Sensex, Nifty retreat from record highs; end lower on Monday

After hitting fresh highs in early trade cheering Narendra Modi’s continuation as the country’s Prime Minister for the third term, Indian equity benchmarks ended the trading session on a lower note on Monday. The start of day was in green, as traders took encouragement after USIBC President Atul Keshap said the swearing-in of Narendra Modi as the prime minister for a historic third consecutive term sends a strong message of political and economic stability amidst rising geostrategic uncertainty. Some optimism came as retail inflation for industrial workers eased to 3.87 per cent in April compared to 4.2 per cent in March this year.  But soon, indices turned volatile and altered between green and red, as some cautiousness came in after Fitch Ratings reportedly said that India’s medium-term fiscal consolidation, critical to any ratings upgrade, is likely to get more challenging as a new coalition government comes to power. 

Finally, indices ended in red, as investors got cautious, after the Reserve Bank of India (RBI) in its latest ‘Inflation Expectations Survey of Households (IESH) - May 2024’ has showed that Households’ inflation expectations for the three months and one year ahead periods increased by 20 basis points (bps) and 10 bps, respectively, but remained in single digits, while their perception on current inflation moderated by 10 bps and stood at 8.0 per cent in the latest survey round. Besides, a stronger-than-expected U.S. jobs report pushed Treasury yields higher and raised doubts about whether the Fed will be able to cut interest rates this year. Some concerns came with report stating that after having net sold stocks worth Rs 42,200 crore in the month of May, foreign institutional investors (FIIs) so far in June have net sold shares to the tune of Rs 13,718 crore. 

On the global front, European markets were trading lower, as Italy's industrial production decreased unexpectedly for the second straight month in April. The data from the statistical office ISTAT revealed that industrial output fell 1.0 percent month-on-month in April, after a 0.5 percent drop in March. Asian markets ended mostly lower on Monday, after a measure of public opinion about the Japanese economy weakened in May to the lowest level in more than one-and-a-half years, and the outlook also weakened further. The survey data from the Cabinet Office showed that the current conditions index of the Economy Watchers' Survey, which measures the present situation of the economy, dropped to 45.7 in May from 47.4 in April. Any reading below 50 indicates pessimism. Further, this was the lowest score since August 2022, when it was 45.5.

Back home, auto stocks remained in watch as the rating agency Icra has said the domestic commercial vehicle (CV) industry’s uptrend to be arrested in FY25, with a decline of 4-7% in wholesale volumes. This follows a muted YoY growth of 1% and 3% for wholesale and retail sales, respectively, in FY24. The healthy growth witnessed in H1 FY24 tapered due to a slower Q4 FY24, which saw a decline of 4% in wholesale volumes due to factors such as implementation of the Model Code of Conduct and perceived slowdown in infrastructure activities ahead of General Elections. Besides, Federation of Automobile Dealers Association (FADA) stated that the Indian Auto Retail sector achieved a modest 2.61% year-on-year (YoY) growth in May 2024. Sales of two-wheeler (2W) increased 2.5% YoY, three-wheeler (3W) rose 20% and commercial vehicle (CV) segment grew 4%, while passenger vehicles (PV) and tractor segment both saw a contraction of 1% each YoY.

Finally, the BSE Sensex fell 203.28 points or 0.27% to 76,490.08, and the CNX Nifty was down by 30.95 points or 0.13% points to 23,259.20.   

The BSE Sensex touched high and low of 77,079.04 and 76,379.73 respectively. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index gained by 0.56%, while Small cap index was up by 1.04%.

The top gaining sectoral indices on the BSE were Realty up by 1.34%, Basic Materials up by 1.28%, Utilities up by 1.11%, Healthcare up by 0.77% and Telecom up by 0.58%, while IT down by 1.50%, TECK down by 1.20%, Metal down by 0.34%, Oil & Gas down by 0.27% and Energy down by 0.12% were the top losing indices on BSE.

The top gainers on the Sensex were Ultratech Cement up by 3.19%, Power Grid up by 2.07%, Nestle up by 1.74%, Axis Bank up by 1.16% and NTPC up by 1.07%. On the flip side, Tech Mahindra down by 2.72%, Infosys down by 2.20%, Wipro down by 1.95%, Mahindra & Mahindra down by 1.73% and Bajaj Finance down by 1.42% were the top losers.

Meanwhile, a labour ministry statement said that retail inflation for industrial workers eased to 3.87 per cent in April 2024 as compared to 4.2 per cent in March this year. It noted that year-on-year inflation for the month of April, 2024 stood at 3.87 per cent as compared to 5.09 per cent in April, 2023. 

Year-on-year inflation for the month of March, 2024 stood at 4.20% as compared to 5.79 % in March, 2023. Year-on-year inflation for the month of February, 2024 stood at 4.90 per cent as compared to 6.16 per cent in February, 2023.

It further said the All-India Consumer Price Index-Industrial Workers (CPI-IW) for April, 2024 increased by 0.5 point and stood at 139.4. The index for March, 2024 decreased by 0.3 point and stood at 138.9 points. The index for February, 2024 increased by 0.3 point and stood at 139.2 points.

The CNX Nifty traded in a range of 23,227.15 and 23,411.90. There were 30 stocks advancing against 20 stocks declining on the index.

The top gainers on Nifty were Ultratech Cement up by 3.47%, Grasim Industries up by 2.81%, Hero MotoCorp up by 2.51%, Cipla up by 2.47% and Power Grid up by 2.09%. On the flip side, Tech Mahindra down by 2.70%, Infosys down by 2.21%, Wipro down by 1.92%, Mahindra & Mahindra down by 1.75% and LTIMindtree down by 1.48% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 25.72 points or 0.31% to 8,219.65, France’s CAC fell 142.9 points or 1.79% to 7,858.90 and Germany’s DAX lost 122.25 points or 0.66% to 18,435.02.

Asian markets ended mostly lower on Monday, amid markets in China, Hong Kong and Taiwan were closed for Dragon Boat Festival. Meanwhile, stronger-than-expected jobs report raised doubts about whether the Fed will be able to cut interest rates this year. Investors were cautiously awaiting this week's US Federal Reserve interest rate decision and crucial US inflation data. However, Japanese shares gained as a weaker yen lifted export-related shares. Meanwhile data showed Japan's economy contracted less than initially reported in January-March on upward revisions to capital spending and inventory data, that lending modest support to the central bank's plans to raise interest rates again this year.