Domestic indices wipe out opening gains to trade in red terrain

Indian equity benchmarks started the session in green on Wednesday tracking overnight gains on Wall Street as well as broadly positive cues from Asian counterparts. However, Sensex and Nifty soon wiped out their gains to trade in red terrain and are hovering near neutral lines with marginal cut as traders largely refrained from making significant moves as they await the release of the minutes of the US Fed's latest monetary policy meeting later in the day for clues about the outlook for interest rates. Some pessimism also came in amid foreign fund outflows. Foreign institutional investors (FIIs) offloaded shares worth Rs 1,874.54 crore on May 21. 

There was some cautiousness as domestic rating agency ICRA projected India's GDP growth to moderate to a four quarter low of 6.7 per cent in March quarter of 2023-24 fiscal. For the full 2023-24 fiscal, ICRA estimates GDP growth to come in at 7.8 per cent. ICRA Chief Economist, Head-Research & Outreach Aditi Nayar said the lower volume growth coupled with diminishing gains from commodity prices dampening the profitability of some of the industrial sectors is expected to dampen India's GVA growth in Q4 FY2024. 

On the sectoral front, travel and tourism industry stocks are in focus as India's rank on the World Economic Forum's Travel & Tourism Development Index 2024 has risen to 39th place, with global tourism activities returning to pre-pandemic level. India is ranked highest in South Asia and among the lower-middle-income economies. In stock specific development, JK Tyre & Industries soared on reporting a 56 percent rise in Q4 net profit. However, BHEL tumbled on reporting a 25 percent fall in Q4 net profit.

The BSE Sensex is currently trading at 73891.24, down by 62.07 points or 0.08% after trading in a range of 73865.73 and 74165.52. There were 10 stocks advancing against 20 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index lost 0.66%, while Small cap index was down by 0.61%.

The few gaining sectoral indices on the BSE were Realty up by 0.93%, FMCG up by 0.60% and Energy up by 0.11%, while PSU down by 1.06%, Capital Goods down by 0.85%, Industrials down by 0.84%, Power down by 0.70% and Metal down by 0.69% were the top losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 1.34%, Hindustan Unilever up by 1.30%, Ultratech Cement up by 0.83%, ITC up by 0.78% and Nestle up by 0.38%. On the flip side, Sun Pharma down by 1.51%, SBI down by 1.46%, Power Grid down by 1.37%, Tata Steel down by 1.32% and JSW Steel down by 1.27% were the top losers.

Meanwhile, with rising aggregate demand and non-food spending in the rural economy, an article on the state of the economy published in the Reserve Bank of India’s (RBI's) May Bulletin has noted that India is likely to grow by 7.5 per cent in the first quarter of the current financial year (Q1FY25). It said the Indian economy has demonstrated marked resilience in the face of geopolitical headwinds impacting the supply chain. It said ‘According to the economic activity index (EAI), activity rebounded in April, and early estimates suggest that Gross Domestic Product (GDP) growth for Q1:2024-25 is likely to remain close to 7.5 per cent’. The economic activity index (EAI) was constructed by extracting the common trend underlying twenty-seven high-frequency indicators of economic activity, using a Dynamic Factor Model. EAI was scaled to 100 in February 2020 and 0 in April 2020, the worst affected month due to mobility restrictions. 

The article noted that high-frequency indicators point towards sustained momentum in domestic demand conditions in April 2024. Toll collections increased by 8.6 per cent (y-o-y) in April 2024. Automobile sales increased by 25.4 per cent (y-o-y) in April 2024, led by strong growth in the two-wheelers and three-wheelers segment, while passenger vehicles recorded the highest-ever monthly sales. It said ‘There is a growing optimism that India is on the cusp of a long-awaited economic take-off. Recent indicators are pointing to a quickening of the momentum of aggregate demand’. Non-food spending is being pushed up by the green shoots of rural spending recovery. A modest easing of headline inflation in the reading for April 2024 confirms the expectation that an uneven and lagged pace of alignment with the target is underway.

It also noted that for the first time in at least two years, rural demand for fast-moving consumer goods (FMCG) has outpaced urban markets in the quarter just gone by. FMCG volume growth of 6.5 per cent was driven by rural growth of 7.6 per cent relative to urban growth of 5.7 per cent on the back of robust demand for home and personal care products. Turning to private investment, for listed private manufacturing companies, earnings remained the major source of funds during the second half of 2023-24. Results that have been declared by listed corporates so far indicate that they closed the financial year 2023-24 with the highest growth in quarterly revenues registered in January-March 2024. 

It highlighted that the prices of vegetables, cereals, pulses, meat and fish in the food category may keep the headline elevated and closer to 5 per cent in the near term, in line with projections set out in the April Monetary Policy Committee (MPC) resolution in spite of deflation in fuel prices and further softening of core inflation to a new historic low. The article is prepared by a team led by Reserve Bank Deputy Governor Michael Debabrata Patra. Meanwhile, the government will be releasing the quarterly GDP estimates for January-March, 2024 (Q4 2023-24), and provisional estimates of National Income for the year 2023-24 on May 31. The Indian economy grew 8.2 per cent in the June quarter, 8.1 per cent in the September quarter and 8.4 per cent in the December quarter of 2023-24.

The CNX Nifty is currently trading at 22506.15, down by 22.90 points or 0.10% after trading in a range of 22483.15 and 22577.40. There were 16 stocks advancing against 34 stocks declining on the index.

The top gainers on Nifty were Coal India up by 2.20%, Reliance Industries up by 1.28%, Hindustan Unilever up by 1.27%, Britannia Industries up by 1.16% and Ultratech Cement up by 1.13%. On the flip side, Hindalco down by 1.85%, BPCL down by 1.62%, Sun Pharma down by 1.51%, SBI down by 1.40% and Power Grid down by 1.40% were the top losers.

Asian markets are trading mostly in green; Taiwan Weighted jumped 246.26 points or 1.16% to 21,483.01, Hang Seng rose 38.1 points or 0.2% to 19,258.72, Jakarta Composite gained 22.89 points or 0.32% to 7,208.93, KOSPI increased 6.77 points or 0.25% to 2,730.95 and Shanghai Composite was up by 0.51 points or 0.02% to 3,158.48. On the other hand, Nikkei 225 slipped 249.16 points or 0.64% to 38,697.77.