Benchmarks exhibit spirited recovery; Nifty reclaims 22,600 mark

Indian equity benchmarks exhibited a spirited recovery after suffering heavy losses in the previous session and ended higher by over three percent on Wednesday, driven by broad based buying across various sectors, as political stability appears assured. However, attention will remain on the formation of the government and the forthcoming RBI policy meeting.  Markets made an optimistic start but soon tuned volatile amid foreign fund outflows. A huge selling was seen from foreign institutional investors (FIIs) on June 4 as they sold Indian equities worth Rs 12,436.22 crore. But recovery in heavyweight stocks helped indices gradually climb higher throughout the day. Traders took encouragement with a private report that India's world record beating economic growth rate together with robust tax revenues, a fast expanding digital and financial infrastructure and a strong manufacturing sector will give the new government a base for unleashing next generation reforms that may make the country a developed nation by 2047.

Sentiments remained up-beat in late afternoon deals, as a private report stated that India's economic fundamentals remain robust, after the results of the country's general elections paved the way for Prime Minister Narendra Modi's third consecutive term in office. The Election Commission of India has declared results for all 543 Lok Sabha constituencies, with the BJP winning 240 seats and the Congress 99. Traders overlooked private survey showing that growth in India's services activity slowed to a five-month low in May as robust domestic demand weakened. The final HSBC India Services purchasing managers' index, compiled by S&P Global, fell to 60.2 in May 2024 from April's 60.8, confounding a preliminary reading for a rise to 61.4. However, it remained above the 50 mark separating growth from contraction for the 34th straight month. 

On the global front, European markets were trading higher as investors looked ahead to Thursday's ECB meeting and the release of U.S. labor market data on Friday for directional cues. Asian markets ended mostly lower on Wednesday with Japanese markets leading regional losses as strong wage data spurred expectations of a 2024 Bank of Japan interest rate hike. However, a private survey showed China's services sector in May expanded at its fastest pace since July last year.

Finally, the BSE Sensex rose 2303.19 points or 3.20% to 74,382.24, and the CNX Nifty was up by 735.85 points or 3.36% points to 22,620.35.   

The BSE Sensex touched high and low of 74,534.82 and 71,879.44 respectively. All the 30 stocks were advancing on the index.

The broader indices ended in green; the BSE Mid cap index rose 4.41%, while Small cap index was up by 2.93%.

The top gaining sectoral indices on the BSE were Telecom up by 6.01%, Metal up by 5.36%, FMCG up by 4.52%, Auto up by 4.50% and Basic Materials up by 4.48%, while there were no losing sectoral indices on the BSE. 

The top gainers on the Sensex were Indusind Bank up by 7.75%, Tata Steel up by 6.55%, Mahindra & Mahindra up by 6.49%, Bajaj Finance up by 5.06% and Kotak Mahindra Bank up by 4.89%, while there were no losers on the Sensex.  

Meanwhile, credit rating agency ICRA in its latest report has said that the overall securitisation volumes, originated mainly by non-banking financial companies (NBFCs) and housing finance companies (HFCs), is estimated at Rs 38,000 crore in Q3 FY2024, reflecting a sequential de-growth of around 17% from around Rs 46,000 crore recorded in Q2 FY2024. The volumes for Q3 FY2024 also trailed around Rs 43,000 crore securitised in Q3 FY2023, mainly due to the exit of a large HFC from the securitisation market in the current fiscal. 

ICRA expects securitisation activity to pick up again and touch Rs 50,000 crore in Q4 of the current fiscal, which is typically the busiest quarter of the year. It said despite a tepid Q3, the securitisation volumes in 9M FY2024 expanded by 20% to around Rs 1,40,000 crore on a YoY basis on the back of a strong H1. NBFCs and HFCs continue to rely on securitisation as a key funding tool to support their portfolio growth. The securitisation market has witnessed a higher share of pass-through certificates issuances vis-a-vis direct assignments, following the exit of a large HFC this year, which had been securitising its assets predominantly through direct assignments. 

The report further stated that vehicle loans continue to be the largest asset class with 35-40% share in the overall securitisation volumes, followed by microfinance loans with 22-25% share.  Mortgage-backed loans have a share of 18-20%. Unsecured loans, the share of which was on the rise in the last couple of years in the overall securitisation volumes, could be impacted in the near term because of the RBI’s circular in November 2023.

The CNX Nifty traded in a range of 22,670.40 and 21,791.95. There were 48 stocks advancing against 2 stocks declining on the index.

The top gainers on Nifty were Adani Ports & SEZ up by 7.29%, Indusind Bank up by 7.06%, Hindalco up by 6.46%, Tata Steel up by 6.32% and Mahindra & Mahindra up by 6.06%. On the flip side, Larsen and Toubro down by 0.10% and BPCL down by 0.03%. 

European markets were trading higher; UK’s FTSE 100 increased 21.44 points or 0.26% to 8,253.48, France’s CAC rose 56.84 points or 0.72% to 7,994.74 and Germany’s DAX gained 146.31 points or 0.79% to 18,551.95.

Asian markets ended mostly lower on Wednesday as investors focusing to the European Central Bank's policy decision on Thursday and the monthly US payroll data due on Friday. Japanese shares lead regional losses as the yen rebounded on strong wage data that spurred expectations of a BOJ interest rate hike. Chinese shares declined by consumer and property shares, even as a private survey showed China's services sector in May expanded at its fastest pace since July last year. However, Seoul shares gained after data showed inflation in the country cooled more than expected to a 10-month low in May.