Benchmarks settle at yet another fresh record closing highs on Thursday

Indian equity benchmarks closed higher for the sixth straight session to settle at yet another fresh record closing highs on Thursday, driven by unabated foreign capital inflows and intense buying in FMCG, Banking and Healthcare stocks. After the initial dip, key indices traded volatile in the early hours as traders got anxious with S&P Global Ratings reportedly stating that India is unlikely to embark on any major new reforms till the 2024 elections, but momentum could pick up if the next government comes with a strong mandate. However, markets soon erased initial losses and turned positive in afternoon deals, as traders took support with World Bank President Ajay Banga’s statement that amidst risk of a global slowdown in the early part of next year, India is expected to remain shielded from its effects due to robust domestic consumption. Traders also took a note of a private report that India’s chances of missing the budget deficit target for this fiscal year is very slim at the moment despite weather hindrances, divestment revenue risks and meek corporate tax collections, thanks to support from the central bank. 

Markets added gains in late afternoon deals, as the Asian Development Bank (ADB) in its latest forecast has maintained the growth outlook for developing economies in Asia and the Pacific at 4.8 per cent for 2023, and noted robust domestic demand continues to support the region’s recovery. According to the Asian Development Outlook (ADO) July 2023, ADB forecasted that inflation in the region is expected to fall continuously, approaching pre-pandemic levels as fuel and food prices decline. Meanwhile, highlighting the transformative potential of the Indian EV industry and its positive impact on both the economy and the environment, NITI Aayog Vice Chairman Suman Bery has emphasized the role of electric mobility in accelerating India’s economic growth along low-carbon pathways and facilitating the nation's net-zero vision for 2070.

On the global front, Asian markets settled mostly lower on Thursday amidst anxiety ahead of the monetary policy reviews by major central banks and the updates to corporate earnings. European markets were trading higher as traders remain cautiously optimistic because of an improving outlook for interest rates. Though the US Fed is still widely expected to raise rates by another quarter point next week, traders are hopeful it is nearing the end of its interest rate hikes.

Finally, the BSE Sensex rose 474.46 points or 0.71% to 67,571.90 and the CNX Nifty was up by 146.00 points or 0.74% to 19,979.15.      

The BSE Sensex touched high and low of 67,619.17 and 66,831.38, respectively. There were 22 stocks advancing against 8 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.05%, while Small cap index was up by 0.19%.

The top gaining sectoral indices on the BSE were FMCG up by 1.45%, Bankex up by 1.40%, Healthcare up by 1.05%, PSU up by 0.60% and Energy up by 0.57%, while IT down by 0.81%, TECK down by 0.53%, Power down by 0.43%, Consumer Durables down by 0.37% and Capital Goods down by 0.29% were the top losing indices on BSE. 

The top gainers on the Sensex were ITC up by 2.78%, Kotak Mahindra Bank up by 2.68%, ICICI Bank up by 2.24%, Maruti Suzuki up by 1.74% and Bharti Airtel up by 1.47%. On the flip side, Infosys down by 1.73%, Ultratech Cement down by 1.21%, HCL Technologies down by 1.09% and Bajaj Finserv down by 0.55% and Titan Company down by 0.27% were the top losers.

Meanwhile, S&P Global Ratings Director Andrew Wood has said that reform momentum in India is likely to pick up only after the Lok Sabha elections next year and a little bit of boost to the expenditure in an election year would not adversely impact India's fiscal deficit target.  Wood stated ‘Our expectation is major reforms in the country are probably unlikely right up to the election cycle and until 2024 Parliamentary elections are over. After that perhaps, reform momentum could pick up, particularly if there is a very strong mandate for the next government.’

S&P anticipates that the central government will meet its modestly lower fiscal deficit target and also state governments will be consolidating their finances gradually overtime. Wood said ‘Even if we see a little bit of boost to the expenditure in an election year, in the run up to the elections, revenue growth also remains healthy in India and that has been supporting the gradual pace of fiscal consolidation.’

The fiscal deficit, which is the difference between government expenditure and revenue, narrowed to 6.4 per cent of GDP in the 2022-23 fiscal, from 6.7 per cent of GDP in the 2021-22 fiscal. In the current fiscal, the deficit is budgeted at 5.9 per cent of GDP. As per the fiscal consolidation roadmap, the government intends to bring down the fiscal deficit below 4.5 per cent of GDP by 2025-26.

The CNX Nifty traded in a range of 19,991.85 and 19,758.40. There were 38 stocks advancing against 12 stocks declining on the index.

The top gainers on Nifty were ITC up by 2.64%, Kotak Mahindra Bank up by 2.62%, ICICI Bank up by 2.19%, Dr. Reddy's Lab up by 1.97% and Grasim Industries up by 1.89%. On the flip side, Infosys down by 2.18%, Ultratech Cement down by 1.25%, Bajaj Finserv down by 0.61%, Eicher Motors down by 0.60% and Britannia Industries down by 0.41% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 56.99 points or 0.75% to 7,645.19, France’s CAC rose 27.33 points or 0.37% to 7,354.27 and Germany’s DAX gained 45.67 points or 0.28% to 16,154.60.

Asian markets settled mostly lower on Thursday as investors were cautiously awaiting cues from the upcoming US Federal Reserve’s interest rate decision next week. Chinese shares declined as the Chinese government's pledge to support the private economy failed to impress investors, while sliding tech shares also dragged the broader market lower. Moreover, Japanese shares dropped ahead of earnings season in Japan. However, some losses were capped by Wall Street’s overnight gains after better-than-expected quarterly earnings reports from a spate of banks and other big companies.