Volatility continues to hit Indian markets in early noon deals

Volatility continued to hit Indian equity benchmarks during early afternoon session, as Sensex and Nifty were altering between green and red terrain, amid negative cues from other Asian markets along with selling at Realty and Banking counters. Traders got cautious as the Reserve Bank of India Governor Shaktikanta Das said that India’s inflation must show signs of settling around the central bank’s target of 4 percent on a sustainable basis before a rate cut can be considered. The inflation rate in July eased below the RBI’s target for the first time since 2019, but the central bank expects it to climb back again from September.

On the global front, Asian markets were trading mostly in red, after business sentiment in South Korea decreased in August to the lowest level in five months, while the outlook improved. The latest survey from the Bank of Korea showed that the Business Survey Index on business conditions in the manufacturing sector dropped to 71 in August from 73 in July. Further, this was the lowest score since March. The sub-index for new orders fell to 77 from 81, and that for production decreased to 84 from 85.

Back home, on the sectoral front, textile sector stocks were in focus, as during the interaction with the beneficiaries of the Production Linked Incentive (PLI) Scheme for MMF Apparel, fabrics and technical textiles, Union Minister of Textiles Giriraj Singh has assured that the Government is dedicated to support the growth and innovation within the textile sector.

The BSE Sensex is currently trading at 80788.78, down by 14.08 points or 0.02% after trading in a range of 80626.38 and 80897.09. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained by 0.37%, while Small cap index was up by 0.84%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.21%, FMCG up by 1.06%, Healthcare up by 0.89%, Metal up by 0.86% and Telecom up by 0.57%, while Realty down by 1.15%, Bankex down by 0.48%, IT down by 0.18% and TECK down by 0.08% were the top losing indices on BSE.

The top gainers on the Sensex were Titan up by 2.24%, Asian Paints up by 2.08%, ITC up by 1.23%, Adani Ports & SEZ up by 0.99% and JSW Steel up by 0.99%. On the flip side, Ultratech Cement down by 1.63%, Tata Steel down by 1.01%, Tech Mahindra down by 0.98%, HDFC Bank down by 0.93% and ICICI Bank down by 0.64% were the top losers.

Meanwhile, credit rating agency ICRA has said that increasing component localisation is expected to offer an annual opportunity of approximately Rs 25,000 crore to construction equipment vendors by FY30, led by components such as undercarriages and precision hydraulics. Overall, ICRA foresees a jump in localisation levels from 50% to over 70% in the next 5-7 years.

According to the report, the Indian mining and construction equipment (MCE) industry is the third largest in the world in terms of volumes sold, however, it imports nearly 50% of its component requirement (by value) from suppliers based out of China, Japan, and South Korea, among others. Components like hydraulics, undercarriages, and high-tech electronics like electronic control units (ECUs), sensors, telematics, etc are generally imported. These imported components are either technology-intensive parts or require large scale manufacturing to attain economic viability. In addition, certain high tonnage fully built machinery and some steel alloy grades are also imported.

The report further said some of the key factors driving the high levels of imports include – viability issues for the component vendors due to insufficient domestic demand and limited exports (due to cost disadvantage and lagging emission standards for a few equipment categories) and unavailability of certain raw materials (e.g. specialty steel). However, factors supportive of increased industry localisation include increasing domestic demand (CAGR of 12% over the last decade – FY2015-FY2024) and the PLI scheme for complementary sectors like specialty steel and auto components in addition to the shifting geo-political dynamics with the China+1 policy being adopted by the global OEMs to diversify their supply chains. At a macro level, the government has been working towards improving the ease of doing business and creating a robust infrastructure to attract investment and improve the overall competitiveness of the domestic manufacturing industry.    

The CNX Nifty is currently trading at 24736.80, up by 37.95 points or 0.15% after trading in a range of 24654.50 and 24753.95. There were 34 stocks advancing against 16 stocks declining on the index.

The top gainers on Nifty were Divi's Lab up by 3.34%, Hindalco up by 2.91%, Titan up by 2.19%, Asian Paints up by 2.03% and HDFC Life Insurance up by 1.96%. On the flip side, Ultratech Cement down by 1.29%, HDFC Bank down by 0.96%, Tech Mahindra down by 0.92%, ONGC down by 0.91% and Tata Steel down by 0.88% were the top losers.

Asian markets were trading mostly in red; Hang Seng declined 185.11 points or 1.06% to 17,325.97, Shanghai Composite weakened 9.61 points or 0.34% to 2,857.05, Straits Times fell 11.2 points or 0.33% to 3,359.11, Nikkei 225 slipped 111.12 points or 0.29% to 37,951.80 and Taiwan Weighted lost 191.21 points or 0.86% to 22,237.89, while Jakarta Composite gained 38.64 points or 0.51% to 7,572.63 and KOSPI increased 4.50 points or 0.17% to 2,701.13.