Post Session: Quick Review

Indian equity benchmarks ended lower for second straight day on Friday. Domestic markets made cautious start, as traders were concerned with Moody's Investors Service’s statement that a combination of weak growth in advanced economies, persistent inflationary pressures, the Russia-Ukraine conflict, tight financial conditions, and a subdued growth outlook for China will create a difficult environment for emerging markets (EM) in 2023. As regards India, Moody's said food and fuel remain the main drivers of inflation because they represent a larger share of the consumption basket. For example, rising food prices have contributed to almost half of the growth in headline inflation this year in India. Markets came under downward pressure, as sentiment got hit after S&P Global Ratings in its latest report has stated that polarization in the performance of Indian banks may persist in 2023 as many large public-sector banks are still saddled with weak assets, high credit costs, and poor earnings. Similarly, the agency expects a mixed-bag performance for finance companies (fincos). It said the asset quality of these fincos is often weaker than that of major private-sector banks.

Mirroring weak Asian markets cues, indices continued to show a sluggish trend in afternoon session after a Federal Reserve official suggested U.S. interest rates might have to be raised higher than expected to cool inflation. Sentiments remained pessimistic amid a private report stating that taking binding commitments on new issues like environment, labour and sustainability in the proposed free trade agreements (FTA), being negotiated by India, may hamper the country's exports in the future. However, traders buy on dips mood switched on and markets trimmed most of their losses after bank credit rose 17 per cent year-on-year (YoY) to Rs 129.26 trillion as on November 4, reflecting robust offtake in the busy season.

On the global front, European markets were trading higher after two straight days of declines, as investors snapped up beaten-down miners, though gains were limited by hawkish comments from more U.S. Federal Reserve officials. Asian markets ended mostly in red after U.S. Federal Reserve officials fired more warning shots on interest rates, while rising coronavirus cases in China and liquidity strains in its bond market added to uncertainty. Back home, entertainment industry remained in limelight after calling for some form of self-regulation within the media and entertainment industry with regard to content, Union Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution and Textiles, Piyush Goyal has said that the industry presented a remarkable opportunity for India but stressed that this opportunity could be realized only if the entire industry and all its verticals and stakeholders come together to ideate and synergize.

The BSE Sensex ended at 61,663.48, down by 87.12 points or 0.14% after trading in a range of 61,337.43 and 61,929.88. There were 10 stocks advancing against 20 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index declined 0.44%, while Small cap index was down by 0.45%. (Provisional)

The only gaining sectoral indices on the BSE were Realty up by 0.14% and Bankex was up by 0.04%, while Auto down by 1.23%, Oil & Gas down by 0.73%, Energy down by 0.73%, Capital Goods down by 0.59% and Telecom was down by 0.58% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were HCL Tech up by 1.11%, Asian Paints up by 0.90%, Hindustan Unilever up by 0.84%, SBI up by 0.48% and Kotak Mahindra Bank up by 0.41%. On the flip side, Mahindra & Mahindra down by 2.40%, NTPC down by 1.61%, Bajaj Finance down by 1.51%, Maruti Suzuki down by 1.50% and Indusind Bank down by 1.31% were the top losers. (Provisional)

Meanwhile, Moody's Investors Service in its latest report has said that a combination of weak growth in advanced economies, persistent inflationary pressures, the Russia-Ukraine conflict, tight financial conditions, and a subdued growth outlook for China will create a difficult environment for emerging markets (EM) in 2023. It added that next year will present a challenging backdrop for EMs.

As regards India, it said food and fuel remain the main drivers of inflation because they represent a larger share of the consumption basket. For example, rising food prices have contributed to almost half of the growth in headline inflation this year in India. With rupee depreciating against the US dollar, it said the act ion taken by the central bank (Reserve Bank of India) ensures an orderly and limited depreciation. It added that Indian banks' asset quality will continue to improve on recoveries and write-offs of legacy nonperforming loans. In India and China, wind and solar power are the least expensive energy sources, and governments are supporting the transition in the form of mandatory consumption targets or prioritising renewable versus fossil fuels in dispatching energy.

The agency said ‘Our negative outlook on credit conditions for EMs will permeate to sovereigns, companies and banks. Although higher-rated EM issuers have the credit fundamentals to weather the turn in the cycle, weaker entities with ratings of B or below are vulnerable given their limited financing options and reduced capacity to absorb shocks’. It noted that relatively deep domestic financial markets and proactive monetary policies will support the resilience of most EM sovereigns with ratings of Ba or higher. It also said lower-rated sovereigns in particular will experience credit stress amid higher borrowing costs and diminished market access.

The CNX Nifty ended at 18,307.65, down by 36.25 points or 0.20% after trading in a range of 18,209.80 and 18,394.60. There were 14 stocks advancing against 36 stocks declining on the index. (Provisional)

The top gainers on Nifty were HCL Tech. up by 0.97%, Hindustan Unilever up by 0.96%, Asian Paints up by 0.78%, SBI up by 0.61% and Kotak Mahindra Bank up by 0.46%. On the flip side, Mahindra & Mahindra down by 2.56%, Bajaj Auto down by 1.66%, Indusind Bank down by 1.56%, Maruti Suzuki down by 1.54% and Cipla down by 1.53% were the top losers. (Provisional)

European markets were trading higher, UK’s FTSE 100 increased 47.00 points or 0.64% to 7,393.54, France’s CAC increased 65.84 points or 1% to 6,641.96 and Germany’s DAX was up by 147.09 points or 1.03% to 14,413.47.

Asian markets ended mostly lower on Friday, tracking the weak close of Wall Street overnight as hawkish comments from several Federal Reserve officials suggested the Fed would continue to hike interest rates for an extended period. St Louis Fed President James Bullard said that interest rates need to be increased further to between 5% and 7% to cool off inflation. Moreover, concerns over flare-up in Covid-19 cases and potential lockdowns in China adding more pressure on market sentiments. Japanese shares declined after data showed inflation in the country hit its fastest pace in 40 years in October.