Key gauges end lower for second consecutive session

Indian equity benchmarks ended lower for the second consecutive session on Monday dragged down by selling in blue-chip stocks Hindustan Unilever, Tata Motors and Axis Bank and mixed global trend.  Markets made a negative start and mostly languished in negative territory during the day as traders remained on sidelines ahead of this week's IIP and inflation numbers, which would be key given the RBI's reluctance to cut rates on the back of higher inflation concerns going ahead. Some cautiousness came as industry body CII has suggested the government to stick to the fiscal deficit target of 4.9 per cent of GDP for 2024-25 and 4.5 per cent for 2025-26, cautioning that overly aggressive targets beyond these could adversely affect India's economic growth. Fresh foreign fund outflows also dented market sentiment. Foreign Institutional Investors (FIIs) turned sellers on Friday after unabated buying for the past many days. They sold equities worth Rs 1,830.31 crore, according to exchange data. Adding some pessimism, a private report stated that the political turmoil in Bangladesh has slowed down exports of gem and jewellery, imitation jewellery, engineering goods and oilmeals from India. The raw cotton, cotton yarn and textiles exporters are facing delays in payments, even though the buyers are depositing payments in local currency Bangladeshi Taka. However, due to dollar shortage, banks are finding it difficult to convert Taka into dollars, resulting in payment delays.

However, losses were limited as traders took support with data from the Department for Promotion of Industry and Internal Trade (DPIIT) showing that foreign direct investment (FDI) inflows into India have crossed the $1 trillion milestone in the April 2000-September 2024 period, firmly establishing the country's reputation as a safe and key investment destination globally. The cumulative amount of FDI, including equity, reinvested earnings and other capital, stood at $1,033.40 billion during the said period. Some support also came as Union Education Minister Dharmendra Pradhan asserted that India will become a $30 trillion-economy by 2047. Pradhan said that India, the fastest-growing global economy, is currently in the fifth position and will bag the third spot in the next three years. Traders took note of report that Information and Broadcasting Minister Ashwini Vaishnaw has said that India will continue to grow at 6-8 per cent for the next five years due to the transformative changes ushered in by Prime Minister Narendra Modi in the face of global turmoil and geopolitical tensions. He said India's growth story was based on four pillars of massive public investments, focus on manufacturing and innovation, inclusive growth and simplification of laws. 

On the global front, Asian markets settled mixed on Monday as heightened geopolitical tensions in the Middle East offset bets of a Federal Reserve rate cut later this month. Also helping cap the downside, China's top leaders have pledged to loosen monetary policy and provide more support for the slowing economy. European markets were trading mostly in green as a measure of China's consumer inflation unexpectedly decelerated in November and factory deflation eased, raising hopes for more proactive fiscal and monetary policies next year to boost domestic consumption.

Finally, the BSE Sensex fell 200.66 points or 0.25% to 81,508.46, and the CNX Nifty was down by 58.80 points or 0.24% to 24,619.00.        

The BSE Sensex touched high and low of 81,783.28 and 81,411.55 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 0.32%, while Small cap index was up by 0.46%.

The top gaining sectoral indices on the BSE were Capital Goods up by 1.08%, Industrials up by 1.01%, Telecom up by 0.62%, Consumer Durables up by 0.56% and Metal up by 0.49%, while FMCG down by 1.93%, Energy down by 0.65%, Auto down by 0.64%, Healthcare down by 0.37% and Oil & Gas down by 0.34% were the top losing indices on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 2.12%, Tata Steel up by 1.05%, JSW Steel up by 0.97%, HDFC Bank up by 0.72% and Adani Ports & SEZ up by 0.48%. On the flip side, Hindustan Unilever down by 3.37%, Tata Motors down by 2.19%, Axis Bank down by 1.91%, Asian Paints down by 1.80% and Nestle down by 1.62% were the top losers.

Meanwhile, the Confederation of Indian Industry (CII) has suggested the government to stick to the fiscal deficit target of 4.9 per cent of GDP for 2024-25 and 4.5 per cent for 2025-26, and cautioned that overly aggressive targets beyond these could adversely affect India's economic growth. It noted that India has been growing rapidly amidst a slowing global economy and prudent fiscal management for macroeconomic stability has been pivotal to this growth.

CII highlighted the announcement in the Union Budget 2024-25 to keep the fiscal deficit at levels that help reduce the debt-to-GDP ratio. In preparation for this, it has suggested the forthcoming budget could lay out a glide path to bring the central government's debt to below 50 per cent of GDP in the medium term (by 2030-31), and below 40 per cent of GDP in the long term. Such an explicit target will have a positive impact on India's sovereign credit rating and further on the interest rates in the economy.

To aid longer-term fiscal planning, the government should consider instituting Fiscal Stability Reporting. This could include issuing annual reports on fiscal risks under different stress scenarios and the outlook for fiscal stability. The exercise will help forecast potential economic headwinds or tailwinds and assess their impact on the fiscal path. The reporting can also include long-term (10-25 years) forecasting of fiscal positions, accounting for the impact of factors like economic growth, technological change, climate change, demographic changes, etc. Several countries have adopted this proactive ranging from 10 years in Brazil to 50 years in the UK. 

CII has suggested three interventions to nudge states towards fiscal prudence. Firstly, the states could be encouraged to institute state-level Fiscal Stability Reporting. Secondly, states have been allowed to borrow directly from the market, following the recommendations of the 12th Finance Commission. States also provide guarantees in case of borrowing by state PSEs, which have implications for the state's fiscal health. Third, the central government could create an independent and transparent credit rating system for states to incentivise them to maintain fiscal prudence.

The CNX Nifty traded in a range of 24,705.00 and 24,580.05. There were 19 stocks advancing against 30 stocks declining, while 1 stock remained unchanged on the index. 

The top gainers on Nifty were Wipro up by 2.67%, Larsen & Toubro up by 2.28%, SBI Life Insurance up by 1.33%, Tata Steel up by 0.95% and BPCL up by 0.90%. On the flip side, Tata Consumer Products down by 4.13%, Hindustan Unilever down by 3.29%, Tata Motors down by 2.09%, Nestle down by 1.71% and Asian Paint down by 1.51% and were the top losers.

European markets were trading mostly in green; UK’s FTSE 100 increased 20.89 points or 0.25% to 8,329.50 and France’s CAC rose 23.02 points or 0.31% to 7,449.90, while Germany’s DAX lost 54.76 points or 0.27% to 20,329.85.

Asian markets settled mixed on Monday, tracking mixed Wall Street last Friday. Data showed that US non-farm payroll employment shot up by 227,000 jobs in November, while the uptick by the unemployment rate increased confidence the Federal Reserve will cut interest rates by another 25 bps later this month. Japanese shares gained slightly after an upward revision of Japan's GDP print for the third quarter. However, Seoul shares declined after South Korea's President Yoon Suk Yeol survived an impeachment vote in parliament and a defense ministry spokesman said he still is commander in chief, deepening a leadership crisis. Chinese Shares fell as China’s consumer inflation unexpectedly decelerated in November while factory deflation eased, painting a mixed picture of the effects of recent stimulus efforts on the economy ahead China’s Central Economic Work Conference this week.