Sensex, Nifty trade under pressure amid weak global cues, election jitters

Indian equity benchmarks made slightly negative start on Thursday tracking overnight losses on Wall Street coupled with weakness in Asian counterparts, as bond yields continued to spike amid uncertainty about the US Fed's interest-rate moves ahead of key inflation data later in the week. The report on US personal income and spending in the month of April, due on Friday, includes readings on inflation said to be preferred by the US Fed. There are concerns the Fed might keep interest rates higher for longer at the next monetary policy meeting on June 11-12 in the event of U.S. inflation readings coming in hotter than expected. Closer home, Sensex and Nifty are trading under pressure in early deals with cut of around half a percent each amid selling in metal stocks, while buying in banking stocks supporting markets to limit the losses. 

Traders avoided taking long positions ahead of the monthly F&O expiry for May series later in the day and Lok Sabha election results on June 04. Foreign fund outflows dented sentiments in the domestic markets. Foreign institutional investors (FIIs) offloaded shares worth Rs 5,841.84 crore on May 29. As per a private report, FIIs selling now topped the Rs 40,000 crore mark in May, the highest in any month since January 2023. Market participants overlooked report that S&P Global Ratings revised outlook for the Indian economy to positive from stable and has affirmed the overall rating at BBB- citing robust growth and improved quality of government expenditure. 

On the sectoral front, banking stocks are buzzing as an analysis by S&P Global Market Intelligence showed that India’s largest banks are poised to improve their asset quality in the current fiscal year, bolstered by record net incomes that will enable them to enhance their balance sheets and underwriting standards. In stock specific development, Tata Steel declined post Q4 results as the company reported lower than expected numbers.

The BSE Sensex is currently trading at 74187.25, down by 315.65 points or 0.42% after trading in a range of 74158.86 and 74493.55. There were 7 stocks advancing against 23 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell 0.25%, while Small cap index down was by 0.30%.

The only gaining sectoral indices on the BSE were Bankex up by 0.68% and Capital Goods up by 0.07%, while Metal down by 1.24%, Basic Materials down by 0.90%, Consumer Durables down by 0.89%, IT down by 0.89% and TECK down by 0.87% were the top losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 1.15%, Kotak Mahindra Bank up by 0.88%, ICICI Bank up by 0.74%, SBI up by 0.62% and Indusind Bank up by 0.27%. On the flip side, Tata Steel down by 2.87%, Power Grid down by 2.00%, JSW Steel down by 1.89%, Bajaj Finserv down by 1.55% and Sun Pharma down by 1.51% were the top losers.

Meanwhile, in an optimistic move, S&P Global Ratings, after a gap of about 10 years, has upped India’s outlook to positive from stable on robust growth prospects for next three years and rising quality of Government spend. It also raised hopes for an upgrade in two years provided the government continues reforms and policies to keep fiscal deficit under check. Retaining India’s sovereign rating at the lowest investment grade of ‘BBB-’, S&P said it expects broad continuity in economic reforms and fiscal policies, irrespective of the election outcome. Results of the ongoing general elections will be announced on June 4. Last in 2014, S&P had upped India’s outlook to stable from negative.

It said ‘Our positive outlook on India is predicated on its robust economic growth, pronounced improvement in the quality of government spending, and political commitment to fiscal consolidation. We believe these factors are coalescing to benefit credit metrics’. Irrespective of the June 2024 general election results, S&P expects the incoming government to carry on economic reforms to support the ‘growth vigor’, continued infrastructure investment drive, and commitment to fiscal consolidation.
The rating agency also said ‘We expect sound economic fundamentals to underpin the growth momentum over the next two to three years. Regardless of the election outcome, we expect broad continuity in economic reforms and fiscal policies’. It said the composition of government spending has been transformed, with an increasing share going to infrastructure. This will ease bottlenecks to put the country on a higher growth trajectory. It said India’s robust economic expansion is having a constructive impact on its credit metrics.

The positive outlook reflects S&P’s view that continued policy stability, deepening economic reforms, and high infrastructure investment will sustain long-term growth prospects. S&P noted that the Indian economy has staged a ‘remarkable comeback’ from the COVID-19 pandemic. It forecasts India’s real GDP growth at 6.8 per cent this year, which compares favourably with emerging market peers amid a broad global slowdown. The agency estimates real GDP growth in the past three years to have averaged 8.1 per cent annually, the highest in the Asia-Pacific region.

The CNX Nifty is currently trading at 22608.30, down by 96.40 points or 0.42% after trading in a range of 22590.30 and 22705.75. There were 9 stocks advancing against 41 stocks declining on the index.

The top gainers on Nifty were Axis Bank up by 1.31%, SBI up by 0.87%, Kotak Mahindra Bank up by 0.85%, ICICI Bank up by 0.78% and ONGC up by 0.42%. On the flip side, Tata Steel down by 2.81%, Power Grid down by 1.86%, Nestle down by 1.85%, JSW Steel down by 1.67% and Titan Company down by 1.64% were the top losers.

All Asian markets are trading lower; Nikkei 225 slipped 473.74 points or 1.23% to 38,083.13, Hang Seng declined 210.66 points or 1.14% to 18,266.35, Taiwan Weighted lost 183.27 points or 0.85% to 21,479.23, Jakarta Composite weakened 80.01 points or 1.12% to 7,060.22, KOSPI dropped 30.75 points or 1.15% to 2,646.55, Straits Times fell 11.54 points or 0.35% to 3,311.66 and Shanghai Composite was down by 3.84 points or 0.12% to 3,107.18.