Markets continue falling streak on profit booking ahead of election results

Continuing their falling streak, Indian equity benchmarks ended lower by around a percent on Thursday due to profit booking amid growing nervousness among investors ahead of the results of the Lok Sabha polls on June 4. Market participants also remained on sidelines ahead of India’s gross domestic product (GDP) data for Q4FY24.  After a weak start, the markets extended the losses as the day progressed as traders got anxious with exchange data showing that foreign Institutional Investors (FIIs) offloaded equities worth Rs 5,841.84 crore on Wednesday. Some pessimism also came with data showing that foreign direct investment (FDI) equity inflows in India declined 3.49 per cent to $44.42 billion in 2023-24 due to lower infusion in sectors such as services, computer hardware and software, telecom, auto and pharma. FDI inflows stood at $46.03 billion during 2022-23. Inflows during January-March FY24, however, rose by 33.4 per cent to $12.38 billion as against $9.28 billion in the year-ago period.

Sentiments remained down-beat in late afternoon deals even as 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. Traders overlooked Finance Minister Nirmala Sitharaman’s statement that S&P Global Ratings' revision of its outlook on India from 'stable' to 'positive' is a welcome development. She said this reflects India's solid growth performance and a promising economic outlook for the coming years. The minister noted that it has been possible due to the series of macroeconomic reforms undertaken since 2014, along with substantial outlay for capex, fiscal discipline, and decisive and visionary leadership. Traders also paid no heed towards credit rating agency, India Ratings and Research’s (Ind-Ra) latest report that the expected mammoth dividend transfer by the Reserve Bank of India (RBI) to the central government and subsequent spending by the latter, is likely to reduce the ongoing pressure on the banking system deposit accretion and overall rates in the system, a few days after the RBI approving the transfer of Rs 2,10,874 crore as surplus to the government for the accounting year 2023-24.

On the global front, European markets were trading higher as the data showed that unemployment across the eurozone has fallen to a new record low in April while a measure of economic sentiment ticked up in May.  Asian markets closed mostly down on Thursday as traders looked ahead to the release of key inflation readings from the euro zone and the U.S. for additional clues on the future path of monetary policy.

Finally, the BSE Sensex fell 617.30 points or 0.83% to 73,885.60, and the CNX Nifty was down by 216.05 points or 0.95% points to 22,488.65.   

The BSE Sensex touched high and low of 74,493.55 and 73,668.73 respectively. There were 7 stocks advancing against 23 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 1.21%, while Small cap index was down by 1.33%.

The lone gaining sectoral index on the BSE was Bankex up by 0.53%, while Metal down by 2.67%, Basic Materials down by 2.05%, Consumer Durables down by 2.05%, IT down by 1.97% and Healthcare down by 1.64% were the top losing indices on BSE.

The top gainers on the Sensex were ICICI Bank up by 1.14%, Axis Bank up by 1.00%, HDFC Bank up by 0.45%, SBI up by 0.38% and Larsen & Toubro up by 0.22%. On the flip side, Tata Steel down by 5.74%, Titan Company down by 3.17%, Tech Mahindra down by 3.15%, Wipro down by 3.09% and Bajaj Finserv down by 2.91% were the top losers.

Meanwhile, a few days after the RBI approving the transfer of Rs 2,10,874 crore as surplus to the government for the accounting year 2023-24, credit rating agency, India Ratings and Research (Ind-Ra) in its latest report has said that the expected mammoth dividend transfer by the Reserve Bank of India (RBI) to the central government and subsequent spending by the latter, is likely to reduce the ongoing pressure on the banking system deposit accretion and overall rates in the system. 

According to the report, the mega dividend will give a fillip to central government’s fiscal position, which may lead to additional spending or fiscal consolidation or a combination of both. However, the agency noted that the structural challenges for banks in term of deposit accretion will continue in the medium to long term.

Meanwhile, the transfer of Rs 2,10,874 crore as surplus to the government for the accounting year 2023-24 is more than double of what was budgeted expectation, helping shore up revenue ahead of a new government taking office. 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 CNX Nifty traded in a range of 22,705.75 and 22,417.00. There were 10 stocks advancing against 40 stocks declining on the index.

The top gainers on Nifty were ICICI Bank up by 1.45%, Axis Bank up by 1.06%, SBI up by 0.76%, HDFC Bank up by 0.66% and Bharti Airtel up by 0.32%. On the flip side, Tata Steel down by 5.19%, Tech Mahindra down by 3.16%, Grasim Industries down by 2.87%, Bajaj Finserv down by 2.86% and Wipro down by 2.80% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 22.78 points or 0.28% to 8,205.85, France’s CAC rose 18.42 points or 0.23% to 7,953.45 and Germany’s DAX gained 8.45 points or 0.05% to 18,481.74.

Asian markets closed mostly down on Thursday tracking Wall Street’s overnight falls and as the US dollar and bond yields continued to surge with caution ahead to the release of key inflation readings from the euro zone and the United States. Market sentiments weakened further as Israel’s national security adviser, Tzachi Hanegbi said the continuing war on Gaza is likely to last through the end of the year. Chinese shares declined as the International Monetary Fund upgraded the country's 2024, 2025 GDP growth forecasts, even though it expected slower growth in the years ahead. Japanese shares settled down, while Yen gained after BoJ board member Seiji Adachi emphasized reducing bond buying in several stages so that long-term yields better serve as a market signal. Hong Kong shares fell ahead of the release of China's official Purchasing Managers Index data for May, while Seoul shares dropped ahead of industrial production figures due on Friday.