Key gauges end marginally lower ahead of Fed policy decision

Indian equity benchmarks ended marginally lower on Wednesday, dragged by losses in IT, TECK and Healthcare stocks. Markets made a cautious start as investors reacted to disappointing trade data. According to data released by Commerce & Industry Ministry, India's trade deficit widened to a 10-month high of nearly $30 billion in August as gold-led merchandise imports surged to over $64 billion and merchandise exports declined. Exports contracted for the second month in a row to $34.7 billion due to softening of oil prices and muted global demand. 

However, the markets soon rebounded and hit fresh record highs in afternoon deals, amid foreign fund inflows. The foreign institutional investors (FIIs) bought equities worth Rs 482 crore on September 17. Traders took support with a private report that the Centre’s direct tax collection collections, net of refunds, rose about 16% on year to Rs 9.92 lakh crore till September 15, 2024 in the current financial year. The direct tax receipts till September 15 were 45% of the FY25 target of Rs 22.07 lakh crore, broadly in line with annual trends. Adding to the optimism, Crisil Ratings said that the recent developments in Bangladesh did not have a significant impact on India's trade and it does not foresee any near-term impact on the credit quality of India Inc. Traders took a note of report that India and the UK are expected to hold the next round of talks for a proposed free trade agreement in October to resolve the pending issues and close the negotiations. But markets retreated from record high levels to settle in the red, as investors booked profit ahead of the Federal Reserve's interest rate decision later in the day. 

On the global front, European markets were trading lower as investors reacted to the latest euro zone and U.K. inflation data. Eurostat confirmed that the euro area annual inflation rate was 2.2 percent in August 2024, down from 2.6 percent in July. The U.K. headline consumer inflation gained 2.2 percent from a year ago in August, the same rate as seen in July, the Office for National Statistics reported. Asian markets ended mostly down on Wednesday as investors waited for the U.S. Federal Reserve's first cut to interest rates in more than four years. There is a debate about the size of reduction after data showed U.S. retail sales unexpectedly ticked up in August in a sign of ongoing consumer resilience.

Back home, on the sectoral front, oil & gas sector stocks were in focus as the government slashed windfall tax on domestically produced crude oil to nil per tonne with effect from September 18. The government, on August 31, slashed windfall tax on domestically produced crude oil to Rs 1,850 per tonne from previous Rs 2,100 per tonne.

Finally, the BSE Sensex fell 131.43 points or 0.16% to 82,948.23, and the CNX Nifty was down by 41.00 points or 0.16% to 25,377.55.    

The BSE Sensex touched high and low of 83,326.38 and 82,700.63 respectively. There were 11 stocks advancing against 19 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.71%, while Small cap index was down by 0.52%.

The lone gaining sectoral index on the BSE was Bankex up by 0.95%, while IT down by 3.00%, TECK down by 2.43%, Healthcare down by 1.23%, Oil & Gas down by 1.12% and Energy down by 0.90% were the top losing indices on BSE.

The top gainers on the Sensex were Bajaj Finance up by 3.65%, Bajaj Finserv up by 2.11%, Nestle up by 1.61%, ICICI Bank up by 1.55% and HDFC Bank up by 1.54%. On the flip side, TCS down by 3.49%, HCL Technologies down by 3.15%, Infosys down by 3.09%, Tech Mahindra down by 2.79% and Sun Pharma down by 1.79% were the top losers.

Meanwhile, Crisil Ratings has said the recent developments in Bangladesh did not have a significant impact on India's trade and it does not foresee any near-term impact on the credit quality of India Inc. It said the effect will vary based on industry/sector-specific nuances and exposure. However, a prolonged disruption can affect the revenue profiles and working capital cycles of some export-oriented industries for which Bangladesh is either a demand Centre or a production hub. Also, the movement in the Bangladeshi Currency Taka, will have to be watched.

It said ‘Recent developments in Bangladesh haven't had a significant impact on India's trade and going forward, the effect will vary based on industry/sector-specific nuances and exposure. We do not foresee any near-term impact on the credit quality of India Inc either’. Companies into footwear, FMCG and soft luggage could also see some impact because of manufacturing facilities located in Bangladesh. These facilities faced operational challenges during the initial phase of the crisis.

However, it said most have since commenced operations, though a full ramp-up and the ability to maintain their supply chain will be critical. Engineering, procurement and construction companies engaged in power and other projects in Bangladesh could see execution delays this fiscal as a sizeable portion of their workforce has been recalled to India for almost a month now. It added with only a gradual ramp-up in workforce expected, revenue booking could be lower this fiscal compared with earlier expectations. It said while sectors such as cotton yarn, power, footwear, soft luggage, fast moving consumer goods (FMCG) may see a small but manageable negative impact, ship breaking, jute, readymade garments (RMG) should benefit. For most others, the impact will be insignificant.

According to Crisil Ratings, India's trade with Bangladesh is relatively low, accounting for 2.5 per cent of its total exports and 0.3 per cent of total imports last fiscal. Merchandise exports mainly comprise cotton and cotton yarn, petroleum products, electric energy, etc., while imports largely consist of vegetable fat oils, marine products and apparel. It added for cotton yarn players, Bangladesh accounts for 8-10 per cent of sales, so the revenue profile of major exporters could be affected. Their ability to compensate for sales in other geographies will be an important monitorable. Nobel Prize winner Muhammad Yunus was last month appointed as Bangladesh's Chief Advisor following the resignation of Sheikh Hasina who fled the country on August 5, amidst student-led mass protests.

The CNX Nifty traded in a range of 25,482.20 and 25,285.55. There were 17 stocks advancing against 33 stocks declining on the index.

The top gainers on Nifty were Shriram Finance up by 4.22%, Bajaj Finance up by 3.36%, Bajaj Finserv up by 1.76%, Nestle up by 1.72% and HDFC Bank up by 1.45%. On the flip side, TCS down by 3.50%, Infosys down by 3.08%, HCL Technologies down by 3.07%, Tech Mahindra down by 2.83% and Wipro down by 2.57% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 55.3 points or 0.67% to 8,254.56, France’s CAC fell 33.04 points or 0.44% to 7,454.38 and Germany’s DAX lost 23.86 points or 0.13% to 18,702.22.

Asian markets ended mostly down on Wednesday tracking mixed cues from Wall Street overnight with caution ahead of the US Federal Reserve's first interest-rate cut in more than four years. While, uncertainty over the size of interest rate cut also added pressure on market sentiments after data showed US retail sales unexpectedly ticked up in August and production at factories bounced back. However, Chinese shares gained on hopes of stimulus measures as trading resumed after a holiday break. Japanese shares advanced, even as Japan posted a trade deficit for a second straight month in August as growth in both imports and exports missed expectations. A weaker yen lifted sentiment. Hong Kong and South Korean markets were closed for Mid-Autumn Festival and Chuseok-Thanksgiving Day respectively.