Domestic indices come off day’s low points in late morning deals

Domestic equity markets came off from day’s low points but continued to trade in red in late morning deals on account of selling in Bajaj Finserv, Bajaj Finance and Mahindra & Mahindra stocks. Negative cues from global markets weighed on the domestic markets. Traders remained cautious ahead to US Fed Chair Jerome Powell's congressional testimonies on Wednesday and Thursday for clues on the monetary policy ahead. Further, the selling activity by institutional investors also emphasized a cautious sentiment prevailing in the market. Foreign institutional investors (FIIs) were observed to have sold shares worth Rs 1,030.90 crore in the preceding session. Besides, a depreciating rupee, which slipped 15 paise to trade at 82.09 against the US dollar, made traders more nervous.

On the global front, Asian markets were trading lower as investors digested China’s central bank decision to cut its one-year and five-year loan prime rate by 10 basis points each to 3.55% and 4.20%, respectively.  Back home, on the BSE sectoral front, traders were seen pilling up position in Metal, Realty, Power, Utilities and IT, while selling was witnessed in Bankex, FMCG, Auto, Healthcare and PSU. 

The BSE Sensex is currently trading at 62956.72, down by 211.58 points or 0.33% after trading in a range of 62801.91 and 63186.33. There were 11 stocks advancing against 19 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.07%, while Small cap index up by 0.17%.

The top gaining sectoral indices on the BSE were Metal up by 0.92%, Realty up by 0.60%, Power up by 0.56%, Utilities up by 0.50% and IT up by 0.37%, while Bankex down by 0.47%, FMCG down by 0.36%, Auto down by 0.28%, Healthcare down by 0.17% and PSU down by 0.09% were the top losing indices on BSE.

The top gainers on the Sensex were Power Grid up by 1.54%, HCL up by 1.27%, Wipro up by 0.97%, Tech Mahindra up by 0.80% and Tata Steel up by 0.75%. On the flip side, Bajaj Finserv down by 2.46%, Bajaj Finance down by 2.40%, Mahindra & Mahindra down by 1.16%, Indusind Bank down by 1.01% and SBI down by 0.96% were the top losers.

Meanwhile, credit rating agency ICRA in its latest report has said that after reporting a stellar 51% YoY revenue growth in FY2023, revenue growth of fashion retailers is set to moderate in the current fiscal (FY24) amid inflationary headwinds. According to ICRA’s most recent industry analysis, revenue growth of 11 listed retail entities in its sample set will moderate to 10% in FY2024. It said their operating profit margins (OPMs) are also expected to decline by 100 bps to around 5.7%, given the demand slowdown and sharp increase in advertisement and promotion expenses undertaken by the retailers to make up for the lost sales of FY2021 and FY2022. The rating agency currently has a Stable outlook on the retail sector.

According to the report, most large retailers also acquired/launched brands in newer categories, especially in the ethnic wear segment and have been undertaking substantial investments to ramp up these brands. Retailers as of now, have not indicated any reduction in ad spends in the coming quarters as they are hopeful of demand recovery in H2 FY2024. ICRA also expects discounting levels to go up in H1 FY2024 as retailers look to shore up sales, which shall exert some pressure on the gross margins.

The report stated that following limited retail space addition in FY2021, retailers resumed their store expansion plans in FY2022 and FY2023 and added nearly 5.2 million sq. ft (reflecting 30% addition over the retail space as on March 2021) of space during this period. Total capex outlay on store additions of entities in ICRA’s sample set increased YoY by 60% (partly aided by a low base) to Rs 1,460 crore in FY2023, despite a slowdown in the value fashion segment. No major pruning of capex has been announced by retailers so far, given the expected demand revival and favourable long-term demand prospects of the Indian retail industry. Capex outlay towards store additions is thus expected to increase further by 10% to Rs 1,600 crore in FY2024.  

The CNX Nifty is currently trading at 18712.40, down by 43.05 points or 0.23% after trading in a range of 18660.65 and 18761.20. There were 22 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were HDFC Life Insurance up by 2.19%, Power Grid up by 1.48%, SBI Life up by 1.44%, Hindalco up by 1.37% and HCL up by 1.36%. On the flip side, Bajaj Finserv down by 2.40%, Bajaj Finance down by 2.32%, Divi's Lab down by 1.25%, Mahindra & Mahindra down by 1.15% and Indusind Bank down by 1.08% were the top losers.

All Asian markets were trading lower; Taiwan Weighted lost 89.65 points or 0.52% to 17,184.91, Hang Seng declined 316.33 points or 1.59% to 19,596.56, Shanghai Composite weakened 9.4 points or 0.29% to 3,246.41, KOSPI dropped 6.26 points or 0.24% to 2,603.24, Jakarta Composite plunged 29.86 points or 0.45% to 6,656.20, Straits Times fell 21.33 points or 0.66% to 3,219.84 and Nikkei 225 slipped 38.38 points or 0.12% to 33,332.04.