Benchmarks end lower amid volatility on Thursday

Indian equity benchmarks fell for the second straight day on Thursday, tracking a broad sell-off in global markets as investors reacted to the 75bps interest rate hike by the US Federal Reserve. Moreover, the weekly F&O derivatives expiry added to the volatility in the stock markets. Markets made a negative start and stayed in red for whole day, as traders remained cautious with per provisional data available on the NSE showing that foreign institutional investors (FIIs) have net sold shares worth Rs 461.04 crore on September 21, 2022. Some pessimism also came with private report stating that India's headline retail inflation is expected to rise to a five-month high of 7.4% in September, with the risk of going higher if the momentum of food and vegetable prices picks up further in the rest of the month.

However, key gauges managed to trim most of their initial losses in late afternoon deals, taking support from global rating agency S&P stating that even though the US and the Euro zone are headed to recession, India is unlikely to face the impact given the not so coupled nature of its economy with the global economy. Traders overlooked the Federation of Indian Export Organisations (FIEO), the apex body of India's export promotion councils, stated that Indian exports to the six Gulf Cooperation Council countries (GCC) grew by 44 per cent to about $43.9 billion in 2021-22 fiscal year compared to previous fiscal's $27.8 billion with the UAE leading the trade with a remarkable 68 per cent growth.

On the global front, European markets were trading lower, as investors looked forward to the Bank of England (BOE) Monetary policy summary and interest rate decision later in the day for further direction on the rate outlook. Asian markets settled mostly lower on Thursday after U.S. Federal Reserve officials announced another big rate hike and reiterated their support for further interest-rate hikes to curb rampant inflation reaching a 40-year high.

Back home, sugar industry stocks were in focus as the Indian Sugar Mills Association (ISMA) requested the government to expedite the sugar export policy, stating that at least eight million tonnes of exports are necessary in the sugar marketing season 2022-23. Logistics industry stocks were in watch as the Union Cabinet approved the National Logistics Policy (NLP) that aims to enable seamless movement of goods across the country as well as improve the competitiveness of Indian goods in the domestic and export markets.

Finally, the BSE Sensex fell 337.06 points or 0.57% to 59,119.72 and the CNX Nifty was down by 88.55 points or 0.50% to 17,629.80.

The BSE Sensex touched high and low of 59,457.58 and 58,832.78, respectively. There were 11 stocks advancing against 18 stocks declining, while 1 stock remain unchanged on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.32%, while Small cap index was up by 0.47%.

The top gaining sectoral indices on the BSE were FMCG up by 1.32%, Consumer Durables up by 0.96%, Auto up by 0.73%, Utilities up by 0.49% and Industrials up by 0.46%, while Bankex down by 1.44%, S&P Financial Services down by 1.22%, Energy down by 0.42%, Realty down by 0.34% and Metal down by 0.32% were the top losing indices on BSE.

The top gainers on the Sensex were Titan Company up by 2.73%, Hindustan Unilever up by 2.64%, Asian Paints up by 2.51%, Maruti Suzuki up by 1.68% and ITC up by 1.19%. On the flip side, Power Grid Corporation down by 2.80%, HDFC Bank down by 2.18%, Axis Bank down by 2.09%, HDFC down by 1.69% and Bajaj Finserv down by 1.67% were the top losers.

Meanwhile, Crisil Ratings in its latest report has said that gross non-performing assets (GNPAs) of banks - a key indicator of asset quality - is expected to improve 90 basis points (bps) to 5% this fiscal on-year (FY23), and another 100 bps to a decadal low of 4% by March 31, 2024 (FY24), riding on post-pandemic economic recovery and higher credit growth.

It stated the asset quality of the banking sector will also benefit from the proposed sale of NPAs to the National Asset Reconstruction Company (NARCL). That said, not all segments will perform equally well. The biggest improvement will be in the corporate segment, where gross NPAs is seen falling below 2% next fiscal from a peak of 16% as on March 31, 2018.

However, it said that all is not well on the dud asset front, and banking system's exposures to the Micro, Small and Medium Enterprises (MSME) sector is a worry. Gross NPA in the MSME segment, which suffered the most during Covid pandemic, may rise to 10-11 per cent by March 2024 from 9.3 per cent as on March 31, 2022.

The CNX Nifty traded in a range of 17,722.75 and 17,532.45. There were 22 stocks advancing against 28 stocks declining on the index.  

The top gainers on Nifty were Titan Company up by 2.79%, Hindustan Unilever up by 2.63%, Asian Paints up by 2.47%, Maruti Suzuki up by 1.85% and Eicher Motors up by 1.85%. On the flip side, Power Grid down by 3.08%, HDFC Bank down by 2.12%, Axis Bank down by 2.07%, HDFC down by 1.82% and ONGC down by 1.76% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 19.13 points or 0.26% to 7,218.51, France’s CAC decreased 37.00 points or 0.61% to 5,994.33 and Germany’s DAX decreased 64.05 points or 0.5% to 12,703.10.

Asian markets settled mostly lower on Thursday, tracking weakness in Wall Street overnight as the US Fed delivered a widely expected 75-bps rate hike and signalled more aggressive rate hikes ahead to curb rampant inflation reaching a 40-year high. Russian President Putin’s announcement of Russia’s first mobilisation since the second world war also adding more pressure on market sentiments. Moreover, concerns over China's slowdown and global recession fears also fuelled cautious trading sentiment. Lingering concerns over the economic impact of China's zero-covid policy weighed on Chinese shares. Japanese shares declined as investors reacted to the Bank of Japan's decision to maintain its ultra-easy monetary policy, while Japanese markets will be closed tomorrow for a national holiday. Although, Indonesian shares rose as the country's central bank delivered a larger-than-expected interest rate hike in line with expectation.