Domestic markets trade in red in early deals; IIP data eyed

Indian markets made cautious start on Friday amid largely negative cues from Asian counterparts on growing tensions between the US and China. Also, investors avoided taking any long position ahead of India’s Index of Industrial Production (IIP) data to be out later in the day. Soon, domestic indices extend southward movement and are trading lower with cut of around 0.35% in early deals due to selling pressure in Metal, Bankex and Healthcare counters. Besides, concerns over high inflation and 10 per cent incremental CRR from August 12 onwards for banks, weigh on the investors' sentiment. As per a private report, India's headline retail inflation is expected to have crashed past the upper bound of the Reserve Bank of India's (RBI) 2-6 percent tolerance band in July on its way to a nine-month high due to a surge in vegetable prices. Though, broader indices are outperforming larger peers with gains of around 0.30% each.

On the global front, Asian markets are trading mostly lower, despite the broadly positive cues from global markets overnight, as traders continue to digest weak data from China and remain concerned about slow economic recovery in China after reporting the first consumer price deflation in more than two years. The Japanese stock market is closed for Mountain Day holiday. Back home, in stock specific development, HCL Technologies leading the gainers on the indices as it signed a deal worth $2.1 billion with Verizon Business. LIC surged after the company’s Q1 net profit more than doubled in Q1FY24. 

The BSE Sensex is currently trading at 65464.20, down by 223.98 points or 0.34% after trading in a range of 65437.05 and 65727.80. There were 7 stocks advancing against 22 stocks declining, while 1 stock remain unchanged on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.32%, while Small cap index was up by 0.27%.

The top gaining sectoral indices on the BSE were Realty up by 0.58%, Industrials up by 0.51%, Consumer Durables up by 0.44%, PSU up by 0.34% and Capital Goods up by 0.29%, while Metal down by 0.75%, Bankex down by 0.51%, Healthcare down by 0.39%, FMCG down by 0.38% and Oil & Gas down by 0.21% were the top losing indices on BSE.

The top gainers on the Sensex were HCL Technologies up by 3.30%, Power Grid up by 0.83%, Titan Company up by 0.62%, Tata Motors up by 0.53% and Maruti Suzuki up by 0.49%. On the flip side, JSW Steel down by 1.05%, Hindustan Unilever down by 1.02%, Sun Pharma down by 0.94%, NTPC down by 0.92% and Bharti Airtel down by 0.87% were the top losers.

Meanwhile, with an aim to drain out excess liquidity from the banking system, the Reserve Bank of India (RBI) has raised the cash reserve ratio in an incremental 10 per cent in proportion to banks’ liquidity. This move will suck out over Rs 1 lakh crore from the system. According to latest data, at Rs 2.48 lakh crore, the surplus liquidity in the system in August was at a 14 month high - the highest since June 2022.

Reserve Bank Governor Shaktikanta Das has said the move, announced along with the bi-monthly policy review, was the best option under the current circumstances and there is enough liquidity in the system for the banks to continue their lending operations. Das said ‘We will have to go beyond Arjuna’s eyes and act quickly if the spiraling vegetable prices become more widespread and become generalized, forcing us to deploy any appropriate tool under our command to tame it and that it may not just be a rate hike, but any tool under our command will be deployed’.

The Governor further noted that ‘the job on inflation is still not done. Inflationary risks persist amidst volatile international food and energy prices, lingering geopolitical tensions and weather-related uncertainties.’ He said one of the reasons for the spike in liquidity is due to the fact that over 90 per cent of the Rs 3.6 lakh crore of the Rs 2,000 banknotes withdrawn on May 19, have come back to banks.

He assured that the public won’t face any crunch as they prepare for the long festive season nor will the system and industry face any liquidity issue to pay the advance tax (September 15) or GST (September 20). He added ‘We have done our internal assessment which showed that there will still be adequate liquidity left with the banking system’.

The CNX Nifty is currently trading at 19470.40, down by 72.70 points or 0.37% after trading in a range of 19465.20 and 19557.75. There were 10 stocks advancing against 40 stocks declining on the index.

The top gainers on Nifty were HCL Technologies up by 3.35%, Apollo Hospital up by 1.55%, Titan Company up by 0.72%, Power Grid up by 0.72% and Maruti Suzuki up by 0.49%. On the flip side, SBI Life Insurance down by 1.44%, Hindalco down by 1.29%, Hero MotoCorp down by 1.28%, NTPC down by 1.20% and JSW Steel down by 1.14% were the top losers.

Asian markets are trading mostly in red; Hang Seng declined 119.72 points or 0.62% to 19,128.54, Straits Times fell 40.42 points or 1.22% to 3,282.51, Shanghai Composite weakened 38.74 points or 1.2% to 3,215.82 and Jakarta Composite lost 20.48 points or 0.3% to 6,872.80. On the other hand, Taiwan Weighted added 16.85 points or 0.1% to 16,651.55 and KOSPI was up by 2.30 points or 0.09% to 2,603.86.