Benchmarks settle at fresh record closing highs on Tuesday

Indian equity benchmarks witnessed a sharp up-move to hit fresh record closing highs on Tuesday, tracking firm trends in Asian markets and buying in Banking, IT and TECK stocks. After opening with a positive note, markets shifted into intraday range movement till mid part of the session. Traders took support with the Reserve Bank of India (RBI) stating that India recorded a current account surplus of $5.7 billion or 0.6 per cent of GDP in the March quarter. In the year-ago period, the current account deficit stood at $1.3 billion or 0.2 per cent of GDP. It added for FY24, the current account deficit narrowed to $23.2 billion or 0.7 per cent of GDP against $67 billion or 2 per cent of GDP in FY23. Traders took a note of RBI MPC member Jayanth R Varma’s statement that with retail inflation nearing the RBI’s target of 4 per cent, the monetary policy needs to shift focus on promoting growth. He further said CPI inflation in 2024-25 is projected to be only about 0.5 percentage point above target, and core inflation is extremely benign.

The upside momentum got strengthened in the afternoon to later part and markets closed near the day’s highs. Sentiments remained up-beat with CRISIL Ratings’ report stating that capital goods makers are likely to see revenue rise 9-11% in fiscal 2025, led by continued significant outlays towards railways (including metros), defence, conventional and renewable sectors. This compares with an expected around 13% growth in fiscal 2024. Some solace also came as US envoy to India, Eric Garcetti stated that the relationship between India and the United States has reached unprecedented heights. Garcetti described the relationship as not just 'additive' but 'multiplicative'. 

On the global front, European markets were trading lower a day after French President Emmanuel Macron warned that a victory for the far left or the far right in this month's snap election could spark ‘civil war’. Asian markets settled mostly higher on Tuesday after China's Premier Li Qiang said the country is capable of achieving the full year growth target of around 5 percent. 

Back home, on the sectoral front, auto stocks were in limelight as CareEdge report stated that the passenger vehicle (PV) industry in India is anticipated to witness moderate growth in the fiscal year 2025, with sales volumes expected to expand by 3 per cent to 5 per cent. Besides, telecom industry stocks were in watch as with an aim to augment existing telecom services and maintain continuity of services, the government is holding the spectrum auction on June 25, 2024.  This is in line with government’s commitment to facilitate affordable, state-of-art high quality telecom services to all the citizens.

Finally, the BSE Sensex rose 712.44 points or 0.92% to 78,053.52, and the CNX Nifty was up by 183.45 points or 0.78% points to 23,721.30.   

The BSE Sensex touched high and low of 78,164.71 and 77,459.60 respectively. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.26%, while Small cap index was down by 0.03%.

The top gaining sectoral indices on the BSE were Bankex up by 1.87%, IT up by 0.53%, TECK up by 0.43%, Capital Goods up by 0.28% and Industrials up by 0.12%, while Realty down by 1.82%, Power down by 1.05%, Utilities down by 0.95%, Metal down by 0.84% and Oil & Gas down by 0.75% were the top losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 3.40%, ICICI Bank up by 2.48%, HDFC Bank up by 2.32%, Tech Mahindra up by 1.80% and Larsen & Toubro up by 1.56%. On the flip side, Power Grid Corporation down by 1.64%, Tata Steel down by 1.24%, Asian Paints down by 1.16%, Nestle down by 0.56% and NTPC down by 0.52% were the top losers.

Meanwhile, CRISIL Ratings in its latest report has said that capital goods makers are likely to see revenue rise of 9-11% in fiscal 2025, led by continued significant outlays towards railways (including metros), defence, conventional and renewable sectors. This compares with an expected around 13% growth in fiscal 2024. It said operating margin could moderate 80-100 basis points to 12-13% in fiscal 2025 as the market scenario continues to be highly competitive and exports, which offer higher margins, remain sluggish, even as prices of raw material (mainly steel, copper, and aluminium) are stable. That said, modest capital expenditure (capex) and continuing lower reliance on debt will support credit profiles. 

According to the report, in fiscal 2024, spending by the government on railways grew a strong 28% on-year, and on defence by 10%. Conventional sectors increased capex spend by 6-8% and investments in renewable capacity increased by a healthy 18%. This continued momentum in capex is also evident from the order books of capital goods makers that has seen a strong growth of over 15% in fiscal 2024, translating into 2.5-3.0 times the revenue. 

The report further said revenue growth momentum for capital good players will also be supported by investments in PLI driven schemes as well as in emerging sectors like electric vehicles and data centres wherein growth opportunities could arise in terms of providing automation, digitalisation services, and setting up of charging networks. These sectors (PLI driven schemes and emerging sectors) which accounted for around 10% of investments in fiscal 2024 is expected to rise to around 25% by fiscal 2028. That said, any deferment in expected capex by end-user industries in a year could alter the growth trajectory of the industry. Also, ability of companies to cater to technological needs of the emerging sectors would be critical to sustain the growth expectations and would be monitorable.

The CNX Nifty traded in a range of 23,754.15 and 23,562.05. There were 25 stocks advancing against 24 stocks declining, while 1 stock remained unchanged on the index.

The top gainers on Nifty were Shriram Finance up by 3.95%, Axis Bank up by 3.63%, ICICI Bank up by 2.90%, HDFC Bank up by 2.07% and Tech Mahindra up by 1.77%. On the flip side, BPCL down by 2.78%, Eicher Motors down by 1.76%, Power Grid down by 1.71%, Asian Paints down by 1.21% and Tata Steel down by 1.18% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 17.81 points or 0.22% to 8,263.74, France’s CAC fell 65.7 points or 0.85% to 7,641.19 and Germany’s DAX lost 205.49 points or 1.12% to 18,120.09.

Asian markets settled mostly higher on Tuesday ahead of crucial US economic reports that could provide insights into the Federal Reserve's interest rate timeline. Japanese shares gained, even as the yen rose for the second straight session against the dollar due to verbal intervention by Japanese authorities. However, Chinese shares declined, even after China's Premier Li Qiang said the country is capable of achieving the full year growth target of around 5%. The Joe Biden administration has launched an investigation into major Chinese telecom firms over concerns that these firms could potentially exploit their access to American data through their US cloud and internet operations to benefit Beijing.