Markets end flat with negative bias; RBI holds repo rate, cuts CRR

In a volatile session, Indian equity benchmarks snapped a five-day winning streak to close flat with a negative bias on Friday, due to losses in TECK, Healthcare and IT stocks. After making flat-to-positive start, the key gauges remained confined to a tight band throughout the day, after the Reserve Bank of India (RBI) kept key interest rates unchanged due to ‘high inflation’. The central bank has maintained the key policy repo rate at 6.5 per cent. This is for the 11th consecutive time that the RBI has kept the repo rate unchanged. The RBI has maintained the repo rate at 6.5 per cent since February 2023. Besides, the RBI has cut real Gross Domestic Product (GDP) growth forecast for FY25 to 6.6% from 7.2% earlier. Also, it has revised the CPI inflation forecast for FY25 to 4.8% from 4.5% earlier. However, to improve liquidity in the banking system, RBI announced a reduction in the cash reserve ratio (CRR) to 4 percent, a cut of 50 bps, done in two tranches of 25 bps each. Some concern also came as India Ratings and Research’s report stated that the current account deficit (CAD) for the September quarter is set to widen to 1.6 per cent, the most in the last seven quarters.

However, losses remained capped as traders took some support with the data available in latest Annual Periodic Labour Force Survey (PLFS) Report stating that the estimated Worker Population Ratio (WPR) indicating employment during the last 7 years including the COVID period has increased from 46.8% in 2017-18 to 58.2% in 2023-24. During the same period, Unemployment Rate (UR) on usual status for persons of age 15 years and above has decreased from 6.0% to 3.2%. Some support also came with report that Union Finance Minister Nirmala Sitharaman said the sharp decline in the growth of gross domestic product (GDP) in the September quarter is ‘not systemic’ and revealed that she expects it to pick up in the third quarter.  Finance minister expressed confidence that India's economic growth won't be badly affected despite reporting a seven-quarter low GDP of 5.4 percent.

On the global front, European markets were trading higher amid optimism that a new French budget could be passed within a matter of weeks. Asian markets settled mostly down on Friday as investors continued to monitor the latest political developments in France and South Korea, and awaited the release of U.S. payrolls data later in the day that could alter the odds of a Federal Reserve rate cut later this month. Back home, on the sectoral front, IT stocks were in focus with report that margins for some Indian IT companies are likely to decline in the third quarter of FY25 due to seasonal and structural factors. Besides, food processing companies stocks were in watch as Minister of State for Food Processing Industries Ravneet Singh Bittu stated that the food processing sector received foreign direct investment (FDI) of $368.37 million till September of the current fiscal year. In FY24, FDI in food processing was $608.31 million. 

Finally, the BSE Sensex fell 56.74 points or 0.07% to 81,709.12, and the CNX Nifty was down by 30.60 points or 0.12% to 24,677.80.       

The BSE Sensex touched high and low of 81,925.91 and 81,506.19 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 0.36%, while Small cap index was up by 0.60%.

The top gaining sectoral indices on the BSE were Metal up by 1.17%, Consumer Durables up by 1.16%, Auto up by 0.92%, Consumer discretionary up by 0.63% and Telecom up by 0.55%, while TECK down by 0.33%, Healthcare down by 0.08%, IT down by 0.07% and Energy down by 0.02% were the losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 3.05%, Axis Bank up by 1.61%, Maruti Suzuki up by 1.23%, Larsen & Toubro up by 0.93% and ITC up by 0.79%. On the flip side, Adani Ports &SEZ down by 1.20%, Bharti Airtel down by 1.01%, Asian Paints down by 0.93%, Indusind Bank down by 0.73% and Bajaj Finserv down by 0.71% were the top losers.

Meanwhile, V Anantha Nageswaran, the Chief Economic Advisor (CEA) of India has expressed confidence in the growth of the Indian economy. The CEA stated ‘If you run through the checklist for Indian economy, the health is pretty robust. Whether it is external debt as the share of GDP, whether it is the non-performing assets in the banking system and then coming to the bottom left, the overall inflation rate If you look at the first seven months of the year in the last several years overall headline Inflation is well-behaved.’

Further, He said that there are some specific food items that are contributing to the sharp rise in inflation but it is confined to a very small percentage of the overall consumer price index basket of goods and services. Besides, talking about the fiscal balance and capital expenditure Nageswaran said it has improved over the last seven years. He said ‘The orientation of fiscal expenditure in the last seven years or so has improved towards more of Capital expenditure and less of revenue expenditure as a proportion.’

On concerns of slowing down of the economy, he said erratic monsoon and excessive rainfall did hamper some economic activity in the second quarter. For context, India’s GDP growth has disappointed expectations, with the economy growing by just 5.4 per cent in the July-September quarter of FY2024-25, significantly below the Reserve Bank of India’s (RBI) forecast of 7 per cent.

The CNX Nifty traded in a range of 24,751.05 and 24,620.50. There were 18 stocks advancing against 32 stocks declining on the index. 

The top gainers on Nifty were Tata Motors up by 3.21%, Bajaj Auto up by 2.34%, Axis Bank up by 1.50%, BPCL up by 1.28% and Dr. Reddy's Laboratories up by 1.10%. On the flip side, Adani Ports & SEZ down by 1.51%, Cipla down by 1.42%, Bharti Airtel down by 1.09%, HDFC Life Insurance down by 1.08% and Indusind Bank down by 0.99% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 3.19 points or 0.04% to 8,352.57, France’s CAC rose 93.59 points or 1.28% to 7,424.13 and Germany’s DAX gained 37.59 points or 0.18% to 20,396.39.

Asian markets settled mostly down on Friday, tracking Wall Streets’ fall overnight and ahead of a US jobs report due later in the day that could give more insights into the future trajectory of interest rate cuts. Meanwhile, investors were also awaiting China’s Central Economic Work Conference next Wednesday, where top leaders will set economic growth targets and plan the agenda for next year. Japanese shares declined after data showed Japan's local wages grew at the fastest pace in 32 years in October, sparking expectations for BOJ interest rate hike. Moreover, Seoul shares fell as the leader of President Yoon Suk Yeol's own party backed impeachment, on which the National Assembly is set to vote on Saturday.