Key gauges end marginally red on Monday

Indian equity benchmarks ended marginally in red on Monday amid weak trends in global markets and spike in Brent crude oil prices due to geopolitical tension in the Middle East. Markets made a negative start and soon tuned volatile as traders got anxious with data showing that India's merchandise exports saw a fall of 2.6 percent year on year, contracting to $34.47 billion in September. The fall was also significantly reflected in imports, which contracted by 15 percent to $53.84 billion in September 2023 against September 2022. However, markets managed to keep their heads above water in afternoon deals, as traders took some support with the International Monetary Fund’s (IMF) statement that the overall macroeconomic environment in India is ‘pretty sound’, it is fiscally disciplined and the central bank moved fast to bring inflation under control. Some support also came with the provisional data available on the NSE showing that foreign institutional investors (FII) purchased shares worth net Rs 317.01 crore on October 13, 2023

But, key indices failed to hold recovery and ended with minor losses as some pessimism remained among traders with chief economic advisor (CEA) V Anantha Nageswaran’s statement that private investment is happening in India, and inflation is not a concern, but crude oil prices and tightening global monetary conditions pose a risk. Some concern also came with reports stating that days after the Reserve Bank took an unprecedented step of warning banks of their ballooning retail book, a foreign brokerage has cautioned against increasing default risks in retail unsecured loans of banks. Meanwhile, traders took note of report that India’s inflation based on wholesale price index (WPI) remained in the deflationary zone for the sixth straight month at (-) 0.26% for the month of September 2023 as against (-) 0.52% recorded in August 2023. Deflation in the reported month is primarily due to fall in prices of coal, minerals, textiles, basic metals and food products as compared to the corresponding month of previous year.

On the global front, European markets were trading higher despite escalating Israel-Gaza tensions and reports suggesting that the U.S. is considering tightening curbs to restrict China's access to advanced semiconductors and chipmaking gear. Asian markets settled down on Monday as investors assessed the risk of any potential escalation of the conflict involving Iran ahead of an expected Israel ground offensive in Gaza against the terror attacks. Iran warned that failure to stop Israel's 'war crimes and genocide' could have 'far-reaching consequences.' 

Finally, the BSE Sensex fell 115.81 points or 0.17% to 66,166.93 and the CNX Nifty was down by 19.30 points or 0.10% to 19,731.75.     

The BSE Sensex touched high and low of 66,342.75 and 66,039.38, respectively. There were 11 stocks advancing against 19 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.25%, while Small cap index was up by 0.34%.

The top gaining sectoral indices on the BSE were Metal up by 1.37%, Consumer Durables up by 0.68%, PSU up by 0.57%, Industrials up by 0.50% and Auto up by 0.45%, while Telecom down by 0.74%, Healthcare down by 0.47%, Realty down by 0.39%, TECK down by 0.32% and FMCG down by 0.28% were the top losing indices on BSE.

The top gainers on the Sensex were JSW Steel up by 1.71%, Tata Steel up by 1.60%, HCL Technologies up by 1.20%, Axis Bank up by 1.13% and Mahindra & Mahindra up by 0.78%. On the flip side, Nestle down by 1.94%, TCS down by 1.29%, Asian Paints down by 1.15%, Indusind Bank down by 1.14% and Sun Pharma down by 0.93% were the top losers.

Meanwhile, the Global Trade Research Initiative (GTRI) has said that India's high-quality labour-intensive goods such as apparel, footwear, carpets and cars will benefit from the removal of import duties by the UK, under the proposed free trade agreement (FTA) between the two countries. However, it said the overall gains for India will be limited because most of the goods from here are already entering the UK at low or zero tariffs (import or customs duties).

According to GTRI, in 2022-23, India's merchandise exports to the UK were valued at $11.41 billion and out of this, $6 billion worth of goods such as petroleum products, medicines, diamonds, machine parts, airplanes, and wooden furniture entered Britain at zero levy. The FTA is expected to have a limited impact on increasing these exports because over half of Indian products already enter the UK with low or no tariffs. The average duty on goods imported from India into the UK is 4.2 per cent.

However, the think tank said there will be gains from reducing duties for Indian exports worth $5 billion and those items include textiles, apparel (shirts, trousers, women's dresses, bed linen), footwear, carpets, cars, marine products, grapes, and mangoes. These products face relatively low to moderate tariffs in the UK. Citing examples, it said that duties on yarn and fabric are 4 per cent, while tariffs on shirts, trousers, women's dresses, and bed linen range from 10 per cent to 12 per cent. Similarly, handbags and trunk cases attract 8 per cent tariffs, levies on footwear vary from 4 per cent to 16 per cent. These products will benefit from the FTA's tariff reductions by the UK.

It further stated that chief negotiators of both the countries are negotiating the pact in the national capital and talks are at a crucial stage, as the negotiations are expected to close by end of this month.  It added that while the duty elimination in the UK can help Indian exports, significant growth requires improvements in product quality and signing an FTA alone may not lead to a substantial increase in India's labour-intensive goods exports.

The CNX Nifty traded in a range of 19,781.30 and 19,691.85. There were 22 stocks advancing against 27 stocks declining, while 1 stock remain unchanged on the index.

The top gainers on Nifty were Hero MotoCorp up by 1.99%, JSW Steel up by 1.75%, Tata Steel up by 1.64%, LTIMindtree up by 1.39% and UPL up by 1.30%. On the flip side, Divi's Lab down by 2.28%, Nestle down by 1.81%, TCS down by 1.40%, Indusind Bank down by 1.21% and Adani Ports and SEZ down by 1.20% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 34.39 points or 0.45% to 7,633.99, France’s CAC rose 9.77 points or 0.14% to 7,013.30 and Germany’s DAX gained 7.4 points or 0.05% to 15,194.06.

Asian markets settled down on Monday amid fears over an escalating war in the Middle East. Israeli Prime Minister Benjamin Netanyahu's office denied reports of any temporary Gaza ceasefire to allow foreign nationals to flee the enclave to neighboring Egypt. Chinese shares declined even after China’s central bank ramped up liquidity support to shore up a wobbly economy. Japanese shares led losses ahead to the release of inflation data this week for directional cues. Meanwhile, investors are also awaiting key economic data in China and the US Federal Reserve Chairman Jerome Powell's speech due this week.