Markets trim opening losses to trade flat in early deals

Indian equity benchmarks made negative start on Monday weighed down by concerns over a potential recession in the US following weaker-than-expected jobs data. Soon, markets trimmed most of their losses and are trading flat in early deals as investors hunting for stocks at reduced levels. Some support came amid foreign fund inflows. Foreign investors infused nearly Rs 11,000 crore in domestic equities in the first week of the month owing to resilience of the Indian market and expectations of rate cut in the US. Foreign Portfolio Investors (FPIs) have been consistently buying equities since June. Before that, they had pulled out funds to the tune of Rs 34,252 crore in April-May. Meanwhile, the GST Council is likely to deliberate on a host of issues, including taxation of insurance premium, GoM's suggestions on rate rationalisation, and a status report on online gaming. 

On the global front, Asian markets are trading mostly lower, following the broadly negative cues from global markets on Friday, as traders react to softer inflation data from China. They also react to a report showing US employment rose by less than expected in the month of August and seem worried the US Fed may have waited too long to prevent the economy from slipping into a recession. Besides, Japan's gross domestic product expanded a seasonally adjusted 0.7 percent on quarter in the second quarter of 2024.

Back home, telecom stocks are in focus with a private report that India has emerged as the world’s second-largest market for 5G smartphones, trailing only behind China. 5G smartphones are becoming increasingly prominent across various price ranges in India. In stock specific development, Deep Industries surged as it bagged Rs 1,400-crore order from ONGC.

The BSE Sensex is currently trading at 81180.32, down by 3.61 points after trading in a range of 80895.05 and 81245.57. There were 14 stocks advancing against 15 stocks declining, while 1 stock remain unchanged on the index.

The broader indices were trading in red; the BSE Mid cap index fell 0.39%, while Small cap index was down by 0.65%.

The few gaining sectoral indices on the BSE were Consumer Durables up by 0.42% and FMCG up by 0.34%, Realty up by 0.27%, while PSU down by 1.16%, Oil & Gas down by 0.88%, Metal down by 0.81%, Energy down by 0.65% and Industrials down by 0.62% were the top losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 0.86%, ICICI Bank up by 0.85%, Asian Paints up by 0.69%, ITC up by 0.47% and Bajaj Finserv up by 0.44%. On the flip side, NTPC down by 1.39%, Adani Ports & SEZ down by 1.34%, Tata Steel down by 1.29%, Tata Motors down by 1.06% and Power Grid down by 0.97% were the top losers.

Meanwhile, the declining bank credit to exporters will hurt the sector, and traders will flag the issue prominently during their meeting with Commerce and Industry Minister Piyush Goyal on September 11. Exports grew by 15 per cent in the rupee terms between 2021-22 and 2023-24, the outstanding credit in March 2024 dropped by 5 per cent over the same month in 2022. Apex exporters body Federation of Indian Export Organisation (FIEO) has said the export credit growth is not keeping pace with rising exports of the country. FIEO Director General Ajay Sahai said ‘We have seen a decline in export credit between March 2022 and March 2024 despite the need for more credit for longer duration due to hike in prices of commodities, sharp spurt in freight (both sea and air) and the Red Sea crisis, leading to longer voyage time and delayed payment’.

According to FIEO, the value of export credit outstanding has come down to Rs 2,17,406 crore in the March 2024 quarter from Rs 2,27,452 crore in the same quarter last year. Sahai said ‘We will raise this issue during the meeting of the exporters community with the minister’, and added that given a consistent decline in credit to exporters during recent times, the RBI should consider prescribing a sub-target for export credit within the existing 40 per cent target for priority sector lending (PSL). He also said this suggestion is worth considering as despite exports being under PSL, the flow of credit has not improved. It was Rs 11,721 crore on June 28 this year against Rs 19,861 crore on July 1, 2022.

FIEO also asked for the availability of pre/post-shipment credit in foreign currency (PCFC) at a competitive price through IFSC (International Financial Services Centre) Banking Units (IBUs). It said ‘This is likely to contribute to the difference in financing cost between Indian exporters and their overseas competitors (typically Chinese and ASEAN exporters) and adversely impact the pricing power of Indian exporters. Enabling Pre-shipment financing in foreign currency for Indian exporters from IBUs (along with the existing activity of post-shipment credit from IBU) can significantly boost trade financing volumes’.

It said due to current geopolitical developments and China plus one policy of the multinational companies, Indian exporters are able to secure additional/new export orders from new or existing buyers. Fulfilment of such export orders requires additional working capital that is pre-shipment and post-shipment export credit. However, the credit risk assessment done by the exporters, banks may not be able to extend the required export credit. The nation's exports can reach $2 trillion by 2030 through the sufficient availability of the required export credit. India has a large access gap compared to advanced economies with respect to non-recourse export credit and collateral-free export credit.

Sahai suggested the government to popularise the gold card scheme for easy flow of credit to exporters. It was rolled out by the RBI for bona-fide exporters with a proven track record. Such exporters are eligible for in-principle limit sanction for three years with a provision for automatic renewal subject to fulfilment of the terms and conditions of the sanction. Further, FIEO suggested that the IES (interest equalisation scheme) excludes from its purview those exporters who are availing of production-linked incentive (PLI) schemes, and this has affected some companies, which availed the PLI scheme to enter into exports. It also flagged that even after generating a BRC (bank realisation certificate) from the DGFT (Directorate General of Foreign Trade) Module, exporters struggle to settle the outstanding entries in the EDPMS (Export Data Processing and Monitoring System).

The CNX Nifty is currently trading at 24838.40, down by 13.75 points or 0.06% after trading in a range of 24753.15 and 24868.45. There were 22 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were Tata Consumer Products up by 1.09%, SBI Life Insurance up by 0.92%, Britannia Industries up by 0.86%, ICICI Bank up by 0.77% and Hindustan Unilever up by 0.76%. On the flip side, ONGC down by 2.88%, Hindalco down by 1.54%, Adani Ports & SEZ down by 1.19%, NTPC down by 1.05% and Tata Motors down by 0.93% were the top losers.

Asian markets are trading mostly in red; Nikkei 225 slipped 437.14 points or 1.22% to 35,954.33, Taiwan Weighted lost 400.44 points or 1.9% to 21,034.75, Hang Seng declined 341.44 points or 2% to 17,102.86, Jakarta Composite plunged 53.55 points or 0.7% to 7,668.30, Shanghai Composite weakened 25.44 points or 0.93% to 2,740.37 and KOSPI dropped 13.51 points or 0.53% to 2,530.77, while Straits Times was up by 30.96 points or 0.89% to 3,485.43.