Key gauges end higher on favourable inflation data

Indian equity benchmarks ended higher by over half a percent on Tuesday amid largely positive cues from global markets. After the initial uptick, key gauges gradually inched higher as data showed domestic retail inflation fell to an 11-month low of 5.88 per cent in November, below the upper end of RBI's target band of 2-6 per cent for the first time since December 2021. Some support also came as a bill seeking to mandate the use of non-fossil energy sources such as biomass, ethanol and green hydrogen was passed by Parliament. Traders also took note of External Affairs Minister S Jaishankar’s statement that India and the UAE which have inked a landmark trade deal have seen a veritable transformation in their ties which are now beginning to have a broader ripple impact and he emphasized that they want to use this relationship to shape the changing world.

Markets continued to trade higher and closed near day’s high points. Traders got support as Finance Minister Nirmala Sitharaman lauded the Indian Rupee and said it has been strong against every currency. She said the Reserve Bank of India (RBI) has used foreign exchange reserves that it has to intervene in the market to make sure that the Dollar-Rupee fluctuation does not go too much. Domestic sentiments remained optimistic as Finance ministry said that steps taken by the government has helped in bringing down the inflation to the RBI's tolerance level of below 6 per cent. The ministry also expressed confidence that prices of cereals, pulses and edible oils will soften further in the coming months. Traders overlooked data released by the Ministry of Statistics and Programme Implementation showing that India's industrial output, as per the Index of Industrial Production (IIP), contracted by 4 percent in October.

On the global front, Asian markets settled mixed on Tuesday, while European markets were trading higher though overall gains remained modest amid caution ahead of key U.S. inflation data and a slew of central bank policy meetings due this week. Investors were pinning hopes that the Federal Reserve, the European Central Bank and Bank of England all will tone down their hawkish stances to help prevent a potential recession.

Back home, power stocks were in focus as ICRA said the all-India electricity demand is expected to grow 7 per cent to 1,480 billion units (BU) in the ongoing financial year. In the preceding 2021-22 fiscal, the all-India power demand was at 1,380 BU. There were some reaction in aviation industry stocks as the rating firm ICRA said amid recovery in domestic passenger traffic in FY2023, the earnings recovery for domestic airlines will be slow-paced due to elevated ATF prices in addition to the rupee depreciation against the US dollar. Leather and footwear related stocks also were in limelight with a report that Indian footwear and leather exports to West Asia and North Africa (WANA) region have registered an exponential growth of 20 per cent in the first half of 2022.

Finally, the BSE Sensex rose 402.73 points or 0.65% to 62,533.30 and the CNX Nifty was up by 110.85 points or 0.60% to 18,608.00.

The BSE Sensex touched high and low of 62,567.92 and 62,129.57, respectively. There were 24 stocks advancing against 6 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.25%, while Small cap index was up by 0.40%.

The top gaining sectoral indices on the BSE were Telecom up by 1.48%, TECK up by 1.32%, IT up by 1.11%, Financial Services up by 0.72% and Bankex up by 0.48%, while Realty down by 0.81%, Oil & Gas down by 0.24%, Consumer Durables down by 0.18%, Metal down by 0.12% and Energy down by 0.07% were the top losing indices on BSE.

The top gainers on the Sensex were Indusind Bank up by 2.46%, Bajaj Finance up by 1.75%, Infosys up by 1.65%, HCL Technologies up by 1.60% and Mahindra & Mahindra up by 1.59%. On the flip side, Nestle down by 0.57%, Tata Steel down by 0.54%, Maruti Suzuki down by 0.43%, Titan Company down by 0.32% and Hindustan Unilever down by 0.22% were the top losers.

Meanwhile, External Affairs Minister S Jaishankar has said India and the UAE which have inked a landmark trade deal have seen a veritable transformation in their ties which are now beginning to have a broader ripple impact. He emphasized that they want to use this relationship to shape the changing world. He stated a defining decision of this transformation is the signing of the bilateral trade pact which led to such effective results and speaks volumes for the bilateral relationship.

He mentioned ‘The fact that we were able to conclude the comprehensive economic cooperation agreement so quickly and has led to such effective results thereafter, speaks really volumes for the relationship. We're now moving into new areas.’ India and the UAE signed UAE-India Comprehensive Economic Partnership Agreement (CEPA) in February this year.

Further, he stated ‘Today, our discussions are about space, education, artificial intelligence, health and startups. The old, traditional energy trade investments continue, but a new agenda is also coming into being.’ Currently, the UAE is India's 3rd largest trade partner. It is India's 2nd largest export market.

The CNX Nifty traded in a range of 18,617.25 and 18,490.20. There were 34 stocks advancing against 16 stocks declining on the index.

The top gainers on Nifty were Indusind Bank up by 2.13%, Bajaj Finance up by 2.05%, Infosys up by 1.54%, HCL Technologies up by 1.58% and TCS up by 1.54%. On the flip side, Apollo Hospital down by 1.27%, UPL down by 1.04%, Hindalco down by 0.90%, Nestle down by 0.69% and BPCL down by 0.66% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 15.69 points or 0.21% to 7,461.66, France’s CAC increased 37.74 points or 0.57% to 6,688.29 and Germany’s DAX increased 103.99 points or 0.73% to 14,410.62.

Asian markets settled mixed on Tuesday amid caution ahead of key US inflation data and a slew of central bank policy meetings due this week. Japanese shares gained in line with Wall Street gains overnight with hopes that the Fed Committee would take a less hawkish stance on interest rate hikes, while an overnight weakening of the yen helped lift exporters. Hong Kong shares jumped on signs of further easing of China's Covid-19 restrictions. Meanwhile, Chinese shares fell marginally after data showed China’s credit expanded at a slightly slower pace than expected in November, despite the PBoC’s efforts to boost lending and ease restrictions on property loans.