Post Session: Quick Review

After day’s halt, Indian equity markets resumed southward journey and ended near day’s low levels as Reserve Bank of India (RBI) chose to keep interest rates unchanged. During the day, markets once hit the green territory but failed to hold gains and dragged lower following the weak global markets cues. Globally investors were worried over slowing U.S. growth. Sector wise, selling was witnessed in Metal and IT sectors’ stocks. The broader indices, the BSE Mid cap index and Small cap index ended in red.

Markets made negative start and extended their losses on weak cues from the global markets. Foreign fund outflows also dented sentiments. On Wednesday, foreign institutional investors (FIIs) net sold stocks worth Rs 3,314.76 crore. Further, traders were concerned as the Reserve Bank of India's monetary policy committee (MPC) kept the repo rate unchanged at 6.5 per cent for the ninth time in a row. The central bank maintained its hawkish stance due to persistently high food inflation. The RBI also keeps the gross domestic product (GDP) growth projection unchanged at 7.2 per cent for the financial year 2024-25 (FY25). However, in afternoon session markets wiped out all their losses to enter in to green as traders took support after the Reserve Bank of India (RBI) Governor Shaktikanta Das has said that domestic economic activity continues to be resilient. On the supply side, steady progress in south-west monsoon, higher cumulative kharif sowing, and improving reservoir levels augur well for the kharif output. The street took a note of Finance Minister Nirmala Sitharaman’s statement that there has been substantial tax relief for middle class in last two years. Sitharaman also said that there will be a comprehensive review of the rate structure of indirect taxes in the next 6 months. But, in late afternoon session markets once again entered into red and touched day’s low levels. Traders overlooked Reserve Bank Governor Shaktikanta Das’ statement that India’s forex reserves have touched a record level of $675 billion on August 2. The new record surpasses the previous high of $670.857 billion set on July 19, with the last reported figure standing at $667.386 billion as of July 26. Furthermore, he said “current account deficit to remain imminently manageable during this fiscal”. 

On the global front, European markets were trading lower as fears over slowing U.S. growth returned to the fore, offsetting mostly upbeat earnings. Asian markets ended mostly lower amid lingering concern over slowing U.S. growth. Back home, the Finance Bill 2024 was passed by Lok Sabha with a few amendments moved by the government. Finance Minister Nirmala Sitharman said the approach of the government has been to bring greater simplification of tax laws and procedures and enable growth and employment in the country.

The BSE Sensex ended at 78,886.22, down by 581.79 points or 0.73% after trading in a range of 78,798.94 and 79,626.92. There were 5 stocks advancing against 25 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index declined 0.44%, while Small cap index was down by 0.16%. (Provisional)

The gaining sectoral indices on the BSE were Healthcare up by 0.22%, Bankex up by 0.00% while, Metal down by 2.02%, IT down by 1.82%, Utilities down by 1.62%, Oil & Gas down by 1.46%, Basic Materials down by 1.45% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were Tata Motors up by 1.72%, HDFC Bank up by 0.94%, Bharti Airtel up by 0.69%, ITC up by 0.30% and Indusind Bank up by 0.19%. On the flip side, Asian Paints down by 3.56%, Infosys down by 2.91%, JSW Steel down by 2.56%, Ultratech Cement down by 2.49% and Power Grid Corp down by 2.43% were the top losers. (Provisional)

Meanwhile, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50 per cent. Consequently, the standing deposit facility (SDF) rate remains unchanged at 6.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent. The MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth. These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.

On the inflation front, the MPC highlighted that headline inflation has moderated from its peak but unevenly. Looking ahead, food price momentum has remained elevated in July. In Q2:2024-25, though favourable base effects are large, the sharper uptick in price momentum relative to earlier expectations is likely to result in a shallower softening of CPI headline inflation. Inflation is expected to edge up in Q3 as favourable base effects taper off. The steady progress in monsoon, pick-up in kharif sowing, adequate buffer stocks of foodgrains and easing global food prices are positives for containing food price pressures. Adverse climate events remain an upside risk to food inflation. Assuming a normal monsoon, CPI inflation for 2024-25 is projected at 4.5 per cent with Q2 at 4.4 per cent; Q3 at 4.7 per cent; and Q4 at 4.3 per cent. CPI inflation for Q1:2025-26 is projected at 4.4 per cent. 

On the economic growth front, going forward, the Indian Meteorological Department’s (IMD) projection of above normal southwest monsoon and healthy kharif sowing will support improving rural demand. The sustained momentum in manufacturing and services suggests steady urban demand. High frequency indicators of investment activity as evident in strong expansion in steel consumption, high capacity utilisation, healthy balance sheets of banks and corporates, and the Government’s continued thrust on infrastructure spending, point to a robust outlook. Improving world trade prospects could support external demand. Headwinds from geopolitical tensions, volatility in international commodity prices and geoeconomic fragmentation, however, pose risks to the outlook. Taking all these factors into consideration, real GDP growth for 2024-25 is projected at 7.2 per cent with Q1 at 7.1 per cent; Q2 at 7.2 per cent; Q3 at 7.3 per cent; and Q4 at 7.2 per cent. Real GDP growth for Q1:2025-26 is projected at 7.2 per cent.

The CNX Nifty ended at 24,117.00, down by 180.50 points or 0.74% after trading in a range of 24,079.70 and 24,340.50. There were 12 stocks advancing against 38 stocks declining on the index. (Provisional)

The top gainers on Nifty were HDFC Life Insurance up by 2.03%, Tata Motors up by 1.60%, SBI Life up by 1.22%, HDFC Bank up by 1.18% and Cipla up by 1.06%. On the flip side, LTIMindtree down by 4.12%, Grasim Industries down by 3.50%, Asian Paints down by 3.10%, Infosys down by 2.71% and Power Grid down by 2.67% were the top losers. (Provisional)

European markets were trading lower; UK’s FTSE 100 decreased 92.71 points or 1.15% to 8,074.17, France’s CAC fell 96.98 points or 1.35% to 7,169.03 and Germany’s DAX was down by 153.03 points or 0.88% to 17,462.12. 

Asian markets settled mostly lower on Thursday tracking Wall Street’s overnight fall following a poorly received US Treasury bond auction and with caution ahead of another US jobs report that might provide further evidence of weakness in the world’s largest economy. Japanese shares declined due to lingering concern over slowing US growth and recent market volatility, while the Bank of Japan’s Summary of Opinions contributed to early yen gains.