Losses intensifies over Dalal Street

Indian equity benchmarks extended their losses in early afternoon deals, with both Sensex and Nifty trading near their intraday low points, on the back of heavy selling at PSU and Energy counters. Kotak Mahindra Bank and Tata Steel lost the most among major industry leaders on the BSE. Sentiments were negative, after India Ratings and Research (Ind-Ra) in its latest report said that sustained disruptions in the Red Sea route is likely to raise the freight and forwarding (F&F) cost by 25-30 per cent for corporates largely dealing in international trade. On the sectoral front, power sector stocks were in watch, after the Ministry of Power directed all states and union territories for adherence to ‘Resource Adequacy Guidelines’, in order to ensure adequate growth in the nation’s power capacity in line with the rapidly growing electricity demand.

On the global front, the Indonesia stock market remained higher on Monday, despite concerns over China's struggling economy and heightened geopolitical tensions in the Middle East. Markets in China, Japan, Hong Kong, Singapore, Malaysia, Taiwan and South Korea are closed for public holidays. 

The BSE Sensex is currently trading at 71156.18, down by 439.31 points or 0.61% after trading in a range of 71076.68 and 71756.58. There were 9 stocks advancing against 21 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell 1.85%, while Small cap index was down by 2.29%.

The few gaining sectoral indices on the BSE were IT up by 0.68%, TECK up by 0.58% and Healthcare up by 0.36%, while PSU down by 3.36%, Energy down by 2.50%, Utilities down by 2.49%, Realty down by 2.40% and Oil & Gas down by 2.27% were the top losing indices on BSE.

The top gainers on the Sensex were Wipro up by 3.04%, HCL Tech. up by 3.01%, Infosys up by 1.13%, Tech Mahindra up by 0.76% and Mahindra & Mahindra up by 0.51%. On the flip side, Kotak Mahindra Bank down by 2.25%, Tata Steel down by 2.23%, NTPC down by 2.20%, Indusind Bank down by 1.81% and ICICI Bank down by 1.77% were the top losers.

Meanwhile, India Ratings and Research (Ind-Ra) in its latest report has said that sustained disruptions in the Red Sea route is likely to raise the freight and forwarding (F&F) cost by 25-30 per cent for corporates largely dealing in international trade. Moreover, it said the working capital cycle is likely to aggravate by 15-20 days, and the impact could be higher for sectors such as agriculture and textiles. Working capital cycle refers to the period between payments made to suppliers and revenue received from sales. 

According to the report, pressures on cash flow, although moderate for large entities, will further increase borrowings, especially for sectors such as iron and steel, auto and auto ancillaries, chemicals and textiles, which have seen a year-on-year rise in net leverage in the first half of the current fiscal (H1FY24). The initial reaction can be seen in freight rates rising by 150 per cent in the past 45 days. The route constituted 40 per cent of the total oil imports and 24 per cent of the total exports during April to October 2023. Major shipping lines have rerouted vessels around the Cape of Good Hope, which has increased time and costs, impacting both exports and imports. 

The report further said this detour adds 12-15 days to voyages on a business as-usual basis; however, there could be a further delay owing to any sudden operational challenges. This detour is directly translating to a higher operational cost, along with freight and insurance and intermittent disruptions on account of ship size and cost dynamics. Although these disruptions have historically been short lived, a swift resolution seems improbable given the geopolitical standing.

The CNX Nifty is currently trading at 21641.95, down by 140.55 points or 0.65% after trading in a range of 21609.25 and 21831.70. There were 18 stocks advancing against 32 stocks declining on the index.

The top gainers on Nifty were HCL Tech. up by 3.17%, Wipro up by 2.95%, Dr. Reddy's Lab up by 2.49%, Divi's Lab up by 2.30% and Apollo Hospital Ent. up by 2.27%. On the flip side, Hero MotoCorp down by 5.05%, Coal India down by 4.55%, BPCL down by 4.11%, ONGC down by 3.01% and Kotak Mahindra Bank down by 2.38% were the top losers.

In Asian markets, Jakarta Composite gained 45.06 points or 0.62% to 7,280.21.