Indices stage recovery in early noon amid easing wholesale inflation

Despite weakness in global markets, Indian equity benchmarks managed to stage some recovery in early afternoon deals, with both Sensex and Nifty cut their losses, amid easing wholesale inflation. India’s inflation based on wholesale price index (WPI) declined further to 3.85% for the month of February 2023 against 4.73% recorded in January 2023, on account of fall in prices of crude petroleum & natural gas, non-food articles, food products, minerals, computer, electronic & optical products, chemicals & chemical products, electrical equipment and motor vehicles, trailers & semitrailers. The wholesale inflation was 4.95% in December 2022. Some relief came with the latest FICCI Manufacturing Survey report stating that with growth expected to continue for the Indian manufacturing sector in Jan-March 2022-23, there are signs that cost pressure witnessed in the last many months seems to be softening a bit for the sector. However, trade was in red, on the back of selling at IT, Power and Realty counters along with weak cues from other Asian markets.

On the global front, Asian markets were trading lower, as Japan large manufacturers' sentiment posted a sharp deterioration in the first quarter. The business outlook survey published by the Ministry of Finance showed that the business survey index of large manufacturers fell to -10.5 in the March quarter from -3.6 in the preceding period. The score is forecast to improve markedly to -0.7 in the second quarter. At the same time, the BSI for large non-manufacturers slid to +0.6 from +2.7 in the prior period. However, the index is expected to improve to +1.4 in the coming quarter.

The BSE Sensex is currently trading at 58070.09, down by 167.76 points or 0.29% after trading in a range of 57865.44 and 58490.98. There were 11 stocks advancing against 19 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell by 0.54%, while Small cap index was down by 0.83%.

The few gaining sectoral indices on the BSE were Metal up by 0.59% and Capital Goods up by 0.04%, while IT down by 1.06%, Power down by 0.88%, Realty down by 0.87%, Utilities down by 0.76% and Bankex down by 0.67% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 1.22%, Titan Company up by 0.81%, Larsen & Toubro up by 0.69%, Bharti Airtel up by 0.60% and Sun Pharma up by 0.59%. On the flip side, Bajaj Finance down by 1.69%, Tech Mahindra down by 1.67%, Wipro down by 1.61%, Mahindra & Mahindra down by 1.47% and HCL Technologies down by 1.41% were the top losers.

Meanwhile, rating agency ICRA has said that domestic aluminium players would need a substantial increase in their renewable energy or low carbon-intensive power sources to meet their ambitious targets of 25 per cent reduction in carbon emissions in the next five-seven years and achieve net-zero status by 2050. Domestic aluminium manufacturers have the highest carbon intensity of nearly 17-20t CO2e/tonne of aluminium, owing to the significant use of coal in generating captive power.

According to an ICRA note on the primary aluminium industry, this could entail significant capital investments of up to $5 billion by 2030 and $20 billion by 2050, depending on the renewable energy (RE) mix used. However, instead of doing an upfront capex, entities may choose to sign power purchase agreements to secure RE power. Nonetheless, their cost of metal production is expected to rise significantly.

The carbon intensity of Chinese aluminium producers also remains high due to increased coal usage. However, aluminium entities operating in western economies have gradually switched to lower carbon-intensive hydro-power with almost 60 per cent lower carbon intensity, compared to their Asian counterparts. To decarbonise the primary aluminium industry, significant usage of RE power in the entire value chain would be a prerequisite.

The CNX Nifty is currently trading at 17098.70, down by 55.60 points or 0.32% after trading in a range of 17038.55 and 17224.65. There were 17 stocks advancing against 33 stocks declining on the index.

The top gainers on Nifty were BPCL up by 1.55%, Tata Steel up by 1.26%, Titan Company up by 0.94%, Larsen & Toubro up by 0.90% and Bharti Airtel up by 0.74%. On the flip side, Adani Enterprises down by 7.88%, Adani Ports and Special Economic Zone down by 3.44%, Tech Mahindra down by 1.58%, Bajaj Finance down by 1.44% and HCL Technologies down by 1.42% were the top losers.

All Asian markets were trading lower; Nikkei 225 slipped 610.92 points or 2.24% to 27,222.04, Hang Seng declined 472.27 points or 2.4% to 19,223.70, Taiwan Weighted lost 200.07 points or 1.3% to 15,360.42, Jakarta Composite plunged 116.77 points or 1.72% to 6,670.19, KOSPI dropped 61.63 points or 2.62% to 2,348.97, Shanghai Composite weakened 20.74 points or 0.63% to 3,247.96 and Straits Times fell 5.87 points or 0.19% to 3,126.50.