Benchmarks snap two-day gains; end lower on Wednesday

Snapping their two-day gains, Indian equity benchmarks traded under pressure and finally settled around the day’s low points on Wednesday amid selling across the sectors. After the flat start, key gauges gradually inched lower as the day progressed amid foreign fund outflows. Foreign institutional investors (FII) sold shares worth Rs 628.07 crore on January 3, as per provisional data available on the NSE. Market participants awaited a slew of U.S. data and the latest FOMC meeting minutes this week for additional clues on when and where interest rates might peak. Traders took a note of report that Micro-Finance Institution Network (MFIN), a self-regulatory organisation (SRO) recognised by RBI, said that outstanding loan portfolio of the micro-finance institution (MFI) sector across India will increase around 20.3 per cent at Rs 3.25 lakh crore in 2022-23 compared to the previous fiscal.

Markets managed to trim some losses in late afternoon deals, taking support from reports that India’s services sector growth expanded further in the month of December, with a quicker upturn in new business boosting output growth. More jobs were created and companies remained strongly upbeat towards the year-ahead outlook for business activity. As per the survey report, the seasonally adjusted S&P Global India Services PMI Business Activity Index surged to 58.5 in December from 56.4 in November. Further, the S&P Global India Composite PMI Output Index -- which measures both manufacturing and services -- improved to 59.4 in December from 56.7 in November. However, markers failed to hold recovery and ended with sharp cuts as traders shifted focus towards the upcoming quarterly earnings season, with IT giant TCS likely to unveil its earnings on January 9.

On the global front, European markets were trading higher as the signs that COVID infections may have peaked in some big Chinese cities is also aiding market sentiment as traders are hopeful of a swift post-COVID era recovery in China. Asian markets settled mostly lower on Wednesday as traders keenly awaited minutes from the Federal Reserve's December meeting later in the day and Friday's employment report for clues to the central bank's future actions.

Back home, road logistics sector stocks were in focus as rating agency Icra revised its growth estimates for the Indian road logistics sector to 11-13 per cent for the current fiscal against the previous estimate of 7-9 per cent. Leather industry stocks also were in watch as Commerce and Industry Minister Piyush Goyal said the government is considering a new scheme to support domestic manufacturing of machinery and accessories used in the leather industry.

Finally, the BSE Sensex fell 636.75 points or 1.04% to 60,657.45 and the CNX Nifty was down by 189.60 points or 1.04% to 18,042.95.

The BSE Sensex touched high and low of 61,327.21 and 60,593.56, respectively. There were 2 stocks advancing against 28 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.97%, while Small cap index was down by 0.79%.

There were no gaining sectoral indices on the BSE, while Metal down by 2.83%, Realty down by 1.99%, Utilities down by 1.74%, Energy down by 1.70% and Oil & Gas down by 1.52% were the top losing indices on BSE.

The only gainers on the Sensex were Maruti Suzuki up by 0.22% and TCS up by 0.10%. On the flip side, Tata Steel down by 2.32%, Power Grid down by 2.09%, Tata Motors down by 2.09%, Wipro down by 1.83% and Infosys down by 1.82% were the top losers.

Meanwhile, the Micro-Finance Institution Network (MFIN), a self-regulatory organisation (SRO) recognised by RBI, has said that outstanding loan portfolio of the micro-finance institution (MFI) sector across India will increase around 20.3 per cent at Rs 3.25 lakh crore in 2022-23 compared to the previous fiscal. During the last fiscal, the total outstanding of the MFI sector was Rs 2.7 lakh crore, and the sector had created around 1.32 crore jobs in the country since 2000.

MFIN CEO Alok Misra said ‘The MFI sector's outstanding for the current fiscal will be around Rs 3.25 lakh crore. There will be a 20.3 per cent rise over the previous fiscal year’. The collection efficiency ratio of the sector during the pandemic of 2021 and 2022 had been affected as group gatherings did not take place properly. He said ‘But the collection efficiency ratio at present has increased to 97 per cent for the sector from 70 per cent during the pandemic’.

According to an MFIN study, the total number of MFI beneficiaries in the country is 6.2 crore. Misra said as per a study conducted by NCAER, the MFI sector's contribution to the overall GDP is 2.7 per cent. He also said the share of West Bengal in terms of the outstanding loan portfolio is 17 per cent at Rs 38,000 crore. Referring to the RBI guidelines for the NBFC-MFI sector announced in March 2022, he said a level playing field had been created among the banks, NBFC-MFIs and NBFCs in terms of charging interest rates on loans as interest caps had been lifted by the apex bank.

MFIN said owing to the rise in the cost of funds, the average interest rate charged by NBFC-MFIs is around 24 per cent. Earlier, the average interest cost was 22.5 per cent, but it has increased now due to a rise in repo rates by RBI. The MFIN has 47 members in its network in West Bengal, which includes Bandhan Bank, Arohan Financial Services, Village Financial Services and Ujjivan Small Finance Bank among others.

The CNX Nifty traded in a range of 18,243.00 and 18,020.60. There were 7 stocks advancing against 43 stocks declining on the index.

The top gainers on Nifty were Divi's Lab up by 1.09%, Maruti Suzuki up by 0.43%, HDFC Life Insurance up by 0.39%, Eicher Motors up by 0.08% and Dr. Reddy's Lab up by 0.07%. On the flip side, JSW Steel down by 4.16%, Hindalco down by 4.05%, Coal India down by 3.21%, Tata Steel down by 2.53% and ONGC down by 2.11% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 36.28 points or 0.48% to 7,590.37, France’s CAC increased 101.21 points or 1.53% to 6,725.10 and Germany’s DAX increased 176.32 points or 1.24% to 14,357.99.

Asian markets settled mostly lower on Wednesday as investors awaited minutes from the US Federal Reserve's December meeting later in the day, which could offer clues to the Fed's future actions. Japanese shares dropped as traders returned to their desks after a long holiday weekend for the New Year, while Japan’s currency yen advanced with fears that the BoJ might move away from its ultra-easy monetary policy. However, Chinese shares rose on the back of the expectations of swift post-covid recovery in the economy. Hong Kong shares gained after China’s property developers surged following forecast beating December sales and news that Chinese officials were considering further support for property developers. Meanwhile, shares in Hong Kong listed Alibaba Group Holdings jumped as much as 8% following news that Ant Group Co., in which the e-commerce giant holds a stake, won approval to raise $1.5 billion for its consumer unit.