Benchmarks close flat on Monday

Indian equity benchmarks closed flat on Monday, due to profit-taking in TECK, Telecom and Consumer Durables shares by cautious investors ahead of the key US Fed interest rate decision later this week. Markets opened at an all-time highs following positive sentiment in the global peers, as traders took encouragement with Piyush Goyal, the union minister for commerce and industry, stating that the hike in capital gains taxes is unlikely to slow down capital market activity. Buying further crept in as Fitch Ratings stated that India's post-election budget confirms that the new administration remains committed to reducing the fiscal deficit for FY25 and FY26, despite demands of the coalition government. It added the sustained focus on supporting economic growth through high public capex also points to continuity in key areas.

Markets extended gains in late morning, as traders found some support from S&P Global Ratings’ statement that it does not expect recent general election results to cast a shadow on the prospects for fiscal improvements in India, even as the US credit rating agency suggested that it may further raise the country’s ratings if fiscal deficits narrow meaningfully. S&P had raised India’s sovereign rating outlook to positive from stable in May this year. Besides, latest data by the Reserve Bank of India (RBI) showed that India’s foreign exchange reserves rose by $4 billion to hit a new all-time high of $670.86 billion in the week ended July 19. Foreign fund inflows in the domestic markets also supported the sentiments. Foreign investors injected over Rs 33,600 crore into Indian equities so far this month on the expectation of continued policy reforms, sustained economic growth and a better-than-expected earnings season. 

However, most of the gains were lost in the second half of the trading session and markets ended off their highs, as traders got cautious with credit rating agency, India Ratings and Research’s (Ind-Ra) report predicting that the recent surge in container freight rates by 4x (YoY basis), if sustained, could affect the business operations, EBITDA margins and working capital of exporters during FY25. Traders also took a note of internal presentation of the Ministry of Electronics and Information Technology (MeitY) stating that the government is worried about the impact of Big Tech and the increase in data usage in making people vulnerable by revealing patterns, trends and associations. 

On the global front, Asian markets settled higher on Monday, while European markets were trading mostly in green tracking a broad rally on Wall Street Friday as soft inflation data bolstered hopes of more interest rate cuts this year. Investors also looked ahead to the release of mega-cap U.S. tech earnings and central bank policy meetings in the United States, Japan and U.K. for directional cues.  

Finally, the BSE Sensex rose 23.12 points or 0.03% to 81,355.84, and the CNX Nifty was up by 1.25 points or 0.01% points to 24,836.10.

The BSE Sensex touched high and low of 81,908.43 and 81,135.91 respectively. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.80%, while Small cap index was up by 1.17%.

The top gaining sectoral indices on the BSE were Capital Goods up by 2.73%, Industrials up by 2.33%, PSU up by 1.68%, Realty up by 1.51% and Oil & Gas up by 1.17%, while TECK down by 0.59%, Telecom down by 0.58%, Consumer Durables down by 0.36%, IT down by 0.31% and FMCG down by 0.26% were the top losing indices on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 2.77%, Bajaj Finserv up by 1.98%, Mahindra & Mahindra up by 1.67%, Ultratech Cement up by 1.42% and SBI up by 1.05%. On the flip side, Titan Company down by 2.38%, Bharti Airtel down by 2.22%, ITC down by 1.33%, Tech Mahindra down by 1.07% and Kotak Mahindra Bank down by 1.04% were the top losers.

Meanwhile, Fitch Ratings has said India's post-election budget confirms that the new administration remains committed to reducing the fiscal deficit for FY25 and FY26, despite demands of the coalition government. In the FY25 budget, the government has lowered the Centre's fiscal deficit target for the year ending March 2025 to 4.9 per cent of GDP, from 5.1 per cent in February's interim budget.

The government's fiscal deficit target for FY25 is significantly below the 5.4 per cent that the ratings agency anticipated when it affirmed India's 'BBB-' rating, with a stable outlook, in January 2024. It said the sustained focus on supporting economic growth through high public capex also points to continuity in key areas.

It stated ‘We believe that it should be achievable as the government's assumption of 10.5 per cent nominal GDP growth in FY25 is modestly below our current forecast. We think the government should also be able to achieve its goal of reducing the deficit below 4.5 per cent of GDP in FY26.’  Moreover, it said the government's record in recent years of achieving or outperforming its budget deficit targets has improved its fiscal credibility - the deficit in FY24, at 5.6 per cent of GDP, was well below the original target of 5.9 per cent.

The CNX Nifty traded in a range of 24,999.75 and 24,774.60. There were 25 stocks advancing against 25 stocks declining on the index.

The top gainers on Nifty were Divi's Lab up by 2.93%, BPCL up by 2.92%, Larsen & Toubro up by 2.58%, Bajaj Finserv up by 1.99% and Mahindra & Mahindra up by 1.98%. On the flip side, Bharti Airtel down by 2.08%,Titan Company down by 1.95%, Cipla down by 1.40%, ITC down by 1.18% and Tata Consumer Products down by 1.12% were the top losers.

European markets were trading mostly in green; UK’s FTSE 100 increased 61.16 points or 0.74% to 8,346.87 and Germany’s DAX gained 60.62 points or 0.33% to 18,478.17, while France’s CAC fell 23.36 points or 0.31% to 7,494.32.

Asian markets settled higher on Monday, tracking Wall Street’s gains last Friday as soft PCE inflation data bolstered expectations of more interest rate cuts this year. Meanwhile investors were awaiting the release of mega-cap US tech earnings and central bank policy meetings in Japan, the United States, and UK for directional cues. Hong Kong shares gained after upbeat industrial profits data. Chinese shares ended almost flat as investors awaited potential stimulus measures from an upcoming Politburo meeting.