and low of 53,095.32 and 52,459.48, respectively. There were 15 stocks advancing against 15 stocks declining on the index. 

The broader indices ended in red; the BSE Mid cap index fell 0.16%, while Small cap index was down by 0.40%.

The top gaining sectoral indices on the BSE were Realty up by 0.72%, Capital Goods up by 0.51%, Industrials up by 0.46%, Power up by 0.42% and TECK up by 0.39%, while Energy down by 1.22%, Oil & Gas down by 1.14%, Auto down by 0.52%, Metal down by 0.47% and Consumer Discretionary down by 0.40% were the top losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 1.63%, NTPC up by 1.61%, Ultratech Cement up by 1.42%, Mahindra & Mahindra up by 1.38% and Infosys up by 1.13%. On the flip side, Indusind Bank down by 2.12%, Tech Mahindra down by 2.08%, Reliance Industries down by 1.33%, Maruti Suzuki down by 1.32% and HDFC Bank down by 1.24% were the top losers.

Meanwhile, State Bank of India (SBI) research in its latest report 'Ecowrap' has said that the Reserve Bank of India (RBI) is much ahead of the curve in containing inflation, which appeared to have peaked, though it may go for an interest rate hike in August and October. After rising to a 95-month (almost 8 years) high of 7.79 per cent in April, Consumer Price Index (CPI) based inflation moderated to 7.04 per cent in May. Core CPI also moderated in May to 6.09 per cent compared to 6.97 per cent in April, as per report. In recent times, there have been commentaries that have questioned whether RBI has been behind the curve in controlling inflation.

Further, it said there are expectations that the RBI could factor in a rate hike in August (as inflation in June is likely to come above 7 per cent) and even in October policy, and take it higher than the pre-pandemic level by October to 5.5 per cent. It stated ‘our peak rate at the end of the cycle now has now a higher probability of a lower bound of 5.5 per cent and a lower probability of going up to 5.75 per cent, depending on inflation trajectory.’

However, it added that this is purely data-dependent and subject to revisions. The RBI raised the short-term lending rate by 40 basis points in May and 50 basis points in June, taking the repo rate to 4.9 per cent to tame stubbornly high inflation. It highlighted ‘our average inflation forecast for 2022-23 is 6.7 per cent but our quarterly inflation numbers are slightly different from RBI.’  It added the best thing is that the peak of inflation may have been reached at 7.8 per cent, with a little bit of luck.

Earlier this month, the RBI had revised upwards its inflation projection to 6.7 per cent for the current fiscal from its previous forecast of 5.7 per cent. The central bank expects the first quarter inflation at 7.5 per cent; the second quarter at 7.4 per cent; the third quarter at 6.2 per cent; and the fourth quarter at 5.8 per cent, with risks, evenly balanced.

The CNX Nifty traded in a range of 15,858.00 and 15,659.45. There were 27 stocks advancing against 23 stocks declining on the index.

The top gainers on Nifty were NTPC up by 2.15%, Bharti Airtel up by 1.80%, Divi's Lab up by 1.46%, Mahindra & Mahindra up by 1.46% and Cipla up by 1.39%. On the flip side, Bajaj Auto down by 4.83%, Indusind Bank down by 2.32%, ONGC down by 2.23%, Hindalco down by 2.17% and Tech Mahindra down by 1.85% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 55.92 points or 0.78% to 7,149.89, France’s CAC decreased 83.22 points or 1.38% to 5,939.10 and Germany’s DAX decreased 115.64 points or 0.86% to 13,311.39.

Asian markets ended mixed on Tuesday as investors cautiously awaiting the outcome of a Federal Reserve policy meeting late on Wednesday. Investors are betting that the US Federal Reserve would raise the key rate by 75 basis points in light of surging US inflation and that could drag the world's top economy into recession. Japanese shares declined sharply following losses in the Wall Street overnight. However, Chinese shares gained even as strict Covid-19 curbs in China sparked worries of new supply chain disruptions.