Benchmarks end lower on fag-end selling

Indian equity benchmarks erased all of their initial gains and sank into the red in the fag-end of the session on Thursday, with TECK and IT stocks playing spoilsport amid monthly derivatives expiry. Benchmarks made optimistic start and stayed in the positive territory for most part of the trade, as traders took some support with RBI Monetary Policy Committee (MPC) Member Ashima Goyal stating that eight years of systemic economic reforms under the Modi government have increased India's macroeconomic stability and its capacity to withstand any external shocks. She further said appropriate countercyclical macroeconomic policy with continuing supply-side improvements has enabled a growth recovery that is among the best in the world. Some optimism also came as S&P Global Ratings in its report said India has built up buffers against cyclical difficulties and has ample foreign exchange reserves to withstand pressure on credit worthiness. Besides, exchange data showed Foreign Institutional Investors (FIIs) bought shares worth Rs 23.19 crore on Wednesday.

However, key gauges suddenly came under heavy selling pressure during the last half-hour of the session, as traders turned cautious with Crisil's report that States' revenue growth will slide to 7-9 per cent in FY23 even as handsome GST collections will help in the accretion. It said the revenue growth had galloped 25 per cent in FY22 courtesy a lower base in the pandemic-affected FY21. Some concern also came with the former chairman of the statistical commission Pronab Sen’s statement that India's banking sector is faced with the predicament of a 'massive asset-liability mismatch' that could explode anytime. Sen stated that there is a need to reassess laws governing the industry. Sen said that explosion has not yet happened as most of the banks are in the public sector.

On the global front, European markets were trading in green after German GDP data for second quarter came in better than expected, lifted by household and government spending. German GDP grew 0.1 percent sequentially and 1.8 percent year-on-year, beating expectations for stagnation in the three months to June. Asian markets settled mostly higher on Thursday as investors looked forward to Fed Chair Jerome Powell's speech on Friday at the central banking conference in Jackson Hole for further cues on the monetary policy outlook. Powell is widely expected to reiterate the central bank's hawkish stance, given the expectations that inflation in the U.S. will be persistent and it will take time to contain it.

Finally, the BSE Sensex fell 310.71 points or 0.53% to 58,774.72 and the CNX Nifty was down by 82.50 points or 0.47% to 17,522.45.

The BSE Sensex touched high and low of 59,484.35 and 58,666.41, respectively. There were 5 stocks advancing against 25 stocks declining on the index. 

The broader indices ended in green; the BSE Mid cap index rose 0.20%, while Small cap index was up by 0.17%.

The top gaining sectoral indices on the BSE were Realty up by 1.52%, Consumer Durables up by 0.89%, PSU up by 0.53%, Consumer Discretionary up by 0.31% and Metal up by 0.07%, while TECK down by 0.88%, IT down by 0.88%, FMCG down by 0.45%, Oil & Gas down by 0.40% and Industrials down by 0.35% were the top losing indices on BSE.

The top gainers on the Sensex were Maruti Suzuki up by 0.46%, SBI up by 0.27%, Dr. Reddy's Lab up by 0.20%, Kotak Mahindra Bank up by 0.06% and Titan Company up by 0.02%. On the flip side, Bajaj Finance down by 1.81%, Power Grid Corporation down by 1.33%, Infosys down by 1.20%, TCS down by 1.14% and Indusind Bank down by 1.11% were the top losers.

Meanwhile, rating agency Crisil in its latest report has said that States’ revenue growth will slide to 7-9 per cent in FY23 even as handsome Goods and Services Tax (GST) collections will help in the accretion. It said that the revenue growth had galloped 25 per cent in FY22 courtesy a lower base in the pandemic-affected FY21. In FY23, it said healthy tax buoyancy will be supporting the revenue growth, with GST collections and devolutions from the Centre - which together comprise up to 45 per cent of the states’ revenue - expected to show robust double-digit growth.  It said a flattish or low single-digit growth in sales tax collections from petroleum products (8-9 per cent of total revenue) and grants recommended by the Fifteenth Finance Commission (13-15 per cent) will be acting as the moderating factors.

The agency said the share of states in central taxes is expected to grow further this fiscal, and added that while the proportions are determined by the Finance Commission, the overall kitty is linked with the central government’s gross tax collections. It also said this pool, which expanded 40 per cent last fiscal, should further grow by 15 per cent this fiscal. Fuel tax collections are expected to be almost unchanged because gains from a 25 per cent increase in crude price and better sales volumes will be offset by the reduction in central excise on petrol and diesel in November 2021 and May 2022, and sales tax cuts by some states.

It further said Centre’s grants, including Centrally Sponsored Schemes, Finance Commission grants and revenue deficit, are likely to see only marginal growth this fiscal. Additionally, GST compensation payments, which were 7-9 per cent of revenue in past two fiscals, will also end, with the expiration of the compensation period on July 1, 2022. It said the outlook is based on an assumption of real GDP growth at 7.3 per cent and no lockdown-related impacts, and added that a slowdown in economic activity due to higher-than-expected inflationary pressures could negatively impact revenue.

The CNX Nifty traded in a range of 17,726.50 and 17,487.45. There were 16 stocks advancing against 34 stocks declining on the index.   

The top gainers on Nifty were Shree Cement up by 1.32%, Hindalco up by 1.20%, Divi's Lab up by 0.98%, HDFC Life Insurance up by 0.73% and SBI Life Insurance up by 0.58%. On the flip side, Adani Ports &SEZ down by 2.46%, Bajaj Finance down by 1.84%, Cipla down by 1.59%, Indusind Bank down by 1.40% and Axis Bank down by 1.25% were the top losers.

European markets were trading in green; UK’s FTSE 100 increased 9.58 points or 0.13% to 7,481.09 and Germany’s DAX increased 20.26 points or 0.15% to 13,240.32, while France’s CAC decreased 4.98 points or 0.08% to 6,381.78.

Asian markets settled mostly higher on Thursday tracking modest gains in US stocks overnight, even as investors cautiously awaiting Fed Chair Jerome Powell's speech at the Jackson Hole symposium on Friday for further cues on the monetary policy outlook. Chinese shares rose sharply after China unveiled fresh measures to boost its economy. China’s energy administration has pledged to alleviate electricity shortages in Sichuan and Chongqing, while China's state cabinet announced Rmb300bn ($44bn) in credit support by its policy banks. Hong Kong shares gained as trading resumed in the afternoon after a halt due to a typhoon warning. Seoul shares rallied after the Monetary Policy Board of the Bank of Korea decided to hike the Base Rate by 25 basis points to 2.50% from 2.25% as expected.