Post Session: Quick Review

Indian equity benchmarks continued their southward journey on Monday amid heavy selling pressure in IT sector’s stocks. Besides, sustained foreign outflows dampened investor sentiment. Since morning, indices traded in red and extended their losses till the end of the session amid U.S. tariff fears.  

Some of the important factors in today’s trade:

Fresh concerns over U.S. tariff: US President Donald Trump has said he will impose 25% tariffs and sanctions on Colombia after its president barred two US military planes carrying deported migrants from landing in the country. Trump said the tariffs ‘on all goods’ coming into the US from Colombia would be put in place ‘immediately’, and in one week the 25% tariffs would be raised to 50%.

Pre-budget cautiousness: Investor avoided to take risk ahead of the Union Budget 2025-26 to be tabled in parliament on February 01, 2025. Traders were concerned about income tax.  

Federal Reserve meeting: The Federal Reserve's two-day meeting starting January 28 is a key focus for investors. Traders were hoping that the central bank to maintain current interest rates. 

Global front: European markets were trading lower as artificial intelligence-related stocks succumbed to selling pressure on doubts over America's technological dominance. Investors also digested weak economic data from China and looked ahead to the Fed and ECB interest-rate decisions due this week. Asian markets ended mostly in red after Japan's leading index decreased less than initially estimated in November. The latest data from the Cabinet Office showed that the leading index, which measures future economic activity, dropped to a 3-month low of 107.5 in November from 109.1 in October. The flash reading was 107.0.

The BSE Sensex ended at 75,366.17, down by 824.29 points or 1.08% after trading in a range of 75,267.59 and 75,925.72. There were 6 stocks advancing against 24 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index declined 2.68%, while Small cap index was down by 3.51%. (Provisional)

The top losing sectoral indices on the BSE were Telecom down by 3.83%, IT down by 3.31%, TECK down by 3.04%, Metal down by 2.86% and Healthcare was down by 2.71%, while there were no gaining sectoral indices on the BSE. (Provisional)

The top gainers on the Sensex were ICICI Bank up by 1.53%, Hindustan Unilever up by 0.99%, Mahindra & Mahindra up by 0.98%, SBI up by 0.65% and Larsen & Toubro up by 0.07%. On the flip side, HCL Tech. down by 4.60%, Zomato down by 4.47%, Tech Mahindra down by 4.08%, Power Grid down by 3.06% and Tata Motors down by 2.83% were the top losers. (Provisional)

Meanwhile, apex exporters' body -- Federation of Indian Export Organisations (FIEO) President Ashwani Kumar said a weaker rupee is often seen as a boost for Indian exports by making goods more competitive globally, but the reality is more complex. He also said the recent depreciation of the domestic currency against the US Dollar represents a complex economic scenario with mixed outcomes. He said ‘A weaker rupee is not a one-size-fits-all solution to boost exports. A strategic, multi-pronged approach is needed to address the root causes of depreciation while mitigating its adverse effects’.

Explaining it further, he said that if the rupee depreciates by 2 per cent and the currencies of key competitors decline by 3-5 per cent, Indian exporters lose competitiveness in global markets. He added ‘This relative disadvantage erodes any potential price advantage Indian goods might gain’. The domestic currency has depreciated over 4 per cent last year. Kumar added that the depreciation also results in a rise in input cost, exchange rate volatility, inflationary pressure, and external debt burden. Many Indian exporters depend on imported raw materials and components. A weaker rupee significantly raises these input costs, often nullifying the perceived benefits of depreciation. 

He said ‘Fluctuating exchange rates create uncertainty, making it difficult for exporters to price their products competitively and plan for the long term’ and added that the depreciation inflates the cost of imported goods like oil and commodities, driving up production costs and fuelling domestic inflation and this reduces consumer purchasing power. He added that a weaker domestic currency increases the cost of servicing foreign currency-denominated external debt, creating additional pressure on businesses and the government. Exports contracted for the second month in a row by about one per cent year-on-year to $38.01 billion due to global uncertainties, while imports rose by about 5 per cent to $59.95 billion.

The CNX Nifty ended at 22,829.15, down by 263.05 points or 1.14% after trading in a range of 22,786.90 and 23,007.45. There were 6 stocks advancing against 44 stocks declining on the index. (Provisional)

The top gainers on Nifty were ICICI Bank up by 1.55%, Britannia up by 1.46%, Mahindra & Mahindra up by 1.08%, Hindustan Unilever up by 1.05% and SBI up by 0.68%. On the flip side, HCL Tech down by 4.51%, Tech Mahindra down by 4.01%, Wipro down by 3.80%, Hindalco down by 3.30% and Shriram Finance down by 3.00% were the top losers. (Provisional)

European markets were trading lower; UK’s FTSE 100 decreased 16.77 points or 0.2% to 8,485.58, France’s CAC fell 56.02 points or 0.71% to 7,871.60 and Germany’s DAX was down by 217.06 points or 1.02% to 21,177.87.

Asian markets settled mostly down on Monday as investors are awaited interest-rate decisions from the US Federal Reserve and the European Central Banks this week for directional cues. Meanwhile, the South Korean, Indonesian and Taiwan markets were closed for a holiday. Moreover, Wall Street’s Friday fall, weak Chinese data and looming tariff threats from US President Donald Trump have also dampened market sentiments. US President Donald Trump had threatened tariffs and sanctions on Colombia to punish it for earlier refusing to accept military flights carrying deportees as part of his sweeping immigration crackdown. But, House said Colombia had agreed to accept the migrants after all and Washington would not impose its threatened penalties. Chinese shares declined after data showed Chinese manufacturing activity unexpectedly shrank in January and non-manufacturing activity growth slowed sharply, that fuelled concerns about Q1 2025 growth and the effectiveness of stimulus measures. Profits at China's industrial firms fell for a third straight year in 2024 highlighting the urgency for policymakers to step up support for an economy facing tariff threats from the new Trump administration.