Domestic indices trade flat with negative bias ahead of RBI policy

Indian equity benchmarks made negative start on Friday amid weak global cues and ahead of the outcome of the Reserve Bank of India’s Monetary Policy Committee (MPC) meeting. In the first policy review for this fiscal, the MPC is likely to predict a status quo in key rates. There are expectations that the central bank is likely to keep its repo rate unchanged at 6.50 per cent, continuing its stance of ‘withdrawal of accommodation’. Sensex and nifty are trading flat with negative bias in early deals as selling in Oil & Gas, Capital Goods and Metal stocks dampened sentiments, while buying in Healthcare, Realty and Consumer Durables counters kept downside in check. Foreign fund outflows weighted down on the markets sentiments. Foreign institutional investors (FIIs) net sold shares worth Rs 1,136.47 crore on April 4, provisional data from the NSE showed. However, downside remained capped as the United Nations said India has become the world’s fastest-growing major economy and a bright spot for the Asia-Pacific in 2023 amid strong household consumption and public investment in infrastructure. 

On the global front, Asian markets are trading mostly lower, following the sell-off on Wall Street overnight, on renewed concerns over the outlook for interest rates, with the likelihood of a rate cut in June remaining uncertain. Higher energy prices will keep inflation elevated and convince the US Fed to hold off on lowering interest rates. Also, the average household spending in Japan was down 0.5 percent on year in February. Markets in Taiwan and China remain closed for the Ching Ming Festival. 

Back home, edible oil industry stocks are in focus as the industry body SEA said mustard seed production is likely to touch an all-time high of 12 million tonnes in the 2023-24 season in view of a record sown area of 10 million hectares. Mustard seed is an important oilseed crop grown during the rabi (winter) season during September-October and harvested in February-March. In stock specific development, Rashi Peripherals zoomed on order wins from NMDC Data Centre.

The BSE Sensex is currently trading at 74119.32, down by 108.31 points or 0.15% after trading in a range of 73946.92 and 74287.02. There were 10 stocks advancing against 20 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index rose 0.10%, while Small cap index was down by 0.08%.

The top gaining sectoral indices on the BSE were Healthcare up by 1.01%, Realty up by 0.90%, Consumer Durables up by 0.37%, FMCG up by 0.32% and Consumer discretionary up by 0.17%, while Oil & Gas down by 0.96%, Capital Goods down by 0.84%, Metal down by 0.73%, Telecom down by 0.70% and Energy down by 0.62% were the top losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 0.93%, HDFC Bank up by 0.83%, Nestle up by 0.82%, Kotak Mahindra Bank up by 0.71% and Mahindra & Mahindra up by 0.67%. On the flip side, Larsen & Toubro down by 1.76%, JSW Steel down by 1.17%, Tata Steel down by 1.07%, Axis Bank down by 0.98% and Tech Mahindra down by 0.90% were the top losers.

Meanwhile, the United Nations in its latest report ‘the Economic and Social Survey of Asia and the Pacific 2024’ has said that India has become the world’s fastest-growing major economy in 2023 amid strong household consumption and public investment in infrastructure. India registered an economic growth rate of 6.8 per cent in FY2023 supported by government spending on infrastructure and strong growth in manufacturing, mining and construction, which offset lower agricultural output. Formal unemployment was at a 12-year low of 4.1 per cent. Gross fixed capital formation increased by 9 per cent in the final quarter of FY23 to reach a share of 34 per cent of GDP, the highest since 2012-2013. 

It said elsewhere in the region, output growth in most economies moderated in 2023. Export-oriented countries faced weak external demand, especially from China and Europe. Average economic growth in the developing Asia-Pacific region picked up from 3.5 per cent in 2022 to 4.8 per cent in 2023. The rebound was concentrated in only a few large economies though, such as in China after it lifted COVID-19 pandemic restrictions and in the Russian Federation due to higher military-related investments.

It further said that climate change erodes productivity and fiscal revenues. South Asia is one of the regions most seriously affected, with India expected to lose about 5.8 per cent of daily working hours due to heat stress in 2030 (Kjellstrom and others, 2019). The problem is most severe for outdoor workers, particularly those employed in agriculture and construction, but also relevant for indoor factory workers. Globally, about 2.2 per cent of working hours are estimated to be lost due to rising temperatures.
Agricultural subsidies play a notable role in the region and are strongly related to climate change. In India, farm subsidies reached 2 per cent of GDP in 2019 and constituted about one fifth of aggregate farm income (Ramaswami, 2019), while also helping to raise agricultural productivity (Badiani, Jessoe and Plant, 2012). An additional 1.2 per cent of GDP was spent on government food subsidies in fiscal year 2021/22 (India, MCAFPD, 2023; India, MSPI, 2023) as part of policies aimed at reducing rural poverty.

On India’s goods and services tax reform, it said the goods and services tax (GST) reform in 2017 consolidated multiple layers of goods and services taxes into a single VAT-style regime, representing a significant transformation in India’s indirect tax system. With a linear tax mix, a simplified rate structure and the built-in advantages of VAT in enforcing compliance, the reform enhanced tax administration and economic efficiency gains as it reduced past distortions and tax-induced domestic market fragmentation. Since the reform, the number of registered GST taxpayers has more than doubled. GST revenues also increased notably to more than 3.1 per cent of GDP in fiscal year 2023.

The CNX Nifty is currently trading at 22485.55, down by 29.10 points or 0.13% after trading in a range of 22427.60 and 22502.65. There were 21 stocks advancing against 29 stocks declining on the index.

The top gainers on Nifty were Dr. Reddy's Lab up by 2.49%, SBI Life Insurance up by 1.38%, Sun Pharma up by 1.06%, HDFC Bank up by 0.90% and Cipla up by 0.83%. On the flip side, BPCL down by 2.50%, Larsen & Toubro down by 1.67%, Hindalco down by 1.57%, Axis Bank down by 1.20% and JSW Steel down by 1.15% were the top losers.

Asian markets are trading mostly in red; Nikkei 225 slipped 753.93 points or 1.9% to 39,019.21, Hang Seng declined 118.84 points or 0.71% to 16,606.26, KOSPI dropped 26.27 points or 0.96% to 2,715.73 and Straits Times fell 22.47 points or 0.69% to 3,212.54, while Jakarta Composite was up by 32.18 points or 0.44% to 7,286.58.