Markets extend gains for second consecutive session

Indian equity benchmarks ended higher for the second consecutive session with gains of over half percent on Tuesday as positive global cues, coupled with reports of China further relaxing its pandemic-related restrictions boosted sentiment. After a positive start, markets witnessed volatility as traders were cautious on a private report that a sustained surge in Covid cases in China could further exacerbate a contraction in India’s exports to its fourth-largest market in the coming months, as order flow has already been faltering at a steady pace. Street now forecast a 40-45% crash in exports to China this fiscal from $21.3 billion in FY22 if the Covid surge continues through January. However, key gauges soon gained strength in late morning deals, as traders turned optimistic with a private report stating that India is well positioned to continue to be the fastest-growing major economy next year, which may mark the lowest global growth since the millennium began barring the pandemic and the global financial crisis.

Markets extended gains in the second half to close the session near the day's high, taking support from Secretary in Department for Promotion of Industry and Internal Trade (DPIIT) Anurag Jain’s statement that India has the third largest startup ecosystem in the world and the way startups here are performing; soon the country will become a top ecosystem globally. He also said that the country's startups will attract significant foreign direct investments (FDI) in 2023 on account of steps being taken by the government to strengthen the ecosystem for budding entrepreneurs. Traders overlooked report that credit rating agency, India Ratings and Research (Ind-Ra) in its ‘December Credit Market Tracker’ has forecasted that the core inflation is likely to remain elevated in the remaining FY23, given that there is a pending pass-through of higher input costs by producers and a continued robust demand in the economy.

On the global front, European markets were trading higher as trading resumed after a long Christmas holiday weekend. U.K. markets remain closed for a public holiday. Asian markets settled higher on Tuesday after China said it would drop quarantine requirements for international arrivals from January 8, in a major step towards reopening its borders and marking another shift from its so-called zero-COVID policy. Investors also digested a slew of economic data from Japan and awaited the release of the Bank of Japan's summary of opinions of the Dec 19-20 meeting due Wednesday for directional cues.

Back home, there was some buzz in coal related stocks as the Coal Consumers Association of India (CCAI) has made a plea to the government to resume rake-based supplies to the non-power sector in a bid to maintain cost competitiveness and sustain operations. Textiles stocks also were in watch as the government said that the Rs 10,683-crore production-linked incentive scheme for India's textiles sector attracted investments of Rs 1,536 crore as approval letters were issued to 56 applicants who met the eligibility criteria.

Finally, the BSE Sensex rose 361.01 points or 0.60% to 60,927.43 and the CNX Nifty was up by 117.70 points or 0.65% to 18,132.30.

The BSE Sensex touched high and low of 60,986.68 and 60,405.66, respectively. There were 25 stocks advancing against 5 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.78%, while Small cap index was up by 1.46%.

The top gaining sectoral indices on the BSE were Metal up by 4.59%, Telecom up by 1.54%, Capital Goods up by 1.40%, Realty up by 1.38% and Industrials up by 1.38%, while FMCG down by 0.22% was the only losing index on BSE.

The top gainers on the Sensex were Tata Steel up by 5.86%, Tata Motors up by 2.42%, Larsen & Toubro up by 1.72%, Asian Paints up by 1.71% and Wipro up by 1.59%. On the flip side, Hindustan Unilever down by 1.00%, Nestle down by 0.51%, ITC down by 0.45%, Mahindra & Mahindra down by 0.33% and NTPC down by 0.30% were the top losers.

Meanwhile, credit rating agency, India Ratings and Research (Ind-Ra) in its ‘December Credit Market Tracker’ has forecasted that the core inflation is likely to remain elevated in the remaining FY23, given that there is a pending pass-through of higher input costs by producers and a continued robust demand in the economy. The country’s retail inflation, measured by the Consumer Price Index (CPI), decreased to 5.88 per cent in the month of November 2022 as compared to 6.77 per cent in October 2022.

As per the report, the surplus liquidity in the banking system has improved in December 2022 compared to November 2022. The surplus liquidity rose moderately to Rs 1115 billion (average up to December 19, 2022) from Rs 454 billion (average for November 2022), largely driven by foreign inflows to equity market and government spending.

According to the LAF data, the Reserve Bank of India (RBI) injected liquidity in the banking system in November 2022 to offset the tightening liquidity. However, it said that the liquidity conditions may tighten further due to a deficit in India’s balance of payments in FY23 and a seasonal uptick in the currency leakage in Q4.

The CNX Nifty traded in a range of 18,149.25 and 17,967.45. There were 40 stocks advancing against 9 stocks declining, while 1 stock remained unchanged on the index.

The top gainers on Nifty were Hindalco up by 6.11%, Tata Steel up by 6.00%, JSW Steel up by 4.30%, Tata Motors up by 2.68% and ONGC up by 2.23%. On the flip side, Hindustan Unilever down by 0.93%, Apollo Hospital down by 0.77%, Nestle down by 0.59%, Mahindra & Mahindra down by 0.57% and ITC down by 0.46% were the top losers.

European markets were trading higher; France’s CAC increased 62.26 points or 0.96% to 6,567.16 and Germany’s DAX increased 100.40 points or 0.72% to 14,041.33.

Asian markets settled higher on Tuesday. Chinese shares gained sharply due to optimism over the reopening of the world’s second largest economy after China said it would reopen borders and scrap Covid quarantine rules for international arrivals from next month. Markets' sentiments improved even after official data showed profits at China’s industrial firms contracted further in the January-November period when strict Covid-related restrictions disrupted factory activity and supply chains as the virus spread through key manufacturing hubs. Japanese shares ended marginally higher as investors awaited the release of Summary of Opinions from the BoJ's December meeting due Wednesday for directional cues. Although, the latest readings of Japan’s unemployment, housing starts and retail sales proved to be a mixed bag. Meanwhile, market in Hong Kong was closed for Christmas holiday.