Markets trade with traction after cautious start on value buying

Indian equity benchmarks made flat-to-positive start on Thursday but soon turned volatile after minutes of the last US Federal Reserve meeting revealed Fed officials’ concerns over sticky inflation, with members seemingly getting cold feet on possible interest rate cuts. Also, foreign fund outflows dented sentiments in domestic markets. Foreign institutional investors sold Indian equities worth Rs 686 crore on May 22. However, markets gained traction and are trading higher with decent gains in early deals on account of healthy buying. Some support came in with a private report that India is seen as an emerging economic superpower of the world. India’s central bank in its monthly economic review says “there is a growing optimism that India is on the cusp of a long awaited economic take-off.” India is positioned to remain the fastest-growing major economy, demonstrating resilience amid geopolitical challenges and supply chain pressures. 

On the global front, Asian markets are trading mostly higher, despite the broadly negative cues from global markets overnight. There was some cautiousness as traders reacted to the minutes of the US Fed's recent monetary policy meeting that suggested officials expect to maintain interest rates at current levels longer than previously thought. The meeting participants highlighted disappointing readings on inflation over the first quarter and indicators pointing to strong economic momentum. Meanwhile, market in Indonesia closed for Vesak Day.

Back home, paper industry stocks are in limelight as The Indian Paper Manufacturers Association (IPMA) said imports of paper and paperboard in the country rose by 34 per cent to 19.3 lakh tonnes in 2023-24, driven by higher shipments from ASEAN countries. It added that the increasing imports of these products are hurting the domestic industry. In stock specific development, Gland Pharma surged post Q4 earnings. ITC remained in focus ahead of its earnings release.

The BSE Sensex is currently trading at 74478.01, up by 256.95 points or 0.35% after trading in a range of 74158.35 and 74502.68. There were 24 stocks advancing against 6 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.45%, while Small cap index was up by 0.48%.

The top gaining sectoral indices on the BSE were Capital Goods up by 1.61%, Industrials up by 1.30%, Realty up by 0.83%, Telecom up by 0.80% and Oil & Gas up by 0.80%, while Metal down by 0.92%, Healthcare down by 0.68%, Utilities down by 0.55%, Basic Materials down by 0.46% and Power down by 0.21% were the top losing indices on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 1.99%, Axis Bank up by 1.52%, Wipro up by 1.17%, Indusind Bank up by 0.79% and Asian Paints up by 0.74%. On the flip side, Sun Pharma down by 4.06%, Power Grid down by 3.88%, JSW Steel down by 1.58%, Tata Steel down by 0.52% and Ultratech Cement down by 0.10% were the top losers.

Meanwhile, the Reserve Bank of India (RBI) board, at its 608th meeting, has approved the transfer of Rs 2,10,874 crore as surplus to the government for the accounting year 2023-24, more than double of what was budgeted expectation, helping shore up revenue ahead of a new government taking office. The board has approved the transfer of surplus. The government had budgeted a receipt of Rs 1.02 lakh crore as dividends from the RBI, public sector banks and financial institutions in the interim budget for the fiscal year 2024-25 (April 2024 to March 2025) presented in February this year. The dividend or surplus transfer by the RBI to the Centre was Rs 87,416 crore for the fiscal 2022-23. The previous high was Rs 1.76 lakh crore in 2018-19.

The central government aims to contain the fiscal deficit or gap between expenditure and revenue to Rs 17.34 lakh crore (5.1 per cent of the GDP) during the current financial year. The RBI board also reviewed the global and domestic economic scenario, including risks to the growth outlook. The Board discussed the working of the Reserve Bank during 2023-24 and approved its Annual Report and Financial Statements for the last fiscal. The RBI said that during accounting years 2018-19 to 2021-22, owing to the prevailing macroeconomic conditions and the onslaught of the Covid-19 pandemic, the Board had decided to maintain the Contingent Risk Buffer (CRB) at 5.50 per cent of the Reserve Bank’s balance sheet size to support growth and overall economic activity.

The central bank added ‘With the revival in economic growth in FY 2022-23, the CRB was increased to 6.00 per cent. As the economy remains robust and resilient, the Board has decided to increase the CRB to 6.50 per cent for FY 2023-24’. The transferable surplus for 2023-24, the RBI said, has been arrived at on the basis of the Economic Capital Framework (ECF) adopted by it in August 2019, as per recommendations of the Bimal Jalan-headed expert committee. The committee had recommended that the risk provisioning under the CRB be maintained within a range of 6.5 to 5.5 per cent of the RBI’s balance sheet.

The CNX Nifty is currently trading at 22676.00, up by 78.20 points or 0.35% after trading in a range of 22577.45 and 22689.35. There were 39 stocks advancing against 11 stocks declining on the index.

The top gainers on Nifty were Larsen & Toubro up by 1.97%, Axis Bank up by 1.73%, BPCL up by 1.31%, Apollo Hospital up by 1.23% and ONGC up by 1.21%. On the flip side, Sun Pharma down by 4.04%, Power Grid down by 3.87%, JSW Steel down by 1.64%, Grasim Industries down by 1.34% and Hindalco down by 1.24% were the top losers.

Asian markets are trading mostly in green; Nikkei 225 surged 452.62 points or 1.17% to 39,069.72, Taiwan Weighted rose 60.71 points or 0.28% to 21,612.54, KOSPI increased 9.76 points or 0.36% to 2,733.22 and Straits Times was up by 8.71 points or 0.26% to 3,316.61. On the other hand, Hang Seng declined 265.58 points or 1.4% to 18,930.02 and Shanghai Composite was down by 31.72 points or 1.01% to 3,126.82.