Sensex, Nifty extend losses to trade near day’s lows

Extending their losses, Indian equity benchmarks were trading near their intraday low points during early afternoon deals, despite positive cues from other Asian markets. Heavy selling at Metal and FMCG counters dragged markets in red. Traders also got cautious amid a private report stating that India's weightage in MSCI's emerging-market benchmark has dropped after the brutal sell-off in Adani Group's stocks. India has been replaced in the second spot by Taiwan after a rally in the latter's market. Traders failed to take any sense relief with S&P Global Ratings’ statement that core inflation in India has been declining sequentially, and an elevated 6.25 per cent policy rate limits the need for further rate hikes.

On the global front, Asian markets were trading mostly in green, even after Japan's leading index decreased further in December to the lowest level in two years. The preliminary figures from a survey by the Cabinet Office showed that the leading index, which measures the future economic activity, dropped to 97.2 in December from 97.7 in the previous month. Further, this was the lowest score since December 2020, when it was 96.5.

The BSE Sensex is currently trading at 60245.24, down by 261.66 points or 0.43% after trading in a range of 60219.23 and 60655.14. There were 9 stocks advancing against 21 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell by 0.12%, while Small cap index was down by 0.27%.

The top gaining sectoral indices on the BSE were Power up by 0.68%, Realty up by 0.43%, Utilities up by 0.41%, Capital Goods up by 0.18% and Industrials up by 0.14%, while Metal down by 2.36%, FMCG down by 1.42%, Telecom down by 1.23%, Consumer Durables down by 0.89% and Auto down by 0.88% were the top losing indices on BSE.

The top gainers on the Sensex were Kotak Mahindra Bank up by 1.06%, Bajaj Finance up by 0.99%, Bajaj Finserv up by 0.66%, SBI up by 0.58% and TCS up by 0.45%. On the flip side, Tata Steel down by 4.63%, ITC down by 3.54%, Sun Pharma down by 1.82%, Maruti Suzuki down by 1.41% and Tata Motors down by 1.38% were the top losers.

Meanwhile, global rating agency Fitch Ratings in its latest report has said that banks will face margin pressure next fiscal (FY24) as they increase the deposit rates to attract funds to support sustained high loan growth. It expects the domestic banking sector's average Net Interest Margins (NIMs) to slightly contract by about 10 basis points (bps) in FY24 to 3.45 per cent, following a 15 bps increase in FY23 to 3.55 per cent, in a base case scenario, but remain well above that during FY17-FY22 average of 3.1 per cent. However, it said the 10 bps likely reduction in margin is unlikely to affect banks' profitability in the near term.

According to the report, higher fee income -- stemming from higher loan growth -- and a revival in treasury gains should broadly counterbalance the twin pressures of higher credit costs and funding costs in FY24, while supporting capitalisation. It noted that this contraction is consistent with the lagged normalisation in deposit rates, although banks should be able to offset some of the impact as they gradually pass-through policy rate hikes to corporate loans, which are typically slower to reprice than retail and SME loans. However, it said loan growth continuing to outstrip deposit growth is a potential risk. NIMs could face greater pressures if banks are forced to increase deposit rates further and turn to wholesale funding, for which costs are rising.

The report warned ‘the risks may be potentially pronounced if higher interest rates are unable to meaningfully moderate credit demand and increase deposit inflows as we expect under our base case’. The system wide loan growth averaged at 17.5 per cent in the first half of FY23, with the trend continuing in December, compared to the agency's full-year estimate of 13 per cent for FY23. This is partly driven by pent-up credit demand and normalisation of excess savings built up during the pandemic, as well as corporate borrowers migrating from the local bond markets towards banks given the significant hardening in bond yields.

The CNX Nifty is currently trading at 17707.65, down by 56.95 points or 0.32% after trading in a range of 17700.85 and 17811.15. There were 18 stocks advancing against 32 stocks declining on the index.

The top gainers on Nifty were Adani Enterprises up by 17.16%, Adani Ports and Special Economic Zone up by 7.38%, Dr Reddy's Laboratories up by 2.08%, Kotak Mahindra Bank up by 1.09% and Bajaj Finance up by 0.95%. On the flip side, Hindalco down by 4.59%, Tata Steel down by 4.43%, ITC down by 3.63%, Hero MotoCorp down by 2.11% and Sun Pharma down by 1.88% were the top losers.

Asian markets were trading mostly in green; Hang Seng advanced 102.95 points or 0.49% to 21,325.11, Jakarta Composite gained 53.33 points or 0.78% to 6,927.12, KOSPI increased 13.52 points or 0.55% to 2,451.71, Taiwan Weighted added 8.09 points or 0.05% to 15,400.91 and Shanghai Composite strengthened 7.17 points or 0.22% to 3,245.87, while Straits Times fell 7.53 points or 0.22% to 3,378.40 and Nikkei 225 slipped 8.18 points or 0.03% to 27,685.47.