Benchmarks end flat; RBI policy decision in focus

In a highly volatile session, Indian equity benchmarks erased initial gains and ended flat on Wednesday as investors stayed on the sidelines ahead of Reserve Bank of India’s (RBI) interest rate decision, which is scheduled for Thursday. Markets opened on a positive note and consolidated during the day, as traders took some support with the provisional data from the NSE showing that foreign institutional investors (FIIs) net bought shares worth Rs 92.52 crore on February 6, 2024. Some encouragement came after Finance Minister Nirmala Sitharaman said that retail inflation has come down to within the tolerance band due to steps taken by the government to check price rise in essential commodities, especially in perishable commodities. Some support also came with Moody's Investors Service stating that growth in Asia Pacific will decelerate in 2024 as a downshift in China's growth trajectory will spill over in the region through trade in goods and services, but India will be able to mitigate the challenge aided by robust domestic demand.

However, markets erased all of their gains in afternoon deals and fell into red terrain as traders turned cautious as India's aggressive fiscal consolidation objective for next year is already being doubted, with Fitch Ratings saying it expects the target of 5.1 percent of GDP to be missed by as much as 30 basis points. Some concern also came with a private report stating that businesses' one-year-ahead inflation expectations rose sharply to 4.58 percent in December 2023 from 4.04 percent in October 2023. Markets wiped out losses to end flat amid positive cues from other Asian markets along with buying in Realty and Telecom stocks. 

On the global front, European markets were trading lower as traders weighed hawkish comments from a slew of Federal Reserve officials and waited to see whether Chinese officials will unveil more effective measures to sustain a nascent market recovery. Besides, German industrial production posted a sharper-than-expected decline in December and France's trade deficit increased at the end of the final quarter, while U.K. house prices increased for the fourth successive month in January, separate reports revealed. Asian markets settled mostly higher on Wednesday, with positive cues from Wall Street and hopes of more support from Beijing helping underpin investor sentiment.

Finally, the BSE Sensex fell 34.09 points or 0.05% to 72,152.00 and the CNX Nifty was up by 1.10 points or 0.01% to 21,930.50.

The BSE Sensex touched high and low of 72,559.21 and 71,938.22, respectively. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 1.31%, while Small cap index was up by 0.38%.

The top gaining sectoral indices on the BSE were Realty up by 1.96%, Telecom up by 1.18%, Power up by 0.92%, Consumer Disc up by 0.89% and Utilities up by 0.75%, while IT down by 1.18%, TECK down by 0.97%, Capital Goods down by 0.31%, Oil & Gas down by 0.07% and Auto down by 0.06% were the top losing indices on BSE.

The top gainers on the Sensex were SBI up by 3.78%, JSW Steel up by 2.12%, Axis Bank up by 1.77%, Bajaj Finance up by 1.76% and Ultratech Cement up by 1.69%. On the flip side, Power Grid Corporation down by 2.33%, Tech Mahindra down by 2.31%, Infosys down by 2.06%, TCS down by 1.22% and NTPC down by 1.11% were the top losers.

Meanwhile, Moody's Investors Service, in a report on Asia–Pacific (APAC), has said that growth in Asia Pacific will decelerate in 2024 as a downshift in China's growth trajectory will spill over in the region through trade in goods and services, but India will be able to mitigate the challenge aided by robust domestic demand.

According to the report, a downshift in China's economic growth rate and a cyclical slowdown in the US will weigh on Asia-Pacific (APAC)'s credit conditions in 2024. Peaking inflation globally will provide space for monetary tightening cycles to slow, but financial conditions will remain difficult for the weakest-rated issuers. Meanwhile, geopolitical risks will continue to shape business decisions. 

It further said growth will decelerate in 2024, but continue to outperform that of most other regions. The downshift in China's growth trajectory will spill over in the region through a number of transmission channels, such as trade in goods and services, commodity prices and investment. This will be mitigated by robust domestic demand in large emerging markets, such as Indonesia and India. In November 2023, Moody's Investors Service had projected Indian's GDP to grow 6.1 per cent in 2024 and 6.3 per cent in 2025. As per Moody's, the growth in 2023 was 6.7 per cent.

The CNX Nifty traded in a range of 22,053.30 and 21,860.15. There were 29 stocks advancing against 21 stocks declining on the index.

The top gainers on Nifty were SBI up by 4.19%, Grasim Industries up by 2.38%, HDFC Life Insurance up by 2.24%, JSW Steel up by 2.17% and Axis Bank up by 2.09%. On the flip side, Tech Mahindra down by 2.67%, Power Grid Corporation down by 2.50%, Infosys down by 1.99%, Adani Ports & SEZ down by 1.32% and TCS down by 1.23% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 35.04 points or 0.46% to 7,645.97, France’s CAC fell 14.38 points or 0.19% to 7,624.59 and Germany’s DAX lost 62.32 points or 0.37% to 16,970.92.

Asian markets settled mostly higher on Wednesday, tracking Wall Street gains overnight in spite of hawkish comments from the US Federal Reserve officials. Market sentiments were also supported by a retreat in the US dollar and bond yields from recent highs. Chinese markets gained on a slew of signals that authorities are strengthening their resolve to support slumping markets. The China Securities Regulatory Commission urged companies to step up mergers and acquisitions and restructuring to enhance the value of listed companies. Reports showing that companies have spent more than $4 billion on buybacks after officials called on them to play their part.