Benchmark indices trim opening gains in early deals

Indian equity benchmarks made optimistic start on Friday tracking gains in Asian peers. But, trimmed some of their gains and are trading higher with around quarter a percent in early deals. Buying in Telecom, FMCG and Auto aiding the sentiments, whereas selling in Metal, IT and Utilities kept gains in check. Initially, sentiments got some support with the RBI report showing that bank credit grew by 13.29 per cent to Rs 123.81 lakh crore and deposits by 9.77 per cent to Rs 169.61 lakh crore in the fortnight ended on July 1. Though, traders turned cautious with the government data showing that India's merchandise trade deficit rose to a record $26.1 billion in June 2022, 172 percent higher than June 2021 as a continuing global commodity super cycle kept the prices of key energy and metal imports high. Exports in June rose by 23.5 percent to $40.13 billion, imports shot up by 57.5 percent to $66.31 billion. Also, the Centre for Monitoring Indian Economy said consumer sentiments continue to be sluggish with its index growing by 1.1% in June 2022.

Most of the Asian markets are trading higher with marginal gains amid mixed global cues as soaring inflation and a series of interest rate hikes around the world continued to fan recession fears, while a big miss on Chinese growth added to anxiety about the world's biggest economies. China's economy grew just 0.4 per cent in the second quarter as it was battered by Covid lockdowns in major cities including Shanghai and Beijing. Back home, banking stocks were in focus as Fitch Ratings said mounting repayment pressure for some borrowers, particularly micro, small and medium-sized enterprises, amid India's interest rate hikes will test banks' loan underwriting quality. In stock specific development, Syngene International gained after it signed a 10-year pact to manufacture drug substance Liberla - a monoclonal antibody used to treat osteoarthritis in dogs, with US-based animal health company Zoetis.

The BSE Sensex is currently trading at 53553.41, up by 137.26 points or 0.26% after trading in a range of 53507.91 and 53755.96. There were 18 stocks advancing against 12 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.21%, while Small cap index was up by 0.05%.

The top gaining sectoral indices on the BSE were Telecom up by 1.10%, FMCG up by 1.06%, Auto up by 0.85%, Consumer Durables up by 0.69%, Industrials up by 0.48%, while Metal down by 0.87%, IT down by 0.45%, Utilities down by 0.38%, Power down by 0.32%, PSU down by 0.17% were the top losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 2.32%, Bharti Airtel up by 1.97%, Titan Company up by 1.34%, Ultratech Cement up by 1.18% and Nestle up by 1.12%. On the flip side, Wipro down by 1.71%, HCL Technologies down by 1.42%, Tech Mahindra down by 0.89%, Tata Steel down by 0.84% and Axis Bank down by 0.48% were the top losers.

Meanwhile, the Finance Ministry in its monthly economic review report has said that India's current account deficit is likely to deteriorate in the current fiscal (FY23) on account of costlier imports and tepid merchandise exports. The review also said that global headwinds would continue to pose a downside risk to growth as crude oil and edibles, which have driven inflation in India, remain major imported components in the consumption basket. For the present, it said ‘their global prices have softened, as fears of recession have dampened prices somewhat. This would weaken inflationary pressures in India and rein in inflation.’

The report said the deterioration of CAD could, however, moderate with an increase in service exports in which India is more globally competitive as compared to merchandise exports, and added that the widening of CAD, has depreciated the Indian rupee against the US dollar by 6 per cent since January of 2022. However, the rupee has performed well in 2022 compared to other major economies unlike in 2013, where it depreciated against other major economies, thus, reflecting strong fundamentals of the Indian economy. It said the depreciation of rupee, in addition to elevated global commodity prices, has also made price-inelastic imports costlier, thereby making it further difficult to reduce the CAD.

In order to further diversify and expand the sources of forex funding so as to mitigate volatility and dampen global spill overs, it said measures have been taken by the RBI to enhance forex inflows while ensuring overall macroeconomic and financial stability. On the commodity prices, the report said, global headwinds continue to pose a downside risk to growth as crude oil and edible oils, which have driven inflation in India, remain the major imported components in the consumption basket.

On the positive side, the report said, agriculture is picking up momentum with the revival in monsoon and Kharif sowing. The geographical distribution of the rainfall too has improved considerably. It is far less skewed. Elevated international agricultural prices have enhanced the real purchasing power in the rural areas with terms of trade for agricultural commodities remaining positive since March 2022. It added that this has triggered a recovery in rural demand, although some indicators are yet to recover to pre-pandemic levels. With regard to corporate sector, the report said, it has begun to show signs of revival with robust growth in net sales in the quarter ending March 2022, assisted by a general recovery in demand.

The CNX Nifty is currently trading at 15984.20, up by 45.55 points or 0.29% after trading in a range of 15970.75 and 16041.25. There were 33 stocks advancing against 17 stocks declining on the index.

The top gainers on Nifty were Hindustan Unilever up by 2.33%, Tata Consumer Products up by 2.06%, Bharti Airtel up by 2.04%, Britannia Industries up by 1.96% and Titan Company up by 1.45%. On the flip side, Wipro down by 1.74%, HCL Technologies down by 1.38%, Coal India down by 1.04%, JSW Steel down by 0.94% and Tech Mahindra down by 0.88% were the top losers.

Asian markets are trading mostly in green; Nikkei 225 surged 167.59 points or 0.63% to 26,810.98, Straits Times rose 11.82 points or 0.38% to 3,102.45, Taiwan Weighted advanced 93.32 points or 0.65% to 14,531.84, KOSPI added 8.88 points or 0.38% to 2,331.20 and Jakarta Composite was up by 11.05 points or 0.17% to 6,701.14. On the other hand, Hang Seng fell 240.21 points or 1.16% to 20,511.00 and Shanghai Composite was down by 7.87 points or 0.24% to 3,273.87.