Market ends marginally lower amid volatility

After trading higher for better part of the day, Indian equity benchmarks turned volatile during the afternoon session, and ultimately ended marginally lower on Wednesday. Initially, supportive global cues led to a positive start of the markets. Sentiments remained upbeat as rating agency ICRA has forecasted the economy to grow 12-13 per cent in the first quarter of the current fiscal, citing the second highest business activity index reading in 13 months in April. Some support also came as the Directorate General of Trade Remedies (DGTR) has initiated several systemic and procedural changes for improving the ease of doing business and reducing the compliance burden on stakeholders. Traders also took a note of RBI article stating that improving infrastructure, ensuring low and stable inflation, and maintaining macroeconomic stability is critical for reviving animal spirits and spurring growth. It said the Indian economy consolidated its recovery, with most constituents surpassing pre-pandemic levels of activity.

However, volatility struck the bourses in second half of the session as key gauges erased all the gains to end lower, as traders turned cautious with Niti Aayog CEO Amitabh Kant’s statement that India has done extremely well on the vaccination front and the challenge for the country is to grow 8-9 per cent over the next three decades. Kant further said that rise in per capita income of India is critical for removing poverty in the country. Some concern also came as credit rating agency, S&P Global Ratings in its ‘Global Macro Update to Growth Forecasts’ report has cut India's growth projection for the current fiscal to 7.3 percent from 7.8 percent earlier pegged in December last year amid rising inflation and the longer-than-expected Russia-Ukraine conflict. Meanwhile, RBI's monthly bulletin for May 2022 said Reserve Bank of India turned net seller of the US currency in March after it sold $20.101 billion on a net basis in the spot market.

On the global front, European markets were trading mostly lower after hawkish comments from the European Central Bank increased market bets on rate hikes. Asian markets settled mostly higher on Wednesday, as traders indulged in buying after US Fed Chair Jerome Powell's positive comments about the strength of the economy and news of lifting of lockdown restrictions in China. Persistent inflation and aggressive rate hikes had stoked concerns about a potential recession. Powell said he is confident that the central bank can raise rates and deal with inflation without sending the economy into recession. He added that the economy is strong and is well positioned to withstand less accommodative monetary policy. The expectations of demand revival in China also boosted market sentiment after Shanghai pledged to gradually ease its COVID-19 lockdown restrictions in stages in June. Shanghai is seeing a strong recovery from COVID cases.

Back home, telecom stocks were in focus as Digital Communication Commission cleared auction of 5G spectrum with a validity of 20 years, but decided not to auction part of the millimetre band between 27.5 GHz to 28.5 GHz for the time being. Stocks related to steel industry were in watch as Moody's Investors Service said India's steel exports are expected to remain strong in the coming months as higher prices and regional demand would drive the steel companies to divert part of their output to exports.

Finally, the BSE Sensex fell 109.94 points or 0.20% to 54,208.53 and the CNX Nifty was down by 19.00 points or 0.12% to 16,240.30.  

The BSE Sensex touched high and low of 54,786.00 and 54,130.89, respectively. There were 13 stocks advancing against 17 stocks declining on the index.

The broader indices ended mixed; the BSE Mid cap index fell 0.13%, while Small cap index was up by 0.33%.

The top gaining sectoral indices on the BSE were FMCG up by 1.21%, Healthcare up by 0.47%, Basic Materials up by 0.27%, while Realty down by 1.82%, PSU down by 1.63%, Telecom down by 0.97%, Oil & Gas down by 0.68% and Consumer Durables down by 0.64% were the top losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 2.02%, Ultratech Cement up by 1.98%, Asian Paints up by 1.65%, Sun Pharma up by 0.78% and ITC up by 0.72%. On the flip side, Power Grid Corp down by 4.55%, Tech Mahindra down by 2.14%, SBI down by 2.01%, Larsen & Toubro down by 1.92% and Bajaj Finserv down by 1.66% were the top losers.

Meanwhile, rating agency Icra has forecasted the Indian economy to grow 12-13 per cent in the first quarter of the current fiscal (Q1FY23), citing the second highest business activity index reading in 13 months in April. However, it has maintained its annual GDP projection at 7.2 per cent for this fiscal citing worries over inflation and the resultant RBI tightening. Icra Chief Economist Aditi Nayar said ‘Our business activity monitor for April at 115.7 indicates that activity was roughly 16 per cent higher than the year ago (period) and pre-COVID levels in spite of the global headwinds’.

She said this high growth may persist in May, especially on an annualised basis, which should translate into a double-digit GDP expansion in Q1 at 12-13 per cent. However, this may not sustain and the annual growth in volume and activity may moderate. According to her, higher input costs may dampen GVA growth to single-digits. She said ‘Therefore, we maintain our GDP growth forecast at 7.2 per cent for FY23’. Citing rising inflation worries, she said the consumer price index is expected to average at 6.3-6.5 per cent this fiscal.

She said the biggest upside risks to inflation and growth come from the runaway fuel prices and the impact of the war in Ukraine. If the war does not de-escalate in the near term, the impact will be much farther than anticipated. This is also the primary reason for maintaining low GDP growth forecast at 7.2 per cent for the full year and higher one on a low base effect. On the interest rate front, she said the central bank is expected to hike rates by 25 basis points each in the June and August policy reviews and September action will depend on the direction of the war and its impact on the commodity prices.

The CNX Nifty traded in a range of 16,399.80 and 16,211.20. There were 26 stocks advancing against 24 stocks declining on the index.

The top gainers on Nifty were Tata Consumer Products up by 3.10%, Hindustan Unilever up by 2.05%, Ultratech Cement up by 2.03%, Shree Cement up by 2.00% and Adani Ports and SEZ up by 1.89%. On the flip side, Power Grid Corporation down by 4.53%, BPCL down by 3.23%, Tech Mahindra down by 2.23%, Apollo Hospital down by 1.94% and SBI down by 1.94% were the top losers.

European markets were trading mostly lower; UK’s FTSE 100 decreased 0.12 points or 0% to 7,518.23 and France’s CAC decreased 5.50 points or 0.09% to 6,424.69, while Germany’s DAX increased 7.60 points or 0.05% to 14,193.54.

Asian markets settled mostly higher on Wednesday tracking overnight gains in Wall Street followed by the strong retail sales numbers. Data showed that retail sales in the US increased 0.9 percent month-on-month in April of 2022 following an upwardly revised 1.4 percent surge in March and matching market forecasts. Japanese shares gained even as the economy contracted 1 percent year-on-year and 0.2 percent quarter-on-quarter in the first quarter of 2022. Although, Chinese shares declined by fears that policies announced by Beijing would not be enough to revive the coronavirus-battered economy.

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