Sensex, Nifty end flat amid volatility

Indian equity benchmarks, despite trading mostly in green, ended flat on Tuesday due to the emergence of profit-taking amid rising geopolitical tensions in the Middle East and Ukraine. After making slightly positive start, key gauges turned volatile as traders got cautious with a report by SBI Research, released just days before the government is set to publish the official data, stating that the Indian economy is expected to grow at 7.0-7.1 per cent in the April-June period, the first quarter of 2024-25. This growth forecast comes with a downward bias. Some concern also came with a private report stating that the newly-announced Unified Pension Scheme (UPS) is expected to shoot up the fiscal deficit by 15 basis points (bps) to 5.1 per cent from the budgeted 4.9 per cent in the financial year 2025 (FY25). 

However, markets managed to keep their heads above water in afternoon deals, amid foreign fund inflows. The foreign institutional investors (FIIs) extended their buying as they bought equities worth Rs 483 crore on August 26. Traders took some support with Crisil Ratings’ report stating that small finance banks (SFBs) are expected to grow their loan book by a robust 25-27 per cent this fiscal year (FY25). It stated that growth will be sustained by segmental and geographic expansion supported by a robust and growing presence in semi-urban and rural markets with significant unmet demand. But, markets failed to hold gains and ended flat as some pessimism remained among traders as India Ratings and Research’s (Ind-Ra) report highlighting increasing borrower leverage as a key concern for the microfinance (MFI) segment. Post the COVID-19 pandemic and implementation of harmonisation guidelines including the removal of interest rate caps, the ease of funding from banks to non-banks, along with a growing need for priority sector loans led to substantial growth in disbursement by existing MFI lenders in FY24. This, coupled with the advent of technology has improved the reach of credit to the bottom of the pyramid post pandemic, also raising a concern on the adherence on accessing repayment capability of the MFI borrower. 

On the global front, European markets were trading higher ahead of key U.S. inflation figures and earnings from AI darling Nvidia due later in the week. Asian markets settled mixed on Tuesday as investors waited for looming U.S. inflation figures and earnings from AI darling Nvidia. Increased tensions in the Middle East and the Canadian government's action to impose a large tax on Chinese-made electric vehicles (EVs) also checked risk sentiment. Back home, on the sectoral front, edible oil industry stocks were in watch after the Solvent Extractors Association of India (SEA) made a fresh appeal to the government to reconsider its decision to extend the ban on de-oiled rice bran exports until January 31, 2025. The industry body argues that the continued restriction is causing severe underutilisation of processing plants, particularly in eastern India. 

Finally, the BSE Sensex rose 13.65 points or 0.02% to 81,711.76, and the CNX Nifty was up by 7.15 points or 0.03% to 25,017.75.     

The BSE Sensex touched high and low of 81,919.11 and 81,600.51 respectively. There were 10 stocks advancing against 20 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.58%, while Small cap index was up by 0.50%.

The top gaining sectoral indices on the BSE were Telecom up by 1.13%, TECK up by 0.70%, IT up by 0.59%, Healthcare up by 0.44% and Industrials up by 0.32%, while FMCG down by 0.88%, Metal down by 0.86%, Consumer Durables down by 0.85%, Energy down by 0.20% and Utilities down by 0.14% were the top losing indices on BSE.

The top gainers on the Sensex were Bajaj Finserv up by 2.07%, Maruti Suzuki up by 2.04%, Larsen & Toubro up by 1.71%, Bajaj Finance up by 1.37% and Infosys up by 1.29%. On the flip side, Titan Company down by 2.19%, JSW Steel down by 2.01%, Hindustan Unilever down by 1.90%, Tata Motors down by 1.37% and NTPC down by 1.24% were the top losers.

Meanwhile, just days before the government is set to publish the India’s official Gross Domestic Product (GDP) data, a report by SBI Research said that the Indian economy is likely to grow at 7.0-7.1 per cent in the April-June period, the first quarter (Q1) of 2024-25. However, this growth forecast comes with a downward bias. The first quarter GDP data is scheduled for release on August 30. According to official data, India’s GDP grew by an impressive 8.2 per cent during the financial year 2023-24, continuing to be the fastest-growing major economy. The economy grew by 7.2 per cent in 2022-23 and 8.7 per cent in 2021-22. 

SBI Research, in its latest Ecowrap report authored by Group Chief Economic Adviser Soumya Kanti Ghosh, noted that the Indian economy remained resilient despite challenges from supply chain pressures, including rising global freight and container costs, and semiconductor shortages. On a positive note, the southwest monsoon picked up from early July, reducing the deficit. As of August 25, 2024, cumulative rainfall was 5 per cent above the long-period average, compared to 7 per cent below the LPA during the same period last year. As a result, as of August 20, 2024, the total kharif sown area stood at 103.1 million hectares (94 per cent of the full-season normal area), which is 2.0 per cent higher than the corresponding period last year.

On the global economy, the SBI report stated that the economic growth outlook remains uncertain, but the softening of inflation has created room for monetary policy easing. At the closely watched Jackson Hole annual symposium, US Federal Reserve Chair Jerome Powell expressed further confidence in imminent policy easing. Powell indicated that it might be time for the US central bank to reduce interest rates as inflation is aligning with the target. Addressing the much-anticipated Jackson Hole Symposium on August 23, Powell stated ‘the time has come for policy to adjust’, but stopped short of hinting at the extent of the interest rate cut.

The CNX Nifty traded in a range of 25,073.10 and 24,973.65. There were 18 stocks advancing against 31 stocks declining, while 1 stock remained unchanged on the index.

The top gainers on Nifty were Bajaj Finserv up by 2.46%, SBI Life Insurance up by 2.27%, Maruti Suzuki up by 1.91%, HDFC Life Insurance up by 1.66% and Larsen & Toubro up by 1.60%. On the flip side, JSW Steel down by 2.04%, Titan Company down by 1.93%, Hindustan Unilever down by 1.92%, Grasim Industries down by 1.26% and Coal India down by 1.18% and were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 27.67 points or 0.33% to 8,355.45, France’s CAC rose 0.5 points or 0.01% to 7,590.87 and Germany’s DAX gained 44.02 points or 0.24% to 18,661.04.

Asian markets settled mixed on Tuesday ahead of Nvidia's eagerly awaited earnings later in the week. Meanwhile, investors were also eagerly awaiting US inflation figures as interest rate cut speculation rises. Moreover, rising tensions in the Middle East and the Canadian government's action to impose a large tax on Chinese-made electric vehicles have kept sentiments bearish. Chinese shares declined, despite data showed China's industrial profits grew faster in July buoyed by high-tech manufacturing. Seoul shares fell as Korean won weakened slightly against the US dollar. Japanese shares gained as a softer yen boosted exporters.