Markets trade lower in early deals ahead of macroeconomic data

Indian equity benchmarks magnified their previous session’s losses with a gap-down opening on Tuesday amid weak global cues. Markets are trading lower with cut of around half a percent each in early deals ahead of the industrial growth data for May and retail inflation figures for June to be out later in the day. There are expectations that India's retail inflation likely held steady in June, but well above the Reserve Bank of India's tolerance limit for a sixth month as lower fuel and cooking oil prices offset higher services and food costs. Sentiments got dulled as Crisil Research said that India Inc is staring at the third consecutive quarter of a year-on-year drop in profit margins for the April-June 2022 period. Adding more pessimism, a private report stated that private equity investments into domestic companies fell 17 per cent to $6.72 billion on an annual basis in the June quarter. However, broader indices were outperforming larger peers and are trading marginally higher.

Most of the Asian markets are trading lower following the broadly negative cues from global markets overnight, as investors remained cautious amid persisting worries about inflation, slowing growth and rising interest rates by major central banks pushing towards a potential recession. The new wave of COVID-19 infections in China also hurt market sentiment. Back home, NBFCs and HFCs stocks were in focus with ICRA’s report that securitisation volumes originated by Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) have almost doubled to around Rs 33,000 crore in the first quarter of the current financial year. In stock specific development, Apollo Hospitals surged after tie-up with ConnectedLife.

The BSE Sensex is currently trading at 54148.33, down by 246.90 points or 0.45% after trading in a range of 54054.47 and 54230.69. There were 9 stocks advancing against 21 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.11%, while Small cap index was up by 0.18%.

The top gaining sectoral indices on the BSE were Utilities up by 1.58%, Telecom up by 1.55%, Power up by 1.48%, Healthcare up by 0.38%, Oil & Gas up by 0.12%, while Metal down by 1.41%, Basic Materials down by 0.48%, Consumer discretionary down by 0.48%, Auto down by 0.45%, Consumer Durables down by 0.44% were the top losing indices on BSE.

The top gainers on the Sensex were NTPC up by 1.49%, Dr. Reddy's Lab up by 0.61%, Bharti Airtel up by 0.55%, Wipro up by 0.54% and TCS up by 0.46%. On the flip side, Bajaj Finserv down by 1.34%, Tata Steel down by 1.30%, HDFC down by 1.26%, Titan Company down by 1.12% and Bajaj Finance down by 1.00% were the top losers.

Meanwhile, Crisil Ratings’ arm -- Crisil Research has said that India Inc is staring at the third consecutive quarter of a year-on-year (Y-o-Y) drop in profit margins for the April-June (Q1) 2022 period. After analysing 300 companies excluding those from financial services and oil and gas sectors, it said operating profit margins have likely fallen by 2-3 percentage points for the June quarter as compared to the year-ago period. It added that almost half of the 47 sectors it tracks are likely to show a contraction in margins. It noted that corporate revenues are likely to have logged a healthy growth of 30 per cent on-year in the first quarter, largely supported by price hikes and moderately rising volumes.

The agency said operating profit margins in construction-linked sectors are likely to have fallen the most, at over 9.90 per cent, followed by the investment-linked segment, which saw an on-year margin erosion of over 2.60 per cent. It said among construction-linked sectors, steel products saw a sharp margin contraction of around 15 per cent on-year as input cost escalation both coking coal and iron ore prices have risen was higher than the rise in steel prices, and added that the petrochemicals sector saw a steep contraction in margins to the extent of 15 per cent. In contrast, the margins of consumer discretionary services and products, as well as consumer staples services, will report an expansion of up to 3 percentage points in the operating profit margin for the quarter, it said, attributing it to airlines services (which rebounded to a healthy level after the operating loss of last fiscal), followed by telecom services (due to tariff hikes), and the media and entertainment segment.

It said margins of consumer staple services are estimated to have been driven by a rise in profitability in the sugar sector. For the quarter, it said automobile revenue is estimated to have risen a sharp 64-67 per cent on-year due to a lower base of last fiscal, an estimated 22-27 per cent increase in realisations and a 30-35 per cent increase in volume. Similarly, cement revenue is estimated to have grown 20-22 per cent year-on-year for the June quarter, on a very low base of last fiscal, as the year-ago quarter was hit by the second wave of Covid pandemic. It said volume is also expected to have risen on a low base, though on a sequential basis, both volume and revenue are estimated to have dwindled.

The CNX Nifty is currently trading at 16135.70, down by 80.30 points or 0.50% after trading in a range of 16103.35 and 16153.30. There were 12 stocks advancing against 38 stocks declining on the index.

The top gainers on Nifty were Apollo Hospital up by 3.78%, NTPC up by 1.31%, Adani Ports & SEZ up by 0.67%, Wipro up by 0.66% and Dr. Reddy's Lab up by 0.62%. On the flip side, Hindalco down by 2.55%, Titan Company down by 1.71%, Bajaj Finserv down by 1.54%, JSW Steel down by 1.52% and UPL down by 1.38% were the top losers.

Asian markets are trading mostly in red; Nikkei 225 slipped 519.05 points or 1.94% to 26,293.25, Hang Seng lost 260.01 points or 1.23% to 20,864.19, Taiwan Weighted plunged 366.62 points or 2.56% to 13,973.91, KOSPI fell 26.61 points or 1.14% to 2,313.66 and Shanghai Composite was down by 33.38 points or 1.01% to 3,280.20. On the other hand, Straits Times added 1.54 points or 0.05% to 3,132.80 and Jakarta Composite was up by 1.68 points or 0.02% to 6,723.83.