Markets trade under pressure after positive start amid geopolitical tensions

Indian equity benchmarks made flat-to-positive start on Tuesday tracking gains in Asian counterparts amid easing global trade concerns after US Treasury Secretary Scott Bessent said 17 trading partners, excluding China, have presented very good trade proposals and some deals may be announced as early as this week. He added there could be substantial progress on trade with China in the coming weeks. Markets soon turned volatile and are struggling for direction in early deals amid escalating geopolitical tensions between India and Pakistan following the recent terror attack in Pahalgam. Traders took note of Moody's Ratings’ statement that escalating tensions between India and Pakistan would weigh on Pakistan's growth. However, Moody's does not expect major disruptions to India's economic activity, as it has minimal economic relations with Pakistan (less than 0.5 percent of India's total exports in 2024). Besides, investors are closely monitoring India's final Services PMI data for April, set to be released later in the day. In stock specific development, IRCON International rose on bagging a work order worth Rs. 187.08 crore (excl. GST) from Kerala State IT Infrastructure.

The BSE Sensex is currently trading at 80738.08, down by 58.76 points or 0.07% after trading in a range of 80666.35 and 80981.58. There were 10 stocks advancing against 20 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell 0.20%, while Small cap index was down by 0.26%.

The top gaining sectoral indices on the BSE were Auto up by 1.21%, Telecom up by 1.07%, TECK up by 0.48%, FMCG up by 0.32% and Metal up by 0.23%, while Realty down by 0.61%, Consumer Durables down by 0.58%, Utilities down by 0.55%, Healthcare down by 0.48% and Energy down by 0.46% were the top losing indices on BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 3.91%, Bharti Airtel up by 2.16%, Nestle up by 0.80%, Hindustan Unilever up by 0.70% and Tata Steel up by 0.46%. On the flip side, Eternal down by 1.19%, Sun Pharma down by 0.96%, Titan Company down by 0.72%, SBI down by 0.62% and Bajaj Finance down by 0.59% were the top losers.

Meanwhile, a SBI Research report titled 'Inflation and Rate Cut Trajectory' has said that the Reserve Bank of India (RBI) may cumulatively cut the key interest rate in the range of 125-150 basis points (bps) this fiscal (FY26) amid benign inflationary patterns. It suggested that the central bank should go for ‘jumbo’ rate cuts of 50 bps as it would be more effective. The report said the sharp moderation in consumer price index-based inflation, hitting a 67-month low of 3.34 per cent in March 2025 due to sharp correction in food inflation, bodes well for lowering the average CPI headline forecast for FY2025-26 below 4 per cent now (with below 3 per cent in Q1FY26).

As per the report, the nominal GDP growth is expected to be in the range of 9-9.5 per cent for FY2025-26 (Budget: 10 per cent), signifying a Goldilocks period to slash the policy rates given the low growth and low inflation. It said ‘With multi-year low inflation in March and benign inflation expectations going forward, we expect rate cuts of 75 basis points in June and August (H1) and another 50-bps cut in H2 -- cumulative cuts of 125 bps going forward while 25 bps rate cut has already been initiated in Feb 25’.

It added ‘However, we feel, jumbo cuts of 50 bps, could be more effective than secular 25 bps tranches spread over the horizon’. Based on the available estimates of natural rate, the report said that the neutral nominal policy rates work out at 5.65 per cent. The current trajectory of the domestic inflation is well within the band of 2-6 per cent with average inflation based on available data placed at 4.7 per cent. It said ‘Assuming further convergence of domestic inflation to target, the possibility of cumulative rate cut of 125-150 bps is also possible by March 2026...implying repo rate declining below neutral rate’.

It further said that in response to the 50-bps cut in the policy repo rate since February 2025, banks have reduced their repo-linked EBLRs by a similar magnitude. While the MCLR, which has a longer reset period and is referenced to the cost of funds, may get adjusted with some lag. Larger transmission to deposits rates is expected in the coming quarters. According to the report, the USD/INR pair is expected to stabilise in the range of Rs 85-87 for 2025.

The CNX Nifty is currently trading at 24454.75, down by 6.40 points or 0.03% after trading in a range of 24421.00 and 24509.65. There were 22 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were Mahindra & Mahindra up by 3.86%, Hero MotoCorp up by 2.41%, Bharti Airtel up by 2.13%, Eicher Motors up by 1.64% and Bajaj Auto up by 1.09%. On the flip side, Cipla down by 2.00%, JIO Financial Services down by 1.77%, Dr. Reddy's Lab down by 1.45%, Eternal down by 1.13% and Titan Company down by 1.11% were the top losers.

Asian markets are trading in green; Hang Seng jumped 154.3 points or 0.69% to 22,658.98, Taiwan Weighted rose 78.79 points or 0.38% to 20,611.78, Jakarta Composite gained 63.74 points or 0.93% to 6,895.69, Shanghai Composite strengthened 30.92 points or 0.93% to 3,309.95 and Straits Times was up by 5.6 points or 0.15% to 3,858.67.