Benchmarks bounce back after two-day fall; Sensex ends above 55,800 mark

Indian equity benchmarks bounced back on Wednesday after a two-day decline and ended with gains of around a percent, led by strong buying support in healthcare, Capital Goods and IT stocks. Benchmarks made cautious start, as the International Monetary Fund (IMF) in its World Economic Outlook update July 2022 has cut India's growth rate by 0.8 percentage point to 7.4 per cent for fiscal year 2022, reflecting ‘mainly less favourable external conditions and more rapid policy tightening’. In April, the IMF had projected a ‘fairly robust’ growth of 8.2 per cent for India in 2022. Some concern also came amid a private report stating that the global economy is in the grips of a serious slowdown, with some key economies at high risk of recession and only sparse meaningful cooling in inflation over the next year. 

However, key gauges erased initial losses to enter in green terrain in morning deals, as traders found some solace with Minister of State for Finance Bhagwad Karad stated that the amount involved in fraud cases reported by public sector banks (PSBs) has come down to Rs 3,204 crore in the last fiscal from Rs 28,884 crore in 2017-18. Sentiments remained up-beat as ECGC has introduced a new scheme to provide enhanced export credit risk insurance cover to the extent of 90% to support small exporters under the Export Credit Insurance for Banks Whole Turnover Packaging Credit and Post Shipment (ECIB- WTPC & PS).  The scheme is expected to benefit a number of small-scale exporters availing of export credit with banks which hold the ECGC WT-ECIB covers.

On the global front, Asian markets ended mostly higher on Wednesday, while European markets were trading in green as the National Bureau of Statistics said China industrial profits grew slightly in June after falling for two straight months, as the relaxation of pandemic related restrictions underpinned production and sales. Industrial profits grew 0.8 percent year-on-year in June, reversing a 6.5 percent fall in May. Market participants awaited the Fed's interest-rate decision later in the day, with a 75-bps rate hike mostly priced in. 

Back home, stocks related to auto component industry were in watch as Crisil’s report stated that auto component industry is expected to see 9-11 per cent of its revenue coming from EV (Electric Vehicle) parts by 2027 amid increasing electrification. It said this growth will come even as the supply of parts for the conventional internal combustion engine-driven vehicles will also grow during the period. Defence industry stocks were action as the defence ministry approved the procurement of military equipment and weapons worth Rs 28,000 crore, including swarm drones and close-quarter battle carbines, to bolster the overall combat prowess of the armed forces along the northern and western borders.

Finally, the BSE Sensex rose 547.83 points or 0.99% to 55,816.32 and the CNX Nifty was up by 157.95 points or 0.96% to 16,641.80. 

The BSE Sensex touched high and low of 55,853.09 and 55,157.99, respectively. There were 25 stocks advancing against 5 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.90%, while Small cap index was up by 0.38%.

The top gaining sectoral indices on the BSE were Healthcare up by 1.73%, Capital Goods up by 1.68%, PSU up by 1.47%, IT up by 1.34% and Basic Materials up by 1.17%, while Telecom down by 0.77% was the lone losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 3.39%, SBI up by 2.76%, Larsen & Toubro up by 2.67%, TCS up by 2.33% and Asian Paints up by 2.31%. On the flip side, Bharti Airtel down by 1.32%, Kotak Mahindra Bank down by 0.17%, NTPC down by 0.10%, Bajaj Finserv down by 0.09% and Reliance Industries down by 0.05% were the top losers.

Meanwhile, the International Monetary Fund (IMF) in its World Economic Outlook update July 2022 has cut India's growth rate by 0.8 percentage point to 7.4 per cent for fiscal year 2022, reflecting ‘mainly less favourable external conditions and more rapid policy tightening’. In April, the IMF had projected a ‘fairly robust’ growth of 8.2 per cent for India in 2022. The report said India’s 7.4 per cent GDP growth for fiscal year 2022 is the second highest growth projection after Saudi Arabia’s 7.6 per cent. India, whose GDP was projected at 8.7 per cent in 2021, will see economic growth slow down to 6.1 per cent in fiscal year 2023.

It said that the global economy, which is still reeling from the pandemic and Russia’s invasion of Ukraine, is facing an increasingly gloomy and uncertain outlook. The IMF projects the global economy to slow further to 3.2 per cent in 2022 from last year’s 6.1 per cent. Global growth at 3.2 per cent in 2022 and moderating to 2.9 per cent in 2023 is lower than projected in the April 2022 World Economic Outlook by 0.4 and 0.7 percentage point, respectively.

Besides, United States’ growth projected to slow down to 2.3 per cent in 2022 from 5.7 per cent last year. In China, further lockdowns and the deepening real estate crisis have led growth to be revised down by 1.1 percentage points to 3.3 per cent growth in 2022, with major global spillovers. In Europe, significant downgrades reflect spillovers from the war in Ukraine and tighter monetary policy.

It added that downgrades for China and the United States, as well as for India, are driving the downward revisions to global growth during 2022-23. This reflects the materialisation of downside risks highlighted in the April 2022 World Economic Outlook: a sharper slowdown in China due to extended lockdowns, tightening global financial conditions associated with expectations of steeper interest rate hikes by major central banks to ease inflation pressure, and spillovers from the war in Ukraine.

The CNX Nifty traded in a range of 16,653.45 and 16,438.75. There were 46 stocks advancing against 4 stocks declining on the index.

The top gainers on Nifty were Sun Pharma up by 3.18%, SBI up by 2.75%, Divi's Lab up by 2.63%, Larsen & Toubro up by 2.52% and TCS up by 2.31%. On the flip side, Bharti Airtel down by 1.33%, Bajaj Auto down by 1.09%, HDFC Life Insurance Company down by 0.33% and Kotak Mahindra Bank down by 0.32% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 40.25 points or 0.55% to 7,346.53, France’s CAC increased 30.43 points or 0.49% to 6,241.88 and Germany’s DAX increased 39.17 points or 0.3% to 13,136.10.

Asian markets ended mostly higher on Wednesday even after US stock indices dropped overnight on a flurry of mixed earnings reports. Seoul shares rose even as the South Korea’s consumer confidence tumbled by the most since the onset of the Covid-19 pandemic. Although, market participants cautiously awaited the Fed's interest-rate decision later in the day. The International Monetary Fund has lowered its 2022 economic forecasts for global growth to 3.2% and for emerging and developing Asia to 4.6% as recession risks looming. Hong Kong shares declined as Hong Kong Financial Secretary Paul Chan Mo-po said commercial banks in Hong Kong will have no choice but to raise prime rates increase, but not at the scale and pace of the US Fed.