Key gauges end lower amid profit taking

Indian equity benchmarks ended lower on Friday as investors turned cautious ahead of the key US inflation data. Markets made a slightly positive start and managed to keep their heads above water in first half of trading session, amid foreign fund inflows. As per NSE data, Foreign Institutional Investors (FII) were net buyers of Indian equities worth Rs 629.96 crore. Traders took support with a finance ministry report stating that India is set to achieve 6.5-7 per cent GDP growth in the current financial year as indicated by the movements in high-frequency indicators till August. Some support came with the finance ministry stating that the Centre has retained its borrowing target for the current financial year and plans to raise Rs 6.61 lakh crore through auction of dated securities during October-March period of 2024-25 to fund the revenue gap to boost economic growth. Traders took a note of former RBI Governor Raghuram Rajan’s statement that India has done well in areas like infrastructure in the last 10 years, but it also needs to do more in other sectors to boost local manufacturing and job creation. Rajan further said the government's focus on production, whether it is goods or services is a good thing, but it is also important to do it the right way.

However, markets erased gains and slipped into red terrain in early afternoon deals as traders got cautious with a private report stating that India’s urban-rural income gap has increased over the last seven years, as urban incomes have outpaced rural areas for both salaried and self-employed people. Markets ended lower as traders resorted to profit taking in banking, realty and utilities stocks. Investors overlooked the report that India's ranking in the Global Innovation Index has improved, climbing one place to 39th rank out of 133 economies in the Global Innovation Index (GII) 2024. Last year, the country was ranked 40th. The consistent improvement in the GII ranking is owing to the knowledge capital, vibrant start-up ecosystem, and the amazing work done by the public and private research organisations.

On the global front, European markets were trading higher as traders continued to bet on further reductions in interest rates by the US Fed, and on hopes about more stimulus measures from the Chinese government to spur growth in the world's second largest economy. Asian markets settled mostly down on Friday amidst anxiety ahead of the crucial PCE-based inflation update due from the U.S. on Friday that could sway the Fed's plans regarding further monetary easing. 

Back home, on the sectoral front, banking stocks were in watch as CareEdge Ratings said net Non-Performing Assets (NNPAs) of scheduled commercial banks (SCB) saw a sharp decline, reducing by 24.9 per cent y-o-y to Rs 1 lakh crore as of June 30, 2024. There was some buzz in sugar stocks as Food Minister Pralhad Joshi said the government is considering increasing the ethanol price for 2024-25 season as well as minimum selling price of sugar. Joshi said the proposal on hiking the ethanol price is under consideration of the government. 

Finally, the BSE Sensex fell 264.27 points or 0.31% to 85,571.85, and the CNX Nifty was down by 37.10 points or 0.14% to 26,178.95.     

The BSE Sensex touched high and low of 85,978.25 and 85,474.58 respectively. There were 15 stocks advancing against 15 stocks declining on the index. 

The broader indices ended in green; the BSE Mid cap index rose 0.29%, while Small cap index was up by 0.07%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 2.57%, Energy up by 2.12%, PSU up by 1.19%, Metal up by 1.02% and Healthcare up by 0.70%, while Realty down by 1.01%, Bankex down by 0.89%, Utilities down by 0.82%, Telecom down by 0.65% and Power down by 0.52% were the top losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 2.66%, Reliance Industries up by 1.72%, Titan Company up by 1.50%, HCL Technologies up by 1.31% and Bajaj Finserv up by 1.10%. On the flip side, Power Grid Corporation down by 3.03%, ICICI Bank down by 1.83%, Bharti Airtel down by 1.74%, HDFC Bank down by 1.65% and Kotak Mahindra Bank down by 1.55% were the top losers.

Meanwhile, CareEdge Ratings has said that Net Non-Performing Assets (NNPAs) of scheduled commercial banks (SCB) saw a sharp decline, reducing by 24.9 per cent y-o-y to Rs 1 lakh crore as of June 30, 2024 (Q1FY25). The gross non-performing assets (GNPAs) of scheduled commercial banks (SCBs) fell by 15.2 per cent year-on-year (y-o-y) to Rs 4.57 lakh crore as of Q1FY25, compared to Rs 5.66 lakh crore in the same period last year.

It stated the GNPA ratio now stands at 2.8 per cent, a reduction from 3.8 per cent a year ago. This drop is primarily due to lower slippages, higher recoveries, and steady write-offs over the last year. The Indian banking sector has continued its positive trajectory with reductions in both gross and net non-performing assets NPAs for SCBs as of June 30, 2024. The NNPA ratio has reached an all-time low of 0.6 per cent, down from 1.0 per cent in Q1FY24.

Despite this, the decline in NNPAs within SCBs varied, as private banks (PVBs) witnessed a marginal increase of 3 basis points (bps) in their NNPA ratio, driven by seasonal collection weaknesses and higher retail delinquencies, leading to a current NNPA ratio of 0.46 per cent. Private sector banks (PSB), in particular, have managed to bring down their incremental provisioning levels due to consistent asset quality improvements. They have contributed to the overall improvement in the banking sector’s asset quality.

The CNX Nifty traded in a range of 26,277.35 and 26,151.40. There were 29 stocks advancing against 20 stocks declining, while 1 stock remained unchanged on the index.

The top gainers on Nifty were BPCL up by 6.23%, Cipla up by 3.25%, Sun Pharma up by 2.45%, Divi's Laboratories up by 2.36% and Reliance Industries up by 1.71%. On the flip side, Power Grid Corporation down by 2.96%, Bharti Airtel down by 1.93%, HDFC Bank down by 1.71%, ICICI Bank down by 1.70% and Hero MotoCorp down by 1.59% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 32.85 points or 0.4% to 8,317.76, France’s CAC rose 14.84 points or 0.19% to 7,756.93 and Germany’s DAX gained 152.87 points or 0.79% to 19,391.23.

Asian markets settled mostly down on Friday with nervousness and anxiety surrounding the release of the PCE-based inflation readings from the United States, due later in the day for further cues on the path of policy rates. South Korean shares declined, tracked by significant drop in biopharmaceutical and auto stocks. However, Chinese shares have surged to their best week since 2008 after China's raft of economic stimulus measures including $114 billion war chest to support capital markets. Japanese shares gained on softer yen, ahead of Friday's leadership contest in the ruling Liberal Democratic Party that prompting investors to assess its impact on interest rate hikes.