Key gauges extend losing streak for third consecutive day

Indian equity benchmarks extended their losing streak for the third consecutive day on Thursday defying largely positive global market trends. Benchmarks began the trade on a positive note, as traders found some solace with former Niti Aayog vice chairman Arvind Panagariya’s statement that the Indian economy is likely to grow at over 7 per cent in the current fiscal year, and observed that the growth rate should sustain next year too provided the forthcoming Budget does not have any negative surprises. Traders took note of report that India, which has already been in talks with Russia for a rupee-rouble payment system, is now looking at expanding the rupee trade with other nations as well, including several countries in Africa, UAE and Saudi Arabia among others. However, key gauges failed to carry forward the gains and slipped into red in morning deals. Traders got cautious as pressing for the prohibition of instruments like Bitcoin, Reserve Bank Governor Shaktikanta Das warned that the next financial crisis can be triggered by private cryptocurrencies, if such speculative instruments are allowed to grow.

Losses got extended in early afternoon session, owing to the hawkish comments from the RBI’s MPC minutes, which suggested that a premature pause in rate tightening would be a costly policy error at this juncture. Some anxiety also came with Indian health minister Mansukh Mandaviya’s statement that COVID is not over yet. He said 'I have directed all concerned to be alert and strengthen surveillance'. Besides, as per provisional data available on the NSE, foreign institutional investors (FIIs) sold shares worth Rs 1,119.11 crore on December 21. But, key gauges managed to trim some losses towards the end, taking support from reports that Union Finance Minister Nirmala Sitharaman exuded confidence that tax revenue generation in the current fiscal year (FY23) would be sufficient to fund the additional spending of Rs 3.26 trillion, for which her ministry has sought Parliamentary approval.

On the global front, European markets were trading mostly in red as data showing that the U.K. economy contracted more than initially estimated in the third quarter, due to the downward revisions to industrial and construction output. Asian markets settled mostly in green as sentiment was further underpinned after China said it would implement policies to support growth in 2023. Some support also came as data showed U.S. consumer confidence rose to an eight-month high in December on the back of declining inflation expectations and a strong labor market.

Back home, auto components industry stocks were in focus as the Automotive Component Manufacturers Association of India said India's auto components industry witnessed a 34.8 per cent growth to Rs 2.65 lakh crore in first-half of 2022-23, riding on domestic demand, particularly from the passenger vehicles segment. Stocks related to steel industry were in watch with rating agency ICRA’s report stating that the demand for finished steel in India is expected to grow 8 per cent in 2022 as compared to 2021. It said supported by the government's infrastructure-led growth model, domestic finished steel demand has registered a double-digit growth of 11.9 per cent in the first eight months of the current fiscal.

Finally, the BSE Sensex fell 241.02 points or 0.39% to 60,826.22 and the CNX Nifty was down by 71.75 points or 0.39% to 18,127.35.

The BSE Sensex touched high and low of 61,464.38 and 60,637.24, respectively. There were 6 stocks advancing against 24 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.77%, while Small cap index was down by 1.83%.

The only gaining sectoral index on the BSE was TECK up by 0.07%, while Industrials down by 1.78%, Utilities down by 1.60%, Capital Goods down by 1.57%, Power down by 1.49%, Realty down by 1.33% were the losing indices on BSE.

The top gainers on the Sensex were Ultratech Cement up by 0.84%, Infosys up by 0.75%, Asian Paints up by 0.65%, Kotak Mahindra Bank up by 0.58% and Sun Pharma up by 0.52%. On the flip side, Mahindra & Mahindra down by 2.61%, Bajaj Finserv down by 2.55%, Indusind Bank down by 2.26%, Tata Motors down by 2.12% and Larsen & Toubro down by 1.70% were the top losers.

Meanwhile, expressing optimism over India’s economic situation, former Niti Aayog vice chairman Arvind Panagariya has said that the Indian economy is likely to grow at over 7 per cent in the current fiscal year, and he added that the growth rate should sustain next year too provided the forthcoming Budget does not have any negative surprises. He further said recessionary fears have been around for a while but so far neither the US nor the EU has gone into recession. He said ‘From the viewpoint of India, in terms of headwinds originating abroad, the worst is probably behind us’.

Panagariya said capital outflows induced by the hikes in policy rates by the US Fed Reserve had placed the rupee under considerable pressure. He said ‘Those flows have reversed with positive net portfolio inflows in November’, and added that inflation in the US is also coming down, suggesting the worst may be over in that country as well. But in the meantime, according to him, the rupee has appreciated against currencies such as the Euro and Yen which may contribute to weakness in exports in the coming year. He noted even prior to this episode, the rupee had been overvalued. He said ‘So, I would lean in favour of further depreciation of the rupee against the dollar’.

On unemployment, he said going by the Periodic Labour Force Survey (PLFS), which is the most reliable household survey available, he does not see that the unemployment rate is high. He said ‘Higher unemployment among the youth is not a new phenomenon. This rate has always been higher than the overall rate because youth do not take the first job they are offered. Instead, they wait in the hope of getting a better offer’. He also pointed out that in recent years, due to rising urban incomes, parents are able to support their children for longer. He said ‘As a result, the waiting period has become longer, which has resulted in an upward shift in this rate’, but pointed out that as per PLFS, the unemployment rate among those aged 15 to 29 years has fallen from 20.6 per cent in 2017-18 to 18.5 per cent in 2020-21.

The CNX Nifty traded in a range of 18,318.75 and 18,068.60. There were 9 stocks advancing against 41 stocks declining on the index.

The top gainers on Nifty were Sun Pharma up by 0.95%, SBI Life Insurance up by 0.86%, Ultratech Cement up by 0.71%, Grasim Industries up by 0.67% and Asian Paints up by 0.66%. On the flip side, UPL down by 3.50%, Mahindra & Mahindra down by 2.47%, Bajaj Finserv down by 2.20%, Eicher Motors down by 2.19% and Indusind Bank down by 2.26% down by 2.15% were the top losers.

European markets were trading mostly in red; France’s CAC decreased 2.99 points or 0.05% to 6,577.25 and Germany’s DAX decreased 18.70 points or 0.13% to 14,079.12, while UK’s FTSE 100 increased 29.59 points or 0.39% to 7,526.91.

Asian markets settled mostly in green on Thursday tracking Wall Street gains for second consecutive day overnight on improved consumer confidence in the United States. South Korean shares gained as the nation saw its annualized producer price index for November reach its lowest reading in 19 months. Japanese shares rose as long-term bond yields calmed down after steep climbs, while the Japan’s currency yen also showed signs of stabilizing following its biggest jump in 24 years. However, Chinese shares fell due to concerns over Covid situation in China, even after China said it would implement policy measures to support the Chinese economy and aim for an improvement in growth in early 2023.