Sensex, Nifty end flat with negative bias

Indian equity benchmarks ended Tuesday’s session flat with negative bias after witnessed volatility. Key gauges made positive start, as traders found some solace with Finance Minister Nirmala Sitharaman’s statement that while the necessary stimulus for growth would continue, her ministry and the Reserve Bank of India (RBI) would work on a pathway to maintain the growth momentum for the next 25 years in order to make India an advanced economy. However, markets soon slipped in red in morning deals, as traders turned cautious as Finance Ministry in its report on ‘India's external debt’ has said that India's external debt rose by 8.2 per cent year-on-year to $620.7 billion as of March 2022. It stated while 53.2 per cent of it was denominated in the US dollar, Indian rupee-denominated debt, estimated at 31.2 per cent, was the second largest. Some concern also came as exchange data showed foreign institutional investors (FIIs) offloaded shares worth Rs 811.75 crore on Monday. 

But, domestic markets recovered from their losses to trade in green in afternoon deals, taking support from Reserve Bank Governor Shaktikanta Das’ statement that despite the latest headwinds arising from the Jackson Hole summit leading to extreme volatility, the country’s banking system and financial markets are strong enough to withstand such pressures. Some optimism also came after credit rating agency Moody’s has allotted a Baa3 rating for the Government of India with a stable outlook. India's credit profile reflects key strengths including its large and diversified economy with high growth potential, a relatively strong external position, and a stable domestic financing base for government debt. However, indices failed to hold gains and settled almost unchanged in a volatile trading session, in absence of any major trigger.

On the global front, European markets were trading higher, while Asian markets ended mostly higher on Tuesday as underlying sentiment was underpinned by China's pledge to make renewed efforts to boost its COVID-hit economy. Chinese policymakers announced a slew of measures, including increased debt issuances and infrastructure spending to shore up the flagging economy.

Back home, coal industry stocks were in focus as the government's monthly statistics (provisional) showed that India produced 58.33 million tonnes of coal in August, missing its target of 67.94 MT for the month, though it increased by 8.27 per cent from 53.88 MT in the corresponding month of previous fiscal. Tea industry stocks were in limelight as Tea Board data showed that exports of tea during the first six months January to June 2022 has increased to 96.89 million kg as compared to 86.46 million kg in the similar previous period.

Finally, the BSE Sensex fell 48.99 points or 0.08% to 59,196.99 and the CNX Nifty was down by 10.20 points or 0.06% to 17,655.60.

The BSE Sensex touched high and low of 59,566.67 and 58,974.26, respectively. There were 9 stocks advancing against 20 stocks declining, while 1 stock remain unchanged on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.47%, while Small cap index was up by 0.10%.

The top gaining sectoral indices on the BSE were Power up by 1.90%, Utilities up by 1.74%, Oil & Gas up by 1.35%, Energy up by 1.08% and Metal up by 0.87%, while FMCG down by 0.46%, Bankex down by 0.41%, IT down by 0.29%, Auto down by 0.10% and Consumer Discretionary down by 0.07% were the top losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 2.79%, NTPC up by 2.56%, Tata Steel up by 1.54%, Reliance Industries up by 0.98% and Power Grid Corporation up by 0.60%. On the flip side, Bajaj Finserv down by 2.08%, Kotak Mahindra Bank down by 1.14%, Hindustan Unilever down by 1.08%, Mahindra & Mahindra down by 1.08% and Bajaj Finance down by 1.03% were the top losers.

Meanwhile, the Reserve Bank Governor Shaktikanta Das has said despite the latest headwinds arising from the Jackson Hole summit leading to extreme volatility, the country’s banking system and financial markets are strong enough to withstand such pressures. Taking the markets by surprise, US Fed chair Jerome Powell had told the annual Jackson Hole summit of central bankers last week that he would have to keep raising federal fund rates to tame inflation, which remains the biggest challenge to the world’s largest economy. He also warned of the pains that such monetary policy actions would create on growth and jobs. In the previous policy meeting, Powell had sort of sounded dovish on interest rates.

Das said the recent commentary from the US Fed at Jackson Hole on the future trajectory of US monetary policy has created substantial volatility in global financial markets, with large spillovers and knock-on effects on emerging markets. And the difficulty gets further compounded in an environment of high uncertainty as such forward guidance may even have destabilising effects on financial markets, especially if the subsequent policy actions are at variance with earlier pronouncements.
He said ‘the health of our banking system is sound. It’s well capitalised and well provisioned, with improved asset quality. This constitutes a key pillar of our financial stability and is expected to provide positive spillovers for the financial markets’. Noting that markets often tend to overreact to new information from central banks and other regulators, amplifying volatility, he said in times like now, when geopolitical tension and synchronised monetary policy tightening come together, overshooting often precedes subsequent realignment with underlying fundamentals.

Listing out the strengths of the economy and financial markets, Das said the India’s economy still is one of the fastest growing major economies, while other major economies are staring at recession or considerable growth moderation. It can be noted that while the US and Britain contracted in Q1, the Eurozone is still not out of the Pandemic woods, and China has just stalled in its track in Q1, weighed down by successive lockdowns of its large cities. He said such growth differential provides confidence to investors, which is amply reflected in surging portfolio inflows since July. Inflows in August alone at $7.5 billion are more than 16 times the net inflows in July. But such large inflows came in after foreign funds remained in the exit mode for the first seven months of the year, pulling out as much as over $29 billion.

The CNX Nifty traded in a range of 17,764.65 and 17,587.65. There were 20 stocks advancing against 29 stocks declining, while 1 stock remains unchanged on the index.

The top gainers on Nifty were Apollo Hospital up by 3.09%, Bharti Airtel up by 2.55%, NTPC up by 2.43%, Shree Cement up by 1.91% and SBI Life Insurance up by 1.59%. On the flip side, Tata Consumer Product down by 2.23%, Bajaj Finserv down by 2.12%, Britannia Industries down by 1.44%, Mahindra & Mahindra down by 1.33% and Bajaj Finance down by 1.09% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 17.07 points or 0.23% to 7,304.50, France’s CAC increased 33.38 points or 0.55% to 6,126.60 and Germany’s DAX increased 138.61 points or 1.09% to 12,899.39.

Asian markets ended mostly higher on Tuesday as investors expecting more clarity ahead of several central bank meetings. The European Central Bank would meet on Thursday to discuss interest rate action, followed by the US Federal Reserve on September 21. Chinese shares gained after China's central bank promised fresh measures to follow a stimulus package released in May. Meanwhile, China reduced amount of foreign-exchange deposits banks need to set aside as reserves for the second time this year to uplift the yuan after the currency hit a two-year low. However, ongoing energy crisis in Europe and the decision to cut global oil output deepened the market concerns over global economic growth.