Indices wipe out opening gains to trade in red on profit booking; CPI, IIP data eyed

Indian equity benchmarks made slightly positive start tracking overnight gains on Wall Street as well as sharp fall in crude oil prices. But, soon markets turned volatile and slipped in red terrain with Sensex and Nifty trading flat in early deals, on account of profit booking after recent consecutive sessions of gains. Investors remained on sidelines ahead of Consumer Price Index (CPI) or retail inflation and Index of Industrial Production (IIP) data to be out later in the day for more directional cues. Initially, some support came in as India and the United Kingdom (UK) are likely to sign a Foreign Trade Agreement (FTA) by the end of October. However, some cautiousness crept in as according to the latest estimates by the IMF, India’s debt-to-GDP ratio is projected to peak at 82.3% in FY25, and then it may gradually ease to touch 80.5% in FY29. 

On the global front, all the Asian markets are trading in green after the minutes of the US Fed's latest monetary policy meeting reiterated that a majority of participants expect one more interest rate hike will likely be appropriate before the end of the year. The continued decline by treasury yields from 16-year highs also aided the markets.

Back home, a Crisil report said the Indian agrochemicals sector is likely to witness 3 per cent decline in revenue in this financial year due to falling prices, tepid demand and lower reservoir levels. In stock specific movement, Plaza Wires is set to make its debut on the BSE and NSE on October 12. The issue price has been fixed at Rs 54 per share.

The BSE Sensex is currently trading at 66426.30, down by 46.75 points or 0.07% after trading in a range of 66414.40 and 66577.60. There were 12 stocks advancing against 16 stocks declining, while 2 stocks remained unchanged on the index.

The broader indices were trading in green; the BSE Mid cap index roses 0.38%, while Small cap index was up by 0.57%.

The top gaining sectoral indices on the BSE were Metal up by 1.57%, Basic Materials up by 0.86%, PSU up by 0.66%, Energy up by 0.54% and Auto up by 0.50%, while Realty down by 0.61%, TECK down by 0.51%, IT down by 0.43%, Telecom down by 0.15% and FMCG down by 0.10% were the top losing indices on BSE.

The top gainers on the Sensex were JSW Steel up by 1.65%, Tata Steel up by 1.40%, Axis Bank up by 0.98%, Maruti Suzuki up by 0.84% and Indusind Bank up by 0.81%. On the flip side, TCS down by 1.33%, Nestle down by 0.59%, Bharti Airtel down by 0.59%, Tech Mahindra down by 0.51% and HCL Technologies down by 0.49% were the top losers.

Meanwhile, advising India in the medium term to have an ambitious fiscal consolidation plan that brings down deficits, the International Monetary Fund’s Deputy Director, Fiscal Affairs Department, Ruud de Mooij said that India has a high debt like that of China but the risks associated with it are not as great as that of its northern neighbour, he said ‘The current debt in India is also high. It stands at 81.9 per cent of GDP. Compared to China, which is 83 per cent, it is very similar. Also, when we compare India's debt to the pre-pandemic level in 2019, it was 75 per cent. So it is still quite a bit higher’.

He further said ‘What we also see in India is a deficit that is 8.8 per cent projected for 2023. In India, a large portion of this is because of expenditures on interest. They pay a lot of interest on their debt: 5.4 per cent of GDP is spent on that, and the primary deficit is 3.4 per cent. So together they add up to 8.8 per cent’. He added that India's debt is not projected to rise like in China. It, in fact, is projected to fall slightly by 1.5 per cent to 80.4 per cent in 2028.

He said one of the reasons is that growth in India is much higher. India is one of the countries with really high growth. This matters of course for the debt to GDP ratio. Also, just to note that the risks are moderated by some factors. He observed the risk factor in India is the state level risks. Some states really have high debts, have high financing needs and face a high interest burden. This is a factor that does mean that there are significant risks also for India.

Mooij said one of the ways in which India could usefully support fiscal consolidation is by strengthening the tech system. There are several opportunities in India. There are opportunities in the general sales tax, which has multiple rates, many exemptions, and maybe not all of them are effective. Improving the design of the general sales tax could contribute to this. He also see opportunities for broadening the base of the personal income tax and the corporate income tax where there are many loopholes that can often be addressed.

The CNX Nifty is currently trading at 19789.75, down by 21.60 points or 0.11% after trading in a range of 19785.70 and 19843.30. There were 22 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were Hindalco up by 1.70%, Grasim Industries up by 1.40%, JSW Steel up by 1.38%, Coal India up by 1.28% and BPCL up by 1.24%. On the flip side, TCS down by 1.44%, Tech Mahindra down by 0.95%, Nestle down by 0.93%, Dr. Reddy's Lab down by 0.86% and Cipla down by 0.83% were the top losers.

All Asian markets are trading higher; Nikkei 225 surged 492.17 points or 1.52% to 32,428.68, Hang Seng jumped 332.09 points or 1.82% to 18,225.19, Taiwan Weighted advanced 116.64 points or 0.69% to 16,788.67, Jakarta Composite strengthened 45.4 points or 0.65% to 6,977.15, Straits Times rose 28.11 points or 0.87% to 3,220.98, Shanghai Composite added 25.4 points or 0.82% to 3,104.36 and KOSPI increased 23.18 points or 0.94% to 2,473.26.