Fed rate hike worries drag Indian markets lower on Friday

Indian equity benchmarks ended the Friday’s trade on a weaker note as traders remain worried on report that Federal Reserve might raise interest rates three more times this year, by a quarter of a percentage point each, after data this week indicated to hot inflation and labor market resilience. Markets made a pessimistic start mirroring weakness in global markets amid fears of higher interest rates. Soon, domestic gauges pared most of their initial losses as traders took support with a private report that India’s gross domestic product (GDP) is expected to grow at 6.2 per cent in FY24 as drivers of domestic demand remain intact amid fears of an impending slowdown.

However, the recovery proved short lived and markets once again moved southward. In afternoon deals, bourses tested their crucial 60,800 (Sensex) and 17,880(Nifty) levels as traders opted to sell their risky bets amid global uncertainty. Weakness in currency markets too dampened sentiments. The rupee depreciated 14 paise to close at 82.84 (provisional) against the US currency as the strength of the American currency in the overseas market and a muted trend in domestic equities weighed on investor sentiments. Traders shrugged off Economic think tank Global Trade Research Initiative’s report where it said that India’s merchandise exports have recorded a healthy growth in both value and volume terms in 2022. The outbound shipments rose by 14.6 per cent year-on-year to $453.3 billion in 2022. Traders took note of report that Former Niti Aayog Vice Chairman Rajiv Kumar said the Budget should have focused more on asset monetisation and privatisation, besides allocating more funds to the social sector schemes. Small set of recovery in dying hours of trade helped key gauges to regain their crucial 61,000 (Sensex) and 17,900 (Nifty) levels as traders went for value buying in late trade.

Weak opening in European counters too dampened sentiments as all the major indices edged lower on fears that central banks will continue their aggressive monetary tightening, while the corporate earnings season continued. Asian markets ended mostly in red on the prospect of more interest rate hikes after Federal Reserve officials hinted at ramping up its monetary tightening campaign in the face of stubbornly high inflation. Back home, metal stocks remained buzzing after steel Minister Jyotiraditya Scindia said that large scale augmentation would be done to double steel production from the existing 150 million tonnes to 300 million tonnes per annum by 2030. Cement companies remained in focus after most of the company managements’ continue to be positive on the cement demand, led by the government’s thrust on infrastructure projects, pick-up in urban real estate, and likely recovery in the rural segment.

Finally, the BSE Sensex fell 316.94 points or 0.52% to 61,002.57 and the CNX Nifty was down by 91.65 points or 0.51% to 17,944.20.

The BSE Sensex touched high and low of 61,302.72 and 60,810.67, respectively. There were 8 stocks advancing against 22 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index declined 0.75%, while Small cap index was down by 0.24%.

The few gaining sectoral indices on the BSE were Capital Goods up by 0.89%, Industrials up by 0.34%, Energy up by 0.22% and Oil & Gas was up by 0.17%, while Realty down by 1.86%, Telecom down by 1.30%, Bankex down by 1.23%, TECK down by 1.17% and IT down by 1.06% were the losing indices on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 2.10%, Ultratech Cement up by 1.77%, Asian Paints up by 1.11%, NTPC up by 0.51% and Reliance Industries up by 0.42%. On the flip side, Nestle down by 3.16%, Indusind Bank down by 3.13%, Mahindra & Mahindra down by 1.73%, SBI down by 1.70% and TCS down by 1.53% were the top losers.

Meanwhile, Economic think tank Global Trade Research Initiative (GTRI) in its report has said that India’s merchandise exports have recorded a healthy growth in both value and volume terms in 2022. The outbound shipments rose by 14.6 per cent year-on-year to $453.3 billion in 2022. It said ‘the study found that products where exports increased to cover a value of $315.9 billion (69.8 per cent of total merchandise exports). But, products whose export quantities increased over the previous year represent $285.6 billion (63 per cent of total exports)’.

Major product categories which have recorded growth in both value and volume terms include petroleum products, sugar, and basmati rice. Petroleum products, including diesel, gasoline and naphtha represent an export value of $94 billion. The unit price rose between 50-115 per cent in one year. The high unit prices may be primarily due to the high prices of crude oil. Sugar saw a unit value increase of 15 per cent, with exports of over $5 billion.

As per the report, gold jewelry and similar products with an export value of about $9 billion saw lower unit value realization in 2022. Similarly, hot rolled steel products with exports of $769 million in 2022 saw a decline of 26.2 per cent in unit value realization. Exports in 2022 saw a healthy trend with products covering 63 per cent of export value and saw an increase in the quantity of export. Further products where India's exports have been traditionally strong but now feeling regulatory heat in a few countries or low global demand include shrimps, and iron-ore pellets.

The CNX Nifty traded in a range of 17,884.60 and 18,034.25. There were 14 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were Larsen & Toubro up by 2.21%, BPCL up by 1.84%, Ultratech Cement up by 1.76%, Asian Paints up by 0.99% and Coal India up by 0.95%. On the flip side, Adani Enterprises down by 4.11%, Nestle down by 3.10%, Indusind Bank down by 2.93%, SBI Life Insurance down by 2.08% and HDFC Life Insurance down by 2.01% were the top losers.

European markets were trading in red; UK’s FTSE 100 decreased 21.26 points or 0.27% to 7,991.27, France’s CAC declined 55.81 points or 0.76% to 7,310.35 and Germany’s DAX was down by 127.85 points or 0.82% to 15,405.79.

Asian markets settled mostly lower on Friday, tracking Wall Street’s fall overnight as strong US data coupled with hawkish comments from US Federal Reserve officials fuelled concerns that the US Federal Reserve would further tighten monetary policy to tackle inflation. Meanwhile, Chinese and Hong Kong shares dropped amid concerns over escalating US-China geopolitical tensions, despite China's top leaders declared a ‘decisive victory’ over Covid-19 and claimed the world's lowest fatality rate. China Renaissance Holdings shares plunged after the investment bank said it is unable to contact Bao Fan, the firm's controlling shareholder, as well as chairman, executive director and CEO. Moreover, Japanese shares declined amid uncertainties over the direction of monetary policy under new Bank of Japan Governor Kazuo Ueda, but a weaker yen continued to buoy exporters.