Indices end lower for second day amid weak global markets

Declining for second consecutive day, Indian equity benchmarks settled with losses of over half percent on Friday, in tandem with a weak trend in overseas markets amid hawkish tone of global central banks. After witnessing volatility in initial trade, Indian benchmarks faced selloff in morning deals as traders were concerned with a private report that India's current account deficit likely rose to its highest in nearly a decade in the July-September quarter as elevated commodity prices and a weak rupee stretched the trade gap even further. Some concern also came as the government data showed that India's exports recorded a flat growth of 0.59 per cent to $31.99 billion in November, even as trade deficit widened to $23.89 billion during the month. Exports stood at $31.8 billion in November last year. Imports rose by 5.37 per cent to $55.88 billion in November as compared to $53.03 billion in the corresponding month a year ago

However, markets witnessed recovery and key indices erased almost all of their losses in noon deals as traders found some support with Icra Ratings’ report stating that led by retail-focused players, non-banking financial companies (NBFCs) are likely to close the current fiscal and the next with a loan growth of 10-12 per cent and see around 50 basis points improvement in profitability. Some relief also came amid a private report stating that India is growing faster than what is captured by the country's official data, and it presents a case for an upgrade of equities outlook. But, recovery proved short-lived and markets once again witnessed selling pressure in last leg of trade as sentiments got hit with report stating that investments by private equity and venture capital funds have declined by 42 per cent year-on-year to $4 billion in November. Traders failed to take support from report that government has slashed the windfall profit tax levied on domestically-produced crude oil as well as on export of diesel and ATF following a drop in global oil prices.

On the global front, European markets were trading lower amidst overwhelming anxiety regarding prolonged period of interest rate hikes. Close on the heels of the Fed's rate hike on Wednesday, the Bank of England and the European Central Bank, both raised rates by 50 basis points, instilling fresh fears of a recessionary economic scenario. Asian markets settled mostly lower on Friday following the broadly negative cues from global markets, with traders remaining largely cautious as aggressive interest rate hikes by global central banks will push the economy into a recession.

Back home, telecom industry stocks remained in focus as a private report stated that the Indian telecom industry is expected to grow by USD 12.5 billion every three years with the advent of 5G which has the potential to boost innovation across the globe. There was some buzz in the sugar industry stocks as the government may consider increasing sugar export quota for the current 2022-23 marketing year after assessing the domestic production in January. In November, the government allowed export of 60 lakh tonnes of sugar for the 2022-23 marketing year (October-September).

Finally, the BSE Sensex fell 461.22 points or 0.75% to 61,337.81 and the CNX Nifty was down by 145.90 points or 0.79% to 18,269.00.

The BSE Sensex touched high and low of 61,893.22 and 61,292.53, respectively. There were 4 stocks advancing against 26 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 1.44%, while Small cap index was down by 0.96%.

The top losing sectoral indices on the BSE were Realty down by 1.57%, Consumer Discretionary down by 1.36%, Healthcare down by 1.33%, Industrials down by 1.32% and Capital Goods down by 1.26%, while there were no gaining sectoral indices on the BSE.

The top gainers on the Sensex were HDFC Bank up by 0.49%, Hindustan Unilever up by 0.30%, Nestle up by 0.19% and Tata Steel up by 0.05%. On the flip side, Dr. Reddy's Lab down by 3.62%, Mahindra & Mahindra down by 2.44%, Asian Paints down by 2.30%, TCS down by 2.01% and SBI down by 1.98% were the top losers.

Meanwhile, rating agency ICRA in its latest report has said that non-banking financial companies (NBFCs) are likely to close the current fiscal (FY23) and the next with a loan growth of 10-12 per cent and see around 50 basis points improvement in profitability, led by retail-focused players. It said retail-focused NBFCs are expected to grow 12-14 per cent while the housing finance companies may grow at 10-12 per cent. The forecast is based on the asset quality improvement and the overall pick up in credit demand.

However, the report stated that microfinance and personal loans, which together constitute a quarter of the Rs 25-lakh crore shadow banking sector, will continue to grow at high pace. Sectoral profitability will improve by 40-50 basis points (bps) this fiscal, supported by stable margins and lower credit cost, and will reach the pre-pandemic levels. It also said that while growth will be broad-based across various sub-sectors, microfinance and personal loans will be leading the growth chart. On the other hand, it said vehicle financing loans (commercial vehicle finance, passenger vehicle finance), which has remained significantly subdued since FY20, are also expected to report higher growth numbers, following an improvement in the operating environment.

According to the report, asset quality of non-banks has been improving steadily since December 2021 as borrowers gradually recovered from the pandemic-induced stress. The improvement has been on the back of higher collections, lower-than-anticipated share of restructured portfolio estimated at 2 per cent of total asset under management as of September 2022 and controlled slippages from this book and reported ratios also benefiting from the base effect of high growth. Overall, the majority stress from the restructured book is likely to be absorbed in FY23 and slippages are expected to remain range-bound. The agency, therefore, expects the NBFCs to report some moderation in reported asset quality indicators and credit costs by March 2023.

The CNX Nifty traded in a range of 18,440.95 and 18,255.15. There were 5 stocks advancing against 45 stocks declining on the index.

The top gainers on Nifty were Tata Motors up by 1.42%, Hindustan Unilever up by 0.40%, Nestle up by 0.21%, HDFC Bank up by 0.21% and UPL up by 0.16%. On the flip side, Adani Ports & SEZ down by 2.83%, Mahindra & Mahindra down by 2.50%, BPCL down by 2.35%, Asian Paints down by 2.19% and Dr. Reddy's Lab down by 2.10%.

European markets were trading lower; UK’s FTSE 100 decreased 89.57 points or 1.21% to 7,336.60, France’s CAC decreased 81.17 points or 1.24% to 6,441.60 and Germany’s DAX decreased 138.92 points or 0.99% to 13,847.31.

Asian markets settled mostly lower on Friday followed the fall in Wall Street overnight on fears of a recession stemming from the Fed's aggressive interest rate hiking cycle. Moreover, hawkish commentaries by global central banks dampened investor sentiments. Japanese shares declined after a survey of manufacturers showed a further contraction in output. Data showed the Jibun Bank Manufacturing PMI Flash fell to 48.8 in early December from 49 in November. The services PMI reading however increased to 51.7 in early December from 50.3 in November. Meanwhile, Chinese shares ended almost flat after the US government slapped restrictions on Chinese companies over their efforts to use advanced technologies to help modernize China’s military.