Domestic indices trade in red amid inflation worries

Indian markets made negative start on Wednesday, after a day’s holiday, tracking weakness on Wall Street overnight as well as lackluster trade in Asian counterparts. Markets are trading in red with cut of around 0.30% each in early deals, as higher-than-expected India’s Consumer Price Index (CPI) inflation print and trade deficit figures dented market sentiments. Retail inflation spiked to a 15month high of 7.44 per cent in July much higher than 4.87 per cent in June as tomatoes, vegetables and other food items turned costlier, overshooting Reserve Bank’s comfort level for the first time in the current fiscal. India's trade deficit, which shows the difference between imports and exports, rose to $20.67 billion in July as compared to $20.13 billion in June. Though, downside remained capped as a report by SBI Research showed that the per capita income of Indians as gleaned from incometax filing is expected to increase from Rs 2 lakh in FY23 to Rs 14.9 lakh in FY47, coinciding with 100 years of the country’s Independence. 

On the global front, all the Asian markets are trading in red following the broadly negative cues from global markets overnight, weighed down by concerns about the health of the US banking sector and broader global economy after a warning from Fitch that it may have to downgrade credit ratings of several banks, including JP Morgan. Back home, oil & gas industry stocks are in focus as the government hiked special additional excise duty on crude petroleum to Rs 7,100 per tonne with effect from August 15. In stock specific movements, Infosys rose after signing an initial five-year agreement worth 1.5 billion euros ($1.64 billion) with Liberty Global.

The BSE Sensex is currently trading at 65226.37, down by 175.55 points or 0.27% after trading in a range of 65032.89 and 65308.42. There were 10 stocks advancing against 20 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index fell 0.04%, while Small cap index was up by 0.39%.

The top gaining sectoral indices on the BSE were IT up by 0.61%, Industrials up by 0.47%, Realty up by 0.42%, FMCG up by 0.34% and TECK up by 0.29%, while Metal down by 0.70%, Consumer Durables down by 0.63%, Bankex down by 0.54%, Telecom down by 0.40% and Auto down by 0.34% were the top losing indices on BSE.

The top gainers on the Sensex were Tech Mahindra up by 1.13%, ITC up by 1.07%, Infosys up by 0.96%, SBI up by 0.80% and Wipro up by 0.78%. On the flip side, HDFC Bank down by 1.08%, Indusind Bank down by 1.02%, Bajaj Finance down by 0.96%, Bharti Airtel down by 0.75% and Tata Motors down by 0.72% were the top losers.

Meanwhile, domestic ratings agency Icra has said it expects a rate cut by the Reserve Bank of India (RBI) to happen only in the July-September quarter next year. It stated the overall cuts in the cycle will be a shallow 0.50-0.75 per cent.

However, it said a rate hike by RBI is possible only if the headline inflation is at over 6 per cent for two consecutive quarters. The agency said the MPC's (Monetary Policy Committee) latest forecasts suggest inflation will remain above 5 per cent through Q1 FY2025, based on which we have pushed out our forecast for the earliest cut to Q2 FY2025.

Consumer price inflation (CPI) spiked to a 15-month high of 7.4 per cent for July. Icra’s chief economist Aditi Nayar said ‘The data for food prices for early August 2023 is not very promising, and we expect the headline CPI inflation to print above the 6.5 per cent mark in August, before cooling off materially in September.’

The CNX Nifty is currently trading at 19373.95, down by 60.60 points or 0.31% after trading in a range of 19317.20 and 19389.60. There were 13 stocks advancing against 37 stocks declining on the index.

The top gainers on Nifty were Infosys up by 1.06%, Tech Mahindra up by 1.01%, ITC up by 0.96%, SBI up by 0.79% and Wipro up by 0.69%. On the flip side, Hindalco down by 2.06%, Divi's Lab down by 1.54%, Britannia Industries down by 1.41%, Hero MotoCorp down by 1.31% and HDFC Life Insurance down by 1.15% were the top losers.

All Asian markets are trading lower; Nikkei 225 slipped 372.67 points or 1.16% to 31,866.22, Hang Seng declined 257.89 points or 1.41% to 18,323.22, Taiwan Weighted lost 44 points or 0.27% to 16,410.80, KOSPI dropped 40.45 points or 1.57% to 2,530.42, Jakarta Composite plunged 27.28 points or 0.39% to 6,887.82, Straits Times fell 17.23 points or 0.53% to 3,215.51 and Shanghai Composite was down by 7.86 points or 0.25% to 3,168.32.