Benchmarks end in red on Wednesday

Indian equity benchmarks traded lackluster for yet another session on Wednesday due to losses in Utilities, Realty and Consumer Durables stocks amid weak global cues. After making cautious start, key gauges trade marginally in green as traders took some support with Fitch Ratings’ report in which it has retained India's economic growth forecast at 7 per cent for the current fiscal, saying India could be one of the fastest-growing emerging markets this year. Some support also came as the World Bank in its India Development Update said the central government is on track to meet its fiscal deficit target of 6.4 per cent of the GDP for 2022-23 on the back of strong growth in revenue collections. High nominal GDP growth in the first quarter supported strong growth in revenue collection, especially Goods and Services Tax (GST), despite tax cuts on fuel.

However, markets failed to hold gains and slipped into red terrain in late morning deals, as investors booked profits post the rate hike by the RBI governor. The Reserve Bank of India (RBI) has increased the policy repo rate under the liquidity adjustment facility (LAF) by 35 basis points to 6.25 per cent with immediate. Meanwhile, it also announced a mild reduction in the GDP growth forecast for the current financial year to 6.8 per cent from 7 per cent earlier. It said that while the growth forecast had been reduced, India would still be among the fastest-growing major economies. Some concern also came as Niti Aayog has raised objections to certain provisions pertaining to the proposed DESH bill, which seeks to replace the existing law for special economic zones. In the Union Budget 2022-23, the government had proposed to replace the existing law governing Special Economic Zones (SEZs) with a new legislation to enable states to become partners in 'Development of Enterprise and Service Hubs' (DESH).

On the global front, European markets were trading in red, while Asian markets settled lower on Wednesday as investors reacted to mixed data out of the United States and China. While better-than-expected data from the U.S. services sector rekindled expectations for rapid rate rises from the Federal Reserve, dismal trade data from China offset recent investor optimism over an easing of some COVID-19 controls in the country. Regional losses remained capped somewhat after U.S. lawmakers scaled back a proposal that placed new curbs on semiconductor sales to China.

Back home, power stocks were in focus as India's thermal power generation registered a growth of 16.28 per cent at 87,687 MU (million units) in November this year as compared to 75,412 MU generated in the corresponding month of previous fiscal. Cement industry stocks were in watch with a private report that the price of cement is hardening across the country and since August this year, the rates have gone up by Rs 16/per bag. According to a report, in November the prices went up by about Rs 6-7/bag. There were some buzz in port industry stocks as Indian Ports’ Association (IPA) data showed state-owned ports handled 1.9 million tonnes (mt) of cargo in November, or just about 3 per cent more than last year, as international trade volatility and freight costs continued to dampen traffic at these ports.

Finally, the BSE Sensex fell 215.68 points or 0.34% to 62,410.68 and the CNX Nifty was down by 82.25 points or 0.44% to 18,560.50.

The BSE Sensex touched high and low of 62,759.97 and 62,316.65, respectively. There were 7 stocks advancing against 23 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.41%, while Small cap index was down by 0.44%.

The top gaining sectoral indices on the BSE were FMCG up by 0.87%, Capital Goods up by 0.84%, Industrials up by 0.44% and Oil & Gas up by 0.04%, while Utilities down by 1.28%, Realty down by 1.11%, Consumer Durables down by 1.06%, Power down by 0.91% and Metal down by 0.90% were the top losing indices on BSE.

The top gainers on the Sensex were Asian Paints up by 2.10%, Hindustan Unilever up by 2.01%, Larsen & Toubro up by 1.42%, Axis Bank up by 0.93% and ITC up by 0.82%. On the flip side, NTPC down by 2.00%, Bajaj Finserv down by 1.73%, Indusind Bank down by 1.64%, Tata Steel down by 1.46% and Reliance Industries down by 1.43% were the top losers.

Meanwhile, the World Bank in its India Development Update said the central government is on track to meet its fiscal deficit target of 6.4 per cent of the GDP for 2022-23 on the back of strong growth in revenue collections. High nominal GDP growth in the first quarter supported strong growth in revenue collection, especially Goods and Services Tax (GST), despite tax cuts on fuel. It said public debt is also projected to decline to 84.3 per cent of GDP in FY23, from a peak of 87.6 per cent in FY21.

The central government's revenues increased by 9.5 per cent and spending by 12.2 per cent. As a result, it said, the fiscal deficit touched 37.3 per cent of the annual target in H1 FY22/23, above the 35 per cent of the same half last year. It also said ‘this masked strong growth in gross tax revenues, which increased by 17.6 per cent y-o-y and resulted in larger transfers to the state governments. Budget execution has also improved with capital spending increasing by 35 per cent’. With regard to the current account deficit, the report said it turned into a deficit of 1.1 per cent of GDP in 2021-22 from a surplus in the previous year, and the deficit widened further in FY'23 due to surging imports.

Thus far, it said, India's current account balance remains adequately financed by robust net capital inflows. Foreign Direct Investment (FDI) inflows the main source of financing for the current account deficit were stable at around 1.6 per cent of GDP in Q1 FY22/23, up from an average of 1.2 per cent in the previous fiscal year. It said this has partially offset the initial net outflows of foreign portfolio investment, which was 1.7 per cent of GDP. It added ‘The slowdown in advanced economies (AEs) could also position India as a more attractive alternative investment destination. The government is also expected to introduce new production-linked investment incentives and fiscal measures to encourage foreign investment in various sectors of the economy’.

With the RBI raising policy rates, it said the widening interest-rate differential with the US Federal Reserve could also help prevent capital outflows. On the external front, it said, the income elasticity of India's exports is high and thus exports are susceptible to the global growth slowdown. India is also a net importer of crude oil and elevated global commodity prices will continue to weigh on domestic inflation, constraining domestic activity. However, the recent decline in commodity prices may dampen inflationary pressures. Observing that the economy is relatively more insulated from global spillovers than other emerging markets, the report said India is less exposed to international trade flows and relies on its large domestic market.

The CNX Nifty traded in a range of 18,668.30 and 18,528.40. There were 11 stocks advancing against 39 stocks declining on the index.

The top gainers on Nifty were Hindustan Unilever up by 1.99%, BPCL up by 1.96%, Asian Paints up by 1.91%, Larsen & Toubro up by 1.50% and Axis Bank up by 0.92%. On the flip side, SBI Life Insurance down by 2.03%, NTPC down by 2.00%, Bajaj Finserv down by 1.79%, Tata Motors down by 1.69% and Bajaj Auto down by 1.62% were the top losers.

European markets were trading in red; France’s CAC decreased 31.85 points or 0.48% to 6,655.94, Germany’s DAX was down by 76.57 points or 0.53% to 14,266.62 and UK’s FTSE 100 fell by 17.31 points or 0.23% to 7,504.08.

Asian markets settled lower on Wednesday tracking a sharp fall in US stocks overnight as investors worried about uncertainty over the US Federal Reserve’s interest rate hikes. Meanwhile, US recession fears also weighed on the market sentiments. Chinese shares dipped after data showed China's exports and imports both shrank at their steepest pace in at least 2-1/2 years in November. Although, some losses were capped after US senators called back a proposal that placed new curbs on semiconductor sales to China.