Benchmarks end lower for second session on Friday

Indian equity benchmarks ended lower for the second session on Friday, dragged by Auto, Oil & Gas and Energy stocks. After making slightly positive start, key gauges soon turned lower, as traders were anxious with Moody's Investors Service stating 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 added losses in afternoon deals, as sentiments remain dampened 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. Some concern also came as a private report said 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, indices recouped most of their losses in late afternoon deals, as traders took some support with provisional data available on the NSE showed that foreign institutional investors (FIIs) net bought shares worth Rs 618.37 crore on November 17. 

On the global front, European markets were trading higher though underlying sentiment remained somewhat cautious on growing concerns of a recession. Asian markets ended mostly lower on Friday amid worries about the U.S. Federal Reserve's tightening cycle and a flare-up in COVID-19 cases in China despite strict measures to fight new outbreaks.

Back home, sugar industry stocks were in focus as industry body ISMA said India has entered into a contract for export of about 35 lakh tonnes of sugar so far in the ongoing 2022-23 season, out of which 2,00,000 tonnes have been shipped last month. Stocks related to gems and jewellery industry were in watch as ICRA in its latest report has said that the domestic jewellery industry, which recorded healthy sales during the festival period, is expected to witness 12 per cent growth during this financial year compared to the previous fiscal. 

Finally, the BSE Sensex fell 87.12 points or 0.14% to 61,663.48 and the CNX Nifty was down by 36.25 points or 0.20% to 18,307.65.

The BSE Sensex touched high and low of 61,929.88 and 61,337.43, respectively. There were 10 stocks advancing against 20 stocks declining on the index.

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

The few gaining sectoral indices on the BSE were Realty up by 0.14% and Bankex 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 down by 0.58% were the top losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 0.99%, Asian Paints up by 0.86%, HCL Technologies up by 0.77%, SBI up by 0.58% and Kotak Mahindra Bank up by 0.44%. On the flip side, Mahindra & Mahindra down by 2.46%, Maruti Suzuki down by 1.57%, Bajaj Finance down by 1.53%, Indusind Bank down by 1.52% and NTPC down by 1.52% were the top losers.

Meanwhile, in a relief to exporters, the commerce ministry has directed the field formations to reduce average export obligations for sectors that have registered more than 5 per cent decline in shipments during 2021-22. A total of 192 product groups registered a decline of more than 5 per cent in exports in 2021-22 compared to 2020-21 and that includes certain ores, gold, yarn, ground nut oil and cheese and curd.

The Directorate General of Foreign Trade (DGFT) in a public notice said that the sector/product group that witnessed such decline in 2021-22 as compared to 2020-21 would be entitled for such relief. The DGFT asked its regional offices to re-fix the annual average export obligation for the Export Promotion Capital Goods (EPCG) authorisation for 2021-22 accordingly.

Under the EPCG scheme, imports of capital goods are allowed duty free, subject to an export obligation. The authorisation holder (or exporter) under the scheme has to export finished goods worth six times of the actual duty saved in value terms in six years. The objective of the Export Promotion Capital Goods (EPCG) scheme is to facilitate import of capital goods for producing quality goods and services and enhance India's manufacturing competitiveness.

Foreign trade policy (2015-20) was extended till March 31 next year envisages that to provide relief to exporters of those sectors where total exports in that sector/product group has declined by more than 5 per cent as compared to the previous year, the average export obligation for the year may be reduced proportionate to reduction in exports of that particular sector/product group during the relevant year s against the preceding year.

The CNX Nifty traded in a range of 18,394.60 and 18,209.80. There were 14 stocks advancing against 35 stocks declining, while 1 stock remained unchanged on the index.

The top gainers on Nifty were HCL Technologies up by 1.14%, Asian Paints up by 0.92%, Hindustan Unilever up by 0.85%, SBI up by 0.50% and Infosys up by 0.44%. On the flip side, Mahindra & Mahindra down by 2.51%, Bajaj Auto down by 1.79%, NTPC down by 1.66%, Bajaj Finance down by 1.60% and Indusind Bank down by 1.57% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 66.28 points or 0.9% to 7,412.82, France’s CAC increased 85.84 points or 1.31% to 6,661.96 and Germany’s DAX increased 170.37 points or 1.19% to 14,436.75.

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 also 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.