Last hour sharp selling drags markets to end near day’s low points

Last hour selling dragged Indian equity markets to end near day’s low points on Tuesday, with Sensex and Nifty closing lower by around half a percent each. After a positive start, markets soon turned negative, as the Finance Ministry’s Economic Review stated that inflation might witness another resurgence in case of deterioration of geo-political situation leading to higher global energy prices and supply chain pressures. Adding more worries among traders, the RBI said India’s forex reserves dropped by $4.50 billion to $528.37 billion for the week ended October 14.

Weak trade continued over the Dalal Street for the most part of the session, on the back of negative cues from the global markets. Traders were concerned on private report stating that the government will not infuse any capital into public sector banks (PSBs) this financial year (FY23). This will happen for the first time since FY08. Some cautiousness also came as foreign investors have pulled out close to Rs 6,000 crore from the Indian equity markets so far this month in the wake of strength in the US dollar against the rupee.

In the last hour of the trade, markets added more losses, amid a private report stating that owing to decreased funding and crashes in late-stage deals, several startups in India may lose their Unicorn status. A company with a valuation of over $1 billion is considered to be a Unicorn in India.Besides, the finance ministry said that Indian fiscal and monetary authorities must remain watchful even as the nation is one of the bright spots amid a 'gloomy global scenario where the dark clouds of recession gather'.

On the global front, European markets were trading mostly in red. Asian markets settled mostly lower, after South Korea's consumer confidence weakened in October after improving a month ago. The survey results from Bank of Korea showed that the consumer confidence index fell to 88.8 from 91.4 in the previous month. Among sub-indicators, the measures for current and future living standard dropped two points each to 83 and 84, respectively. The index measuring future household income decreased two points to 94, while that concerning future household spending gained one point to 110.

Back home, sugar industry stocks were in focus with a private report that the government will soon announce the sugar export quota for the marketing year that started on October 1, which would be substantially lower than the 2021-22 level. Besides, infrastructure industry stocks also remained in watch, as the Ministry of Statistics and Programme Implementation in its latest report has said that as many as 384 infrastructure projects, each entailing an investment of Rs 150 crore or more, have been hit by cost overruns of more than Rs 4.52 lakh crore.

Finally, the BSE Sensex fell 287.70 points or 0.48% to 59,543.96 and the CNX Nifty was down by 74.40 points or 0.42% to 17,656.35.

The BSE Sensex touched high and low of 60,081.24 and 59,489.02, respectively. There were 10 stocks advancing against 20 stocks declining on the index.

The broader indices ended mixed; the BSE Mid cap index rose 0.45%, while Small cap index was down by 0.35%.

The top gaining sectoral indices on the BSE were Capital Goods up by 1.24%, Auto up by 1.22%, PSU up by 1.07%, Industrials up by 0.84% and Oil & Gas up by 0.53%, while FMCG down by 1.10%, Telecom down by 0.91%, Realty down by 0.61%, Utilities down by 0.60% and Bankex down by 0.56% were the top losing indices on BSE.

The top gainers on the Sensex were Tech Mahindra up by 3.29%, Maruti Suzuki up by 2.72%, Larsen & Toubro up by 1.98%, Dr. Reddy's Lab up by 1.52% and SBI up by 1.37%. On the flip side, Nestle down by 2.83%, Hindustan Unilever down by 2.71%, Bajaj Finserv down by 2.55%, Kotak Mahindra Bank down by 2.52% and HDFC down by 1.59% were the top losers.

Meanwhile, attributing the rise in tax collections to demonetisation, the Reserve Bank of India (RBI) Monetary Policy Committee (MPC) member Ashima Goyal has said that it will help the nation move towards the ideal situation where low taxes are levied on a large base. Noting that demonetisation had short-term costs but some long-term benefits, she said it enhanced digitisation and formalization in the economy and reduced tax evasion, although all this has further to go. The tax department on October 9 said that the gross collection of tax on corporate and individual earnings jumped nearly 24 per cent so far in the current fiscal year to Rs 8.98 lakh crore.

Regarding Central Bank Digital Currency (CBDC), Goyal said the objectives of the CBDC are to reduce the use of cash, and provide additional functions to the existing payment system rather than replace it. She noted that CBDC can certainly meet new needs in the digital age, reach remote areas and enhance financial inclusion, and save costs since cash is expensive and cumbersome. CBDC is a digital form of currency notes issued by a central bank. While most central banks across the globe are exploring the issuance of CBDC, the key motivations for its issuance are specific to each country's unique requirements.

On India's widening trade deficit, she said multiple policy levers are available to reduce the deficit, among shorter-term measures are exchange rate depreciation and reducing aggregate demand. According to her, more emphasis should be on longer-term sustainability-aiding measures such as reducing oil intensity as well as dependence on energy imports and encouraging exports. She suggested that the best export incentives are increasing the competitiveness of the Indian industry by lowering the costs and difficulties of doing business. India's trade deficit widened to $26.72 billion in September, while exports contracted by 3.52 per cent to $32.62 billion.

The CNX Nifty traded in a range of 17,811.50 and 17,637.00. There were 20 stocks advancing against 29 stocks declining, while 1 stock remain unchanged on the index.

The top gainers on Nifty were Tech Mahindra up by 3.28%, Maruti Suzuki up by 2.73%, JSW Steel up by 2.34%, Larsen & Toubro up by 2.06% and Eicher Motors up by 1.91%. On the flip side, Nestle down by 2.84%, Hindustan Unilever down by 2.63%, Kotak Mahindra Bank down by 2.60%, Bajaj Finserv down by 2.54% and Britannia down by 2.33% were the top losers.

European markets were trading mostly in red; UK’s FTSE 100 fell 45.12 points or 0.64% to 6,968.87 and Germany’s DAX decreased 99.32 points or 0.77% to 12,832.13, while France’s CAC increased 21.24 points or 0.35% to 6,152.60.

Asian markets settled mostly lower on Tuesday, despite bets that the US Federal Reserve could begin to slow monetary policy tightening later in the year. Chinese shares declined marginally amid concerns over growth prospects following signs that the country won't compromise on issues over Taiwan and the zero-covid policy. Market sentiments dropped further amid fears about Chinese President Xi Jinping's shocking move to tighten his grip on power at a major leadership reshuffle. Concerns over US restrictions on semiconductor exports to China also weighed on Taiwan shares. Although, Japanese shares gained on earnings optimism.