Key gauges trade flat with negative bias

Indian equity benchmarks were trading flat with negative bias in morning deals, dragged by a decline in Auto, IT and Capital Goods stocks. Traders remained cautious as data released by the Reserve Bank of India (RBI) showed India’s foreign exchange reserves fell by $8.4 billion to $644 billion in the week ended December 20. However, losses were limited as traders took some support with report that following the lackluster growth numbers in the second quarter (Q2FY25), economists believe the upcoming Union Budget for 2025-26 should focus on reforms that will stimulate consumption, manufacturing and spur employment. Sector-wise, paint industry stocks remained in watch as CareEdge Ratings in its study stated that the Indian paint industry, after witnessing robust growth in FY'22 and FY'23, is bracing for a challenging landscape marked by intensifying competition and margin pressures. On the global front, Asian markets are trading mostly in red amid rising global uncertainties and caution ahead of the year-end holiday season.  

The BSE Sensex is currently trading at 78659.18, down by 39.89 points or 0.05% after trading in a range of 78395.50 and 78703.27. There were 12 stocks advancing against 18 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index rose 0.14%, while Small cap index was down by 0.12%.

The top gaining sectoral indices on the BSE were Telecom up by 0.52%, Utilities up by 0.43%, Healthcare up by 0.42%, Realty up by 0.40% and Bankex up by 0.28%, while Auto down by 0.73%, IT down by 0.46%, Capital Goods down by 0.42%, Consumer Discretionary down by 0.30% and TECK down by 0.29% were the top losing indices on BSE. 

The top gainers on the Sensex were Adani Ports &SEZ up by 1.54%, Sun Pharma up by 0.83%, Indusind Bank up by 0.77%, Zomato up by 0.76% and Ultratech Cement up by 0.62%. On the flip side, Infosys down by 1.01%, Mahindra & Mahindra down by 0.88%, Maruti Suzuki down by 0.74%, Tata Motors down by 0.67% and Titan Company down by 0.64% were the top losers.

Meanwhile, CareEdge Ratings in its latest report has said that the Indian paint industry, after witnessing robust growth in FY22 and FY23, is bracing for a challenging landscape marked by intensifying competition and margin pressures. It stated revenue growth for long-established players such as Asian Paints, Berger Paints, Kansai Nerolac, Akzo Nobel, and Indigo Paints moderated to 4 per cent in FY24, significantly lower than the 14-15 per cent CAGR recorded between FY19 and FY23.

The decline was attributed to price cuts with softening raw material costs and an increasing share of lower-value products in the sales mix. It said ‘While the volume growth remained high at over 10 per cent, the revenue moderation can be attributed to price cuts undertaken by the players to partly pass on softening raw material cost and change in product mix with a growing share of lower-value products.’ It mentioned the revenue was further impacted in the first half of FY'25 (H1FY'25) due to stiff competition, general elections, prolonged monsoon and the continued effect of price cuts. Moreover, it said that the entry of new players, including JSW Paints, Grasim Industries, and others, has disrupted the market. These entrants have aggressively expanded capacity, dealer networks, and sales teams, resulting in heightened promotional activities and advertising expenditure. This has pressured incumbents to respond with their own capital expenditure and marketing investments.

The report noted that ad and sales promotion expenses are expected to increase by 100-200 basis points as a percentage of revenue, further straining operating margins. Operating margins for the sector declined from an average of 18 per cent during FY20-FY24 to 16 per cent in H1FY25. CareEdge Ratings projects a further reduction to approximately 14 per cent by FY26 due to pricing pressures and rising competition. The gross margin, however, is expected to remain stable around 40 per cent, aided by recent price hikes of 1.5-2.5 per cent to counter rising input costs, primarily crude oil derivatives. The share of organised players in the paints sector is set to rise to 80 per cent in the medium term, driven by massive capacity expansions by both incumbents and new entrants. It stated over 1 billion litres of additional capacity, predominantly from new players, is expected to come online in FY25-FY26.

Decorative paints, which account for 70-75 per cent of total demand, continue to be the primary growth driver, fueled by repainting activities, urbanisation, and rising disposable incomes. Meanwhile, industrial paints, contributing 25-30 per cent of demand, are supported by sectors such as automotive, oil and gas, and infrastructure. CareEdge Ratings Associate Director Richa Bagaria noted that despite the challenges, the sector is poised to grow at 8-10 per cent with a somewhat lower operating margin of around 14 per cent in FY26 as compared to the average of around 18 per cent in the last five years.

The CNX Nifty is currently trading at 23789.95, down by 23.45 points or 0.10% after trading in a range of 23709.10 and 23818.80. There were 18 stocks advancing against 32 stocks declining on the index.

The top gainers on Nifty were Adani Enterprises up by 4.73%, Adani Ports &SEZ up by 1.60%, Apollo Hospital Ent. up by 1.11%, Sun Pharma up by 0.87% and Shriram Finance up by 0.75%. On the flip side, Trent down by 1.71%, Bajaj Auto down by 1.14%, Wipro down by 0.97%, Infosys down by 0.93% and Mahindra & Mahindra down by 0.92% were the top losers.

Asian markets are trading mostly in red; Nikkei 225 slipped 416.29 points or 1.03% to 39,864.87, Taiwan Weighted lost 42.58 points or 0.18% to 23,233.10, Hang Seng declined 113.98 points or 0.57% to 19,976.48, Jakarta Composite plunged 17.48 points or 0.25% to 7,019.09 and Shanghai Composite weakened 3.02 points or 0.09% to 3,397.12.

On the flip side, KOSPI increased 8.39 points or 0.35% to 2,413.16 and Straits Times rose 14.58 points or 0.39% to 3,786.21.