Indian markets settle in green terrain on Monday with limited gains

Monday brought only limited gains for Indian equity markets as investors remained cautious ahead of the key US Federal Reserve’s meeting later this week. Recent US inflation data has partly offset optimism the US Fed will lower rates more aggressively, but the central bank is still expected to continue cutting rates over the next several months. The start of day was positive, as foreign fund inflows aided domestic sentiments. Foreign Portfolio Investors (FPIs) continued their bullish stance on Indian stocks, infusing Rs 16,881.03 crore in the second week of September, according to data from the National Securities Depository (NSDL). Besides, according to the payroll data, Employees’ State Insurance Corporation (ESIC) recorded a 13.32 per cent increase in subscribers addition to 22.53 lakh in July, 2024 compared to the figure of a year ago. 

In the middle of the trading session, markets wiped out gains to trade near neutral lines, tracking negative cues from European markets. Markets participants got cautious, as the think tank Global Trade Research Initiative (GTRI) said that India needs to increase container production, promote the use of domestic containers, strengthen domestic shipping firms and enhance port infrastructure as higher freight costs, container shortage and dependence on major shipping hubs and foreign carriers pose serious challenges to the country’s exports. However, indices again added gains during late afternoon session, as some support came amid report that India’s foreign exchange reserves have been rising for months now, hitting several all-time highs. The forex kitty increased by $66 billion so far this year and is currently at $689.235 billion.

On the global front, European markets were trading lower, even after the euro area trade surplus increased notably in July due to the sharp rebound in exports. The Eurostat reported that on an unadjusted basis, the trade surplus rose sharply to EUR 21.2 billion in July from EUR 6.7 billion in the same period last year. In June, the surplus was EUR 21.7 billion. Asian markets ended in green on Monday with some of the major markets in the region were closed. Traders got relief, after Japan's industrial production expanded more-than-expected in July after falling in the previous month. The final data from the Ministry of Economy, Trade, and Industry showed that Industrial production advanced 3.1 percent on a monthly basis, reversing a 4.2 percent decrease in June. In the flash report, the rate of growth was 2.8 percent.

Back home, sugar industry stocks remained in watch after the government's decision to permit sugar mills and distilleries to produce rectified spirit and extra-neutral alcohol from sugarcane juice and B-heavy molasses. This move is anticipated to provide increased production flexibility for ethanol and other alcohol-based products, thereby supporting the industry’s diversification strategies. Meanwhile, in line with the Government of India’s vision to transform India into a global leader in innovation and entrepreneurship, the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, is set to launch a digital platform ‘BHASKAR’, aimed at strengthening India’s startup ecosystem. 

Finally, the BSE Sensex rose 97.84 points or 0.12% to 82,988.78, and the CNX Nifty was up by 27.25 points or 0.11% to 25,383.75.    

The BSE Sensex touched high and low of 83,184.34 and 82,832.82 respectively. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index inched up by 0.01%, while Small cap index was up by 0.28%.

The top gaining sectoral indices on the BSE were Utilities up by 1.97%, Power up by 1.93%, Metal up by 0.65%, Capital Goods up by 0.56% and Realty up by 0.52%, while FMCG down by 0.51%, Telecom down by 0.44%, IT down by 0.16% and TECK down by 0.07% were the top losing indices on BSE.

The top gainers on the Sensex were NTPC up by 2.44%, JSW Steel up by 1.73%, Larsen & Toubro up by 1.35%, Axis Bank up by 1.13% and ICICI Bank up by 0.94%. On the flip side, Bajaj Finance down by 3.36%, Hindustan Unilever down by 2.30%, Bajaj Finserv down by 1.89%, Adani Ports & SEZ down by 0.87% and Titan Co down by 0.79% were the top losers.

Meanwhile, expressing some cautiousness over the country’s inflation, the Reserve Bank of India (RBI) Governor Shaktikanta Das said that inflation in India has moderated but still there is a distance to cover. He said ‘Inflation has moderated from its peak of 7.8 per cent in April 2022 into the tolerance band of +/- 2 per cent around the target of 4 per cent, but we still have a distance to cover and cannot afford to look the other way’.

He further said while global economic activity and trade have largely withstood downside risks, the last mile of disinflation has proved to be challenging, giving rise to financial stability risks. He said ‘The momentum of global disinflation is slowing, warranting caution in easing monetary policy’ and added monetary policy management by central banks has to be prudent and supply side measures by government have to be proactive.

Das noted that market expectations of rate cuts are now regaining momentum, especially after indications of a policy pivot from the US Fed, but the adverse spillovers from the ‘higher for longer’ interest rate scenario remains a contingent risk. On the other hand, there are central banks which naturally and justifiably remain averse to premature loosening of policy before inflation has been durably reined in in their countries. He added central banks in these countries need to remain watchful of their domestic inflation-growth balance and make policy choices.

India’s retail inflation based on movement in consumer price index (CPI) was at 3.65 per cent in August, making it the second consecutive month of sub-4 per cent inflation. The government has tasked the RBI to ensure that inflation remains at 4 per cent with a margin of 2 per cent on either side. The RBI’s projections indicate that inflation is likely to ease from 5.4 per cent in 2023-24 to 4.5 per cent in 2024-25 and 4.1 per cent in 2025-26.

The CNX Nifty traded in a range of 25336.20 and 25445.70. There were 25 stocks advancing against 25 stocks declining on the index.

The top gainers on Nifty were NTPC up by 2.55%, JSW Steel up by 1.71%, Hindalco up by 1.67%, Shriram Finance up by 1.52% and Larsen & Toubro up by 1.24%. On the flip side, Bajaj Finance down by 3.38%, Hindustan Unilever down by 2.16%, Bajaj Finserv down by 2.02%, SBI Life Insurance down by 1.27% and Britannia down by 1.04% were the top losers.

European markets were trading lower; Germany’s DAX decreased 47.25 points or 0.25% to 18,652.26 and UK’s FTSE 100 decreased 4.21 points or 0.05% to 8,268.88, while France’s CAC increased 2.50 points or 0.03% to 7,467.73.

Asian markets ended in green on Monday despite slew of Chinese data disappointed. Traders were eyeing the Fed, BoJ and BoE policy meetings this week, with central banks in Japan and the U.K. both expected to stand pat on rates. Economic data from China over the weekend disappointed as industrial output growth slowed to a five-month low in August, while retail sales and new home prices weakened further. Investors remained optimistic about a potential interest rate cut by the Federal Reserve. Holidays in China, Japan, Malaysia, Indonesia and South Korea made for thin trading conditions and moves were modest. The Japanese stock market remained closed for Respect for the Aged Day. Trading remained closed in China for Mid-Autumn Festival, South Korea for Chuseok Thanksgiving Day, Malaysia for Malaysia Day and Indonesia for Prophet Muhammad's birthday.