Sensex, Nifty remain lower during early noon deals

Indian equity benchmarks remained lower during early afternoon deals, with both Sensex and Nifty trading in red, impacted by negative cues from other Asian markets along with selling in all sectors except TECK. Traders got cautious, as the latest bulletin from the Reserve Bank of India has stated that India's inflation is on a downward trajectory, but there is still significant ground to cover. The final stretch of disinflation hinges on controlling food inflation and mitigating its spillover effects on inflation expectations and core inflation. However, downside remained capped, as Finance Minister Nirmala Sitharaman has said that India is poised to continue its sustained growth trajectory and enhance its contribution to global growth significantly. She also noted that at the current rate, India is likely to be the world's third-largest economy by 2027. 

On the global front, Asian markets were trading mostly in red, after Malaysia's economy posted a slower growth in the third quarter on a contraction in mining output and a moderation in services growth. The advance estimates from Department of Statistics showed that gross domestic product grew 5.3 percent on a yearly basis in the third quarter after rising 5.9 percent in the previous quarter. 

The BSE Sensex is currently trading at 80863.95, down by 287.32 points or 0.35% after trading in a range of 80699.97 and 81504.24. There were 9 stocks advancing against 21 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell by 1.48%, while Small cap index was down by 2.65%.

The only gaining sectoral index on the BSE was TECK up by 0.08%, while Realty down by 2.82%, Industrials down by 2.40%, PSU down by 2.22%, Capital Goods down by 2.12% and Power down by 1.78% were the top losing indices on BSE.

The top gainers on the Sensex were ICICI Bank up by 1.36%, Nestle up by 1.10%, Ultratech Cement up by 0.71%, Bharti Airtel up by 0.50% and Infosys up by 0.46%. On the flip side, Mahindra & Mahindra down by 2.01%, Tata Motors down by 1.94%, Tata Steel down by 1.90%, SBI down by 1.87% and Power Grid down by 1.53% were the top losers.

Meanwhile, a paper by senior Reserve Bank of India (RBI) staffers Michael Patra, Indranil Bhattacharyya, Joice John and Avnish Kumar, has said that the macroeconomic impact of monetary policy on aggregate demand and inflation indicates that the cumulative rate hikes of 2.5 percentage points by the central bank since May 2022 negatively contributed to aggregate demand and headline inflation by 1.60 per cent each till Q2 of FY25. 

The RBI paper said policy rate increases have anchored inflation expectations and modulated aggregate demand, generating disinflationary responses. Making it clear that the paper does not represent the views of the central bank, the study on monetary policy transmission found that monetary policy changes affect short-term interest rates more than long-term rates. It can be noted that in the past, the RBI brass has denied that the elevated interest rates has had any impact on the growth. In the past, questions have also been asked in some quarters about the impact monetary policy can have on inflation when it is fuelled by supply-side factors.  

It further argued that a significant negative impact on inflation expectations is observed on account of policy rate tightening on the real economy. The long-run elasticity of the policy rate with respect to inflation expectation reveals that an increase in policy rate anchors expectations effectively. It said anticipated policy changes do not have any instantaneous impact on long-term rates but policy ‘surprises’ significantly impact all market segments and across tenors. Policy 'surprises' are found to have a relatively lower but significant pass-through to the exchange rate and equity prices.

The CNX Nifty is currently trading at 24641.15, down by 139.95 points or 0.56% after trading in a range of 24626.90 and 24882.00. There were 11 stocks advancing against 39 stocks declining on the index.

The top gainers on Nifty were ICICI Bank up by 1.49%, Nestle up by 1.10%, Shriram Finance up by 0.94%, Ultratech Cement up by 0.63% and Bharti Airtel up by 0.43%. On the flip side, Mahindra & Mahindra down by 2.50%, Bharat Electronics down by 2.48%, Adani Enterprises down by 2.37%, SBI down by 2.17% and Tata Motors down by 1.93% were the top losers.

Asian markets were trading mostly in red; Hang Seng declined 8.01 points or 0.04% to 20,470.45, Straits Times fell 14.85 points or 0.41% to 3,599.73, KOSPI dropped 34.22 points or 1.33% to 2,570.70, Nikkei 225 slipped 542.64 points or 1.41% to 38,411.96 and Taiwan Weighted lost 7.1 points or 0.03% to 23,535.43, while Jakarta Composite gained 1.58 points or 0.02% to 7,774.18 and Shanghai Composite strengthened 9.48 points or 0.29% to 3,277.59.