Post Session: Quick Review

Indian equity benchmarks failed to build on the previous two sessions of rally and ended near intraday lows with a cut of around one and a half percentage points on across-the-board selloff as investors weighed more rate hikes by central banks in coming days and high possibility of global recession. Markets made a gap-down opening as RBI data showed that operating profit growth of listed private companies decelerated across broad sectors in the January-March quarter of 2021-22, on the back of rise in expenditure. Operating profit of manufacturing companies decelerated sharply to 7 per cent in the fourth quarter of last fiscal as against 70 per cent in the corresponding quarter of the preceding fiscal. Sentiments were also fragile as foreign institutional investors (FIIs) remained net sellers in the capital market, as they sold shares worth Rs 2,701.21 crore on Tuesday.

Markets extended losses after the CBDT said that the Income Tax department has detected unaccounted income of over Rs 100 crore after it recently raided a diversified business group engaged in the export of handicraft and real estate among others. Market participants shrugged off report that markets regulator Sebi has permitted mutual funds to again invest in foreign stocks within the aggregate mandated limit of $7 billion for the industry. This came in the wake of a major correction in global markets that brought down the valuation of international stocks.

Weak opening in European counters too dampened sentiments with all the European counters trading in red amid lingering concerns that higher interest rates could lead to a recession. Asian markets ended lower as inflation and interest-rate concerns took center stage ahead of congressional testimony by Federal Reserve Chair Jerome Powell. Back home, the construction companies stocks remained focus as ICRA said the domestic metro rail projects will provide business opportunities worth Rs 80,000 crore for construction companies over the next five years. Banking stocks were in focus, after the Reserve Bank gave three more months to banks and NBFCs issuing credit and debit cards to comply with certain norms including activation of cards without consent of customers.

The BSE Sensex ended at 51822.53, down by 709.54 points or 1.35% after trading in a range of 51739.98 and 52272.85. There were 4 stocks advancing against 26 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index lost 1.53%, while Small cap index was down by 1.11%. (Provisional)

The top losing sectoral indices on the BSE were Metal down by 4.96%, Basic Materials down by 2.67%, Realty down by 2.24%, Energy down by 2.24%, Power down by 2.11%, while there were no gaining sectoral indices on the BSE. (Provisional)

The top gainers on the Sensex were TCS up by 0.31%, Hindustan Unilever up by 0.18%, Power Grid up by 0.05% and Maruti Suzuki up by 0.01%. On the flip side, Tata Steel down by 5.24%, Wipro down by 3.29%, Reliance Industries down by 3.07%, Indusind Bank down by 2.67% and HCL Technologies down by 2.61% were the top losers. (Provisional)

Meanwhile, Crisil Ratings in its latest report has said that new equated monthly instalment scheme introduced by power ministry can help electricity distribution companies (discoms) save a quarter of their additional payouts and clear around Rs 20,000 crore payments to generation firms (gencos) this fiscal (FY23). It noted that under this scheme, overdues, including past Late Payment Surcharge (LPS) as on the cut-off date of June 3, 2022, will be converted into Equated Monthly Instalments (EMIs) that discoms have to pay over 12 to 48 months, based on different slabs.’

The report further said if discoms clear the fresh dues and EMIs on time, going forward, they won't be billed for LPS by gencos. Success of the scheme will depend on two factors, firstly, how discoms are able to enhance their revenues, and secondly, an enforcement mechanism that ensures timely payment to gencos. The scheme aims to provide immediate liquidity to gencos. That's because, along with commencement of payments, the receivables can also be discounted by banks based on the assurance of timely payment of EMIs. This would help free up working capital limits for gencos to buy coal, the prices of which have soared because of geopolitical tensions.

In fiscal 2021, the central government unveiled the Aatmanirbhar Bharat package worth Rs 1.35 lakh crore to clear discom dues. However, its impact was short-lived and most discoms continue to face liquidity challenges following operating losses and their dues remain high at Rs 1.2 lakh crore as on May 31, 2022.

The CNX Nifty ended at 15413.30, down by 225.50 points or 1.44% after trading in a range of 15385.95 and 15565.40. There were 6 stocks advancing against 44 stocks declining on the index. (Provisional)

The top gainers on Nifty were BPCL up by 1.56%, Hero MotoCorp up by 1.01%, TCS up by 0.34%, Power Grid up by 0.14% and Maruti Suzuki up by 0.03%. On the flip side, Hindalco down by 6.72%, UPL down by 6.20%, Tata Steel down by 5.28%, JSW Steel down by 4.48% and Wipro down by 3.27% were the top losers. (Provisional)

European markets were trading lower; UK’s FTSE 100 declined 101.73 points or 1.42% to 7,050.32, France’s CAC fell 108.07 points or 1.81% to 5,856.59 and Germany’s DAX was down by 263.84 points or 1.98% to 13,028.56.

Asian markets settled mostly down on Wednesday as markets shrugged off overnight gains on Wall Street and ahead of congressional testimony by US Federal Reserve Chair Jerome Powell. Investors looked for further clues about whether another 75 basis point interest rate hike at the Fed's next meeting in July. Japanese shares ended lower on recession worries, while the yen hit a fresh 24-year low against the dollar on Bank of Japan’s ultra-loose monetary policy. Meanwhile, Chinese healthcare-related stocks declined in Hong Kong on speculation that authorities are turning to online pharmaceutical platforms as the next focus of regulatory crackdown.