Key indices end at record closing highs yet again on Tuesday

Indian equity benchmarks ended at record closing highs yet again on Tuesday, aided by an uptick in fast-moving consumer goods (FMCG), Consumer Durables and Metal stocks. After the cautious start, markets gradually inched higher and continued their positive trend for whole day, amid a largely firm trend in other Asian markets. Sentiments remained optimistic as the data showed that foreign portfolio investors have infused funds worth Rs 32,344 crore in Indian stock markets so far in the month of November and became net buyers again. Some support also came in as the RBI released quarterly statistics on deposits and credit highlighting bank credit growth to 17.2 per cent on an annual basis in September from 14.2 per cent a quarter ago.

However, markets cut some of the gains towards the end, as some concern came with SBI Research stating that India's economic growth for the July to September quarter may slow to 5.8 per cent, 30 basis points lower than average estimates, dragged down by weak manufacturing sector and steep corporate margin compression. But, key gauges managed to end the session at record closing highs, taking support from the Reserve Bank of India’s (RBI) latest report ‘Data on ECB/FCCB’ showing that Indian companies raised $1.43 billion ($1,42,99,20,622) through external commercial borrowings (ECBs) in for the month of October 2022. Traders took note of report that senior officials of India and the European Union (EU) on November 28 commenced the third round of talks on a proposed free trade agreement, which aims at boosting trade and investments between the two regions.

On the global front, European markets were trading in green as traders awaited German inflation data for November and final November consumer confidence data for the euro zone due later in the day. Asian markets settled mostly higher on Tuesday with mainland China and Hong Kong markets leading the surge, as China reported a slight dip in new COVID-19 infections and China reopening rumors swirled ahead of a press conference later in the day on COVID prevention and control measures.

Back home, auto stocks were in focus as credit rating agency Icra said passenger vehicle makers are expected to spend Rs 65,000 crore between FY23 and FY25, as companies ramp up outlay towards capacity expansion and new product development. Power stocks were in limelight as the Power Ministry launched a scheme for the procurement of aggregate electricity of 4,500 MW for five years under of the SHAKTI (Scheme for Harnessing and Allocating Koyala Transparently in India) policy.

Finally, the BSE Sensex rose 177.04 points or 0.28% to 62,681.84 and the CNX Nifty was up by 55.30 points or 0.30% to 18,618.05.

The BSE Sensex touched high and low of 62,887.40 and 62,362.08, respectively. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.39%, while Small cap index was down by 0.29%.

The top gaining sectoral indices on the BSE were FMCG up by 1.73%, Consumer Durables up by 0.58%, Metal up by 0.57%, Healthcare up by 0.54% and Utilities up by 0.22%, while Telecom down by 0.96%, Capital Goods down by 0.74%, Industrials down by 0.65%, Realty down by 0.41% and Auto down by 0.25% were the top losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 4.27%, Sun Pharma up by 1.46%, Nestle up by 1.32%, Dr. Reddy's Lab up by 1.16% and Tata Steel up by 1.14%. On the flip side, Indusind Bank down by 1.50%, Bajaj Finserv down by 1.27%, Maruti Suzuki down by 0.98%, Power Grid Corporation down by 0.97% and Larsen & Toubro down by 0.70% were the top losers.

Meanwhile, Fitch Ratings has said that India's bank credit growth will accelerate in the financial year ending March 2023 (FY23), despite the effects of higher interest rates. It stated strong loan growth should benefit net revenue, particularly as it will be coupled with wider net interest margins. However, it will put pressure on Core Equity Tier 1 ratios (CET1) should credit growth exceed Fitch's expectations, limiting buffers to absorb potential future losses.

Fitch Ratings sees bank credit expanding by around 13 per cent in FY23, up from 11.5 per cent in FY22. It said ‘The acceleration will be driven by the normalisation of economic activity after the Covid-19 pandemic, and high nominal GDP growth, which we expect to boost demand for retail and working-capital loans.’ It forecasts India's real GDP growth at 7 per cent in FY23.

It mentioned 'The full-year loan growth is likely to represent a modest slowdown from the 17 per cent y-o-y pace in 1HFY23. This factors in some base effects. Nonetheless, we expect credit demand to stay robust into FY24, when we see growth at similar levels or slightly higher, assuming continued strong economic expansion.’ Besides, it said rapid loan growth contributed to the system CET1 ratio dropping by nearly 50 basis point in 1HFY23, from 13.4 per cent at end-FY22.

However, it added ‘Most banks do not factor in quarterly profits as part of their capital calculation. Our baseline assumption is that CET1 ratios will fall only modestly, and remain around 13 per cent levels until FY24, as banks step up efforts to raise external capital.’

The CNX Nifty traded in a range of 18,678.10 and 18,552.15. There were 22 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were Hindustan Unilever up by 4.39%, JSW Steel up by 2.16%, Cipla up by 1.85%, Hero MotoCorp up by 1.74% and Sun Pharma up by 1.52%,. On the flip side, Indusind Bank down by 1.49%, Coal India down by 1.44%, Bajaj Finserv down by 1.20%, Eicher Motors down by 0.91% and Power Grid Corporation down by 0.81% were the top losers.

European markets were trading in green; France’s CAC increased 59.26 points or 0.79% to 7,533.28, Germany’s DAX was up by 22.43 points or 0.16% to 14,405.79 and UK’s FTSE 100 was up by 59.26 points or 0.79% to 7,533.28.

Asian markets settled mostly higher on Tuesday, with Chinese and Hong Kong shares gaining after Beijing rolled out more stimulus measures targeting the real estate sector and speculation mounted that the Chinese government was considering the scaling back of its anti-covid policies. However, Japanese shares bucked the trend and fell, tracking a sharp decline in US stocks overnight and after data showed Japanese retail sales grew less than expected in October. Hawkish comments on US interest rates from a top Federal Reserve policymakers still makes investors cautious.