Benchmarks end marginally higher on Tuesday

Indian equity benchmarks ended marginally higher on Tuesday supported by firm global trends ahead of the much-awaited US Fed's decision on interest rates. Markets made a cautious start amid foreign fund outflows and higher crude oil prices. As per NSE data, Foreign Institutional Investors (FII) were net sellers of Indian equities worth Rs 1,634.98 crore. Some cautiousness also came in with Reserve Bank of India Governor Shaktikanta Das’ statement that the benchmark interest rate in the country will hinge on the future trajectory of inflation.   

However, markets entered into green terrain in late morning deals and managed to keep their heads above water throughout the day as inflation based on wholesale price index (WPI) in India slowed down in the month of August 2024 to 1.31% from 2.04% in July, amid easing prices of crude petroleum, natural gas and food articles. Some support also came with Finance Minister Nirmala Sitharaman’s statement that the Union Government has kept the interests of the middle class in mind while formulating tax rates, and is constantly trying to keep it simpler while giving more options to them via the new tax regime. Traders also took a note of Prime Minister Narendra Modi’s statement that India is becoming a major stakeholder in the global supply chain and this growing capacity is the foundation of the country’s economic growth. He added innovation and collaboration are India’s greatest strengths on its development journey. 

On the global front, European markets were trading higher ahead of the Federal Reserve's interest-rate decision on Wednesday and the Bank of England's announcement, due on Thursday. Asian markets settled mostly higher on Tuesday as investors braced for the Federal Reserve's most anticipated meeting in years. A two-day policy meeting of the U.S. Federal Reserve gets underway later today, with markets seeing a nearly 70 percent probability of a bigger 50 bps rate cut to the 4.7-5 percent range on Wednesday. 

Finally, the BSE Sensex rose 90.88 points or 0.11% to 83,079.66, and the CNX Nifty was up by 34.80 points or 0.14% to 25,418.55.    

The BSE Sensex touched high and low of 83,152.41 and 82,866.68 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 0.08%, while Small cap index was down by 0.13%.

The top gaining sectoral indices on the BSE were Realty up by 0.64%, Telecom up by 0.46%, Consumer Durables up by 0.45%, Utilities up by 0.44% and TECK up by 0.34%, while PSU down by 0.69%, Metal down by 0.55%, Basic Materials down by 0.27%, Industrials down by 0.26% and Capital Goods down by 0.19% were the top losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 1.59%, NTPC up by 1.27%, Mahindra & Mahindra up by 1.14%, Titan Company up by 0.86% and Larsen & Toubro up by 0.83%. On the flip side, Tata Motors down by 1.33%, Adani Ports & SEZ down by 0.93%, JSW Steel down by 0.92%, ITC down by 0.91% and Tata Steel down by 0.91% were the top losers.

Meanwhile, talking about when the central bank would start cutting the repo rate, the Reserve Bank of India (RBI) Governor Shaktikanta Das has said the decision on interest rate moderation will be based on long-term inflation trajectory and not monthly data. The Monetary Policy Committee (MPC) headed by the RBI Governor is scheduled to meet between October 7 and 9 and take call on interest rate. The RBI kept the repo rate unchanged at 6.5 per cent for the ninth time in a row amid risks from higher food inflation. In the August meeting, four of six MPC members voted in favour of the status quo.

Das said the focus will be on the month-on-month momentum -- whether inflation is building up or moderating and the upcoming inflation trajectory will be carefully monitored with a forward-looking approach, and decisions will be made based on that assessment. He said ‘It is not a question that in the current context, like in July, the inflation came to about 3.6 per cent, that is the revised number, and August has come at 3.7 per cent. So, it is not so much how the inflation is now; we have to look at, for the next six months, for the next one year, what is the outlook on inflation. So, therefore, I would like to sort of step back and look more carefully at what is the future trajectory of inflation and growth, and based on that, we will take a decision’.

On whether the RBI's Monetary Policy Committee (MPC) will be actively considering a rate cut in early October, Das said ‘No, I can't say that’. He said ‘We will discuss and decide in the MPC but so far as growth and inflation dynamics are concerned, two things I would like to say. One, the growth momentum continues to be good, India's growth story is intact and, so far as inflation outlook is concerned, we have to look at the month-on-month momentum’, and added that based on that a decision will be taken. He further said the rupee has been one of the least volatile currencies globally, especially since the beginning of 2023. He said the rupee has been very stable vis-a-vis the US dollar and the volatility index. He remarked that the RBI is committed to maintaining financial stability and the bank will take steps to ensure this.

The CNX Nifty traded in a range of 25,441.65 and 25,352.25. There were 21 stocks advancing against 29 stocks declining on the index.

The top gainers on Nifty were Hero MotoCorp up by 3.25%, Bajaj Auto up by 2.02%, Bharti Airtel up by 1.68%, NTPC up by 1.19% and Mahindra & Mahindra up by 0.89%. On the flip side, Tata Motors down by 1.36%, Eicher Motors down by 1.00%, Tata Steel down by 0.98%, Coal India down by 0.96% and JSW Steel down by 0.88% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 59.43 points or 0.72% to 8,337.87, France’s CAC rose 55.66 points or 0.75% to 7,505.10 and Germany’s DAX gained 143.56 points or 0.77% to 18,776.67.

Asian markets settled mostly higher on Tuesday as investors were awaiting the US retail sales data for August due later in the day. Market sentiments improved further as the US central bank is likely to announce the first interest rate cut after more than four years. Hong Kong shares rallied as hopes of fiscal stimulus measures to bolster the Chinese economy lifted real estate and technology shares. However, Japanese markets declined as a stronger yen hurt export-related shares. Markets in mainland China, Taiwan, and South Korea were closed for public holidays.