Domestic indices trade under pressure in early deals after hawkish Fed remarks

Indian markets extend their previous session’s losses on Thursday, tracking overnight losses on Wall Street and sell-off in Asian counterparts amid renewed concerns about the outlook for interest rates after the US Fed signaled on keeping interest rates at an elevated level through 2024 after one more rate hike this year, despite the decision to hold interest rates steady this month. Domestic indices soon extend their losses and are trading lower with cut of over half a percent in early deals. Traders were concerned as the Asian Development Bank (ADB) marginally lowered India's growth forecast to 6.3 per cent for the current financial year from its earlier projection of 6.4 per cent on account of slowing exports and the likely impact of erratic rainfall on agriculture output. Foreign fund outflows also dented sentiments. Provisional data from the National Stock Exchange (NSE) showed that foreign institutional investors (FII) sold shares worth Rs 3,110.69 crore on September 20. However, broader indices -- BSE Mid & Small cap -- are outperforming larger peers with decent gains. 

On the sectoral front, sugar stocks are in focus as the India Sugar Mills Association (ISMA) said there will be no scarcity in supply of sugar in the next season (October-September), thanks to an adequate buffer and an increase in production prospects in Uttar Pradesh, Maharashtra and Karnataka. In stock specific movement, DCB Bank traded jubilantly after the Reserve Bank of India (RBI) allowed HDFC Asset Management Company (AMC) to acquire up to 9.5 percent stake in the Bank. However, SJVN traded under pressure amid report that the government will sell a 4.92% stake in SJVN at a floor price of Rs 69 per share through a two-day offer for sale.

The BSE Sensex is currently trading at 66439.38, down by 361.46 points or 0.54% after trading in a range of 66420.50 and 66608.67. There were 9 stocks advancing against 21 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.24%, while Small cap index was up by 0.31%.

The top gaining sectoral indices on the BSE were Realty up by 1.18%, PSU up by 0.67%, Oil & Gas up by 0.45%, Metal up by 0.34% and Energy up by 0.34%, while IT down by 0.87%, TECK down by 0.84%, Bankex down by 0.40%, Auto down by 0.39% and FMCG down by 0.34% were the top losing indices on BSE.

The top gainers on the Sensex were SBI up by 0.73%, NTPC up by 0.39%, Tata Steel up by 0.35%, JSW Steel up by 0.25% and Tata Motors up by 0.16%. On the flip side, HCL Technologies down by 1.72%, ICICI Bank down by 1.65%, TCS down by 1.41%, Larsen & Toubro down by 1.04% and Ultratech Cement down by 0.86% were the top losers.

Meanwhile, revising India’s economic growth forecast upwardly, India Ratings and Research (Ind-Ra) has estimated Real Gross Domestic Product (GDP) growth at 6.2 per cent in FY24 from the 5.9 per cent expected earlier. The domestic ratings agency attributed its revision to a variety of factors, including the government's capital expenditure, deleveraged balance sheets of India Inc and banks, subdued global commodity prices and the prospect of private capital expenditure picking up. However, it also flagged some constraints on GDP growth in the current fiscal year before the general elections, including a slip in global growth, which has hit Indian exports, tighter financial conditions upping cost of capital domestically, a deficit monsoon, and tepid manufacturing growth. 

It said ‘all these risks will continue to weigh and restrict India's GDP growth to 6.2 per cent in FY24, and the quarterly GDP growth, which came in at 7.8 per cent in the June quarter, is slated to slow down sequentially in the remaining three quarters of FY24’. Meanwhile, the RBI expects the real GDP growth to come at 6.5 per cent for FY24. The agency said the consumption demand is not broad based, and estimated the Private Final Consumption Expenditure (PFCE) to grow 6.9 per cent in FY24 as against 7.5 per cent in FY23. It also said the real wage growth of households belonging to the lower income bracket has been negative since the fourth quarter of FY21 and became marginally positive only the December quarter of FY23, and added that the same for households belonging to the upper income bracket rose in the range of 9.5 per cent to 12.7 per cent during the same period.

The agency explained that 1 per cent increase in real wages could lead to a 1.12 per cent increase in the real PFCE and the multiplier effect of this could result in a 0.64 per cent increase in the GDP growth. Citing a recent Reserve Bank of India paper, it noted that there are some green shoots visible on the private capital expenditure front. The agency said while exports are facing headwinds, the services sector recovery is on track. It, however, called out monsoon rainfall and industrial growth as ‘areas of concern’. It further said retail inflation will soften, and the headline CPI will come at 5.5 per cent in FY24, and added that financial conditions will remain tight. The agency said meeting the 5.9 per cent fiscal deficit target will be a challenge for the government, pointing at the gross tax collection growth at just 2.8 per cent in the first four months of the fiscal year as against a 10.4 per cent estimated in the Budget.

The CNX Nifty is currently trading at 19787.75, down by 113.65 points or 0.57% after trading in a range of 19775.70 and 19848.75. There were 12 stocks advancing against 38 stocks declining on the index.

The top gainers on Nifty were Adani Ports & SEZ up by 1.66%, Hindalco up by 1.51%, Dr. Reddy's Lab up by 1.07%, Adani Enterprises up by 0.79% and BPCL up by 0.75%. On the flip side, ICICI Bank down by 1.82%, Grasim Industries down by 1.73%, HCL Technologies down by 1.66%, LTIMindtree down by 1.60% and TCS down by 1.47% were the top losers.

All Asian markets are trading lower; Nikkei 225 slipped 418.33 points or 1.27% to 32,605.45, Hang Seng declined 233.29 points or 1.3% to 17,652.31, Taiwan Weighted lost 215.89 points or 1.31% to 16,318.86, KOSPI dropped 42.30 points or 1.65% to 2,517.44, Straits Times fell 35.41 points or 1.09% to 3,206.59, Jakarta Composite weakened 28.07 points or 0.4% to 6,983.61 and Shanghai Composite was down by 18.26 points or 0.59% to 3,090.31.