Indian markets end marginally lower ahead of Union Budget

Indian equity markets ended the session marginally in red on Monday ahead of the Union Budget 2024-25 coupled with disappointing earnings from Reliance Industries and Wipro. After a sharp fall at the opening, indices soon staged recovery to trade in green amid foreign fund inflows. Foreign investors injected Rs 30,772 crore into Indian equities so far this month, driven by hopes of continued policy reforms, sustained economic growth and a better-than-expected earnings season. Some support also came as a recent report by the Organisation for Economic Co-operation and Development (OECD) and the Food and Agriculture Organization (FAO) said that India is likely to have the highest per-capita income growth in the world at 5.4 per cent per annum during 2024-33, allowing it and other emerging economies to drive global consumption of agricultural and fisheries products in the next decade. 

However, the recovery was short-lived, as markets turned volatile during afternoon deals, amid mixed cues from Asian and European markets as Joe Biden announced his withdrawal from the 2024 presidential race against Donald Trump and China's central bank unexpectedly lowered its one-year benchmark loan prime rate to bolster a slowing economy. Market participants got cautious, after the Economic Survey said that the rising Geopolitical uncertainties will likely to exert a bigger influence on capital flows. However, downside remained capped with the Retirement fund body, Employees' Provident Fund Organisation’s (EPFO) latest ‘Provisional payroll data’ report showing that 19.50 lakh net members have been added in the month of May 2024. The addition during the month is the highest since the first payroll data was issued in April 2018. Further, the year-over-year analysis showed a growth of 19.62% in net member additions compared to May 2023.

On the global front, European markets were trading higher, after Eurozone inflation expectations for this year and next year remained unchanged. The Survey of Professional Forecasters from the European Central Bank showed that respondents' expectations for headline inflation were stable at 2.4 percent this year and 2.0 percent in 2025. Meanwhile, inflation expectation for 2026 was revised down to 1.9 percent from 2.0 percent. Longer-term inflation expectations came in at 2.0 percent.  Asian markets settled mostly down on Monday, even after China lowered its short-term policy rate as well as benchmark lending rates on Monday, in order to prop up growth. The People's Bank of China cut the interest rate on seven-day reverse repos to 1.7 percent from 1.8 percent. The central bank said that the action was aimed to strengthen counter-cyclical adjustments to better support the real economy.

Back home, the petrochemicals and chemical sector stocks remained in focus, as Union Minister for Chemicals and Fertilizers JP Nadda has reiterated the crucial role of the petrochemicals and the chemical sector in achieving the vision of Prime Minister Narendra Modi of achieving a $5 trillion economy by 2025. He announced that the government is prepared to make significant policy and programme interventions to overcome challenges faced by chemicals and petrochemicals industry and stimulate the sector’s growth. Besides, the garment sector also remained in watch, as the Global Trade Research Initiative (GTRI) in its latest report has said that issues like complex procedures of the Director General of Foreign Trade (DGFT) and customs, import restrictions and domestic vested interests are holding up the export growth of the Indian garment sector. At the root of the exporters' problem is difficulty in obtaining quality raw fabric, particularly synthetic fabric. 

Finally, the BSE Sensex fell 102.57 points or 0.13% to 80,502.08, and the CNX Nifty was down by 21.65 points or 0.09% points to 24,509.25. 

The BSE Sensex touched high and low of 80,800.92 and 80,100.65 respectively. There were 14 stocks advancing against 16 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose by 1.27%, while Small cap index was up by 0.83%.

The top gaining sectoral indices on the BSE were Power up by 1.66%, Capital Goods up by 1.51%, Basic Materials up by 1.43%, PSU up by 1.34% and Utilities up by 1.33%, while Energy down by 0.67%, Realty down by 0.53%, Bankex down by 0.27%, FMCG down by 0.27% and Oil & Gas down by 0.12% were the top losing indices on BSE.

The top gainers on the Sensex were NTPC up by 2.58%, Ultratech Cement up by 2.20%, HDFC Bank up by 2.10%, Power Grid up by 1.96% and Mahindra & Mahindra up by 1.95%. On the flip side, Kotak Mahindra Bank down by 3.55%, Reliance Industries down by 3.49%, ITC down by 1.69%, SBI down by 1.22% and HCL Tech. down by 1.03% were the top losers.

Meanwhile, the Reserve Bank of India (RBI) Governor Shaktikanta Das has said that the monetary policy has to be ‘clearly and unambiguously’ focused on inflation in an environment like the current one, where growth is steady. Amid a debate around neutral rates, he said theoretical and abstract concepts as arrived at are based on a person’s judgment and cannot determine the policy in the real world. It can be noted that the RBI has been steadfastly maintaining the status quo on interest rates, and there is increasing dissent among some members of the rate-setting panel who are in favour of rate cuts to promote economic growth lately. 

Talking about the impact on growth because of the elevated interest rates, Das said that the growth has been robust even with the current interest rates and the RBI is optimistic that its 7.2 per cent real GDP expansion estimate for FY25 is being achieved. Moreover, the nowcast team is pointing towards a 7.4 per cent growth in the June quarter (Q1FY25) as against the monetary policy committee’s expectation of 7.3 per cent, and that the momentum will continue into the Q2 as well. In the last three years, the average growth of India has been 8.3 per cent. 

The Governor further said the RBI is looking specifically on the food inflation front, and also if there is a spillover of - Wholesale Price Inflation (WPI), which moved up to a 16-month high for June into consumer price inflation. He said ‘it is the food inflation which is drawing our greatest attention because that is actually giving the push to the headline numbers because core and fuel inflation are quite low. Food inflation is the worry’.

The CNX Nifty traded in a range of 24,362.30 and 24,595.20. There were 30 stocks advancing against 20 stocks declining on the index.

The top gainers on Nifty were Grasim Industries up by 2.50%, NTPC up by 2.43%, Ultratech Cement up by 2.29%, HDFC Bank up by 2.19% and Dr. Reddy's Lab up by 2.03%. On the flip side, Wipro down by 9.22%, Kotak Mahindra Bank down by 3.52%, Reliance Industries down by 3.50%, ITC down by 1.69% and SBI Life Insurance down by 1.61% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 60.14 points or 0.74% to 8,215.86, France’s CAC rose 92.45 points or 1.23% to 7,626.97 and Germany’s DAX gained 234.61 points or 1.29% to 18,406.54.

Asian markets settled mostly down on Monday as Joe Biden announced his withdrawal from the 2024 presidential race against Donald Trump and endorsed Vice President Kamala Harris as the new Democratic nominee, adding to uncertainties over the future of the world’s largest economy. Meanwhile, a surprise rate cut by China's central bank failed to give Asian markets a lift. Japanese shares declined sharply to hit a three-week low tracking Wall Street’s fall last Friday, while chip-related shares such as Shin-Etsu Chemical, Tokyo Electron and Advantest fell 2 to 4%. However, Hong Kong shares rebounded from three-month lows.