Key gauges snap six-day losing streak on Tuesday

Snapping their six-day losing streak, Indian equity benchmarks ended near the day's highs on Tuesday primarily driven by a recovery in select heavyweight stocks. Markets made a cautious start but soon gained traction and continued to move up for better part of the sessions, as traders took support with Commerce and Industry Minister Piyush Goyal’s statement that India is poised to attract $100 billion in investments from the United Arab Emirates in the coming years. Separately, he also said it is time for the Indian rupee to appreciate on the back of inflows in debt and equity markets. Some support also came with Oil Minister Hardeep Singh Puri’s statement that with global oil prices flaring due to widening conflict in the Middle East, India is watching the situation carefully and is confident of navigating any challenges it may pose. 

Sentiments remained up-beat in late afternoon deals, taking support from domestic rating agency ICRA’s report in which it has estimated that loan securitisation volumes of standard assets touched Rs. 60,000 crore in the September quarter. Securitisation grew 36% sequentially and 31% on year basis. It noted that the sharp increase in the quarterly volumes has been fuelled by large private sector banks selling down their portfolio to improve their credit-to-deposit ratio, given the relatively lower pace of deposit accretion being witnessed. Traders overlooked exchange data showing that Foreign Institutional Investors (FIIs) offloaded equities worth Rs 8,293.41 crore on Monday. Meanwhile, the Central Board of Direct Taxes (CBDT) has formed an internal committee to oversee a comprehensive review of the Income-tax Act, 1961 (Act), as was announced in the Union Budget 2024-25 by Finance Minister Nirmala Sitharaman. The goal is to make the Act concise, clear, and easy to understand, which will reduce disputes, and litigation, and provide greater tax certainty to taxpayers. Besides, all eyes will be on the Reserve Bank of India’s (RBI’s) credit policy outcome on Wednesday, although there are expectations that the central bank could maintain status quo on interest rates. 

On the global front, European markets were trading lower as Middle East worries persisted. Traders ignored positive data that showed German industrial production expanded more than expected in August after falling in the previous month. Asian markets settled mostly down on Tuesday as investors looked ahead of key U.S. inflation readings and the release of the Fed's latest meeting minutes this week for additional clues on the Fed's rate trajectory.

Back home, on the sectoral front, alcohol beverages stocks were in watch as a report by rating agency ICRA stated that alcoholic beverages (alcobev) companies in India are expected to report a revenue growth of 8 to 10 per cent in this financial year supported by a revival in consumption of spirits. Cement industry stocks were in focus with private report that the cement demand in September remained below the market expectations due to heavy monsoons and region-specific challenges which impacted both trade and non-trade demand. 

Finally, the BSE Sensex rose 584.81 points or 0.72% to 81,634.81, and the CNX Nifty was up by 217.40 points or 0.88% to 25,013.15.      

The BSE Sensex touched high and low of 81,763.28 and 80,813.07 respectively. There were 19 stocks advancing against 11 stocks declining on the index. 

The broader indices ended in green; the BSE Mid cap index rose 1.86%, while Small cap index was up by 2.44%.

The top gaining sectoral indices on the BSE were Capital Goods up by 2.82%, Industrials up by 2.81%, Power up by 2.44%, Telecom up by 2.35% and Utilities up by 2.23%, while Metal down by 1.12% was the lone losing index on BSE.

The top gainers on the Sensex were Adani Ports & SEZ up by 4.76%, Mahindra & Mahindra up by 3.42%, Reliance Industries up by 2.01%, HDFC Bank up by 1.95% and Larsen & Toubro up by 1.83%. On the flip side, Tata Steel down by 2.89%, Titan Company down by 2.59%, Bajaj Finserv down by 2.27%, JSW Steel down by 1.98% and Bajaj Finance down by 1.12% were the top losers.

Meanwhile, Crisil Ratings in its latest report has said that operating losses, denoted by the gap between average cost of supply (ACS) and average revenue realised (ARR) per unit of power, of 30 state power distribution companies (discoms) will remain sizeable at 40-45 paise per unit this fiscal despite a 15-20% reduction on-year.  It said elevated cost of supply and subdued tariff hikes have kept operating losses elevated and led to an increase in borrowings to fund the losses. That, in turn, will keep credit profiles weak and discoms reliant on timely government support.

According to the report, there are multiple reasons for the slow growth in ARR.  First, even at the national level, despite improvement, there have been delays in the release of tariff orders. For instance, discoms in 10 of the 36 states and union territories (UTs) witnessed delayed or no release of tariff orders for fiscal 2024 (14 states and UTs for fiscal 2023 and 22 for fiscal 2022). Second, regulatory support mechanisms such as automatic pass through have been implemented in only 15 states and UTs. Third, the improvement in billing efficiency has been slow and it remains below 90%, impacting the revenue of discoms and keeping the ACS-ARR gap at 40-45 paise per unit this fiscal. That said, it will be only the second instance of the gap narrowing below 50 paise per unit in the past five fiscals.

The report said while the operating losses are expected to slip from more than Rs 30,000 crore in the past two fiscals to Rs 25,000-30,000 crore this fiscal, they will remain large, leading to increased debt in balance sheets to fund the losses and keeping the credit profiles weak. That makes a continued improvement in subsidy realisation from state governments crucial for the discoms. While subsidy disbursements from states have been more than 100% and timely over the past three years, any dilution in state support or delay in subsidy realisations will pose downside risks to the estimates of operating losses.

The CNX Nifty traded in a range of 25,044.00 and 24,756.80. There were 36 stocks advancing against 14 stocks declining on the index.

The top gainers on Nifty were Trent up by 7.95%, Bharat Electronics up by 5.29%, Adani Enterprises up by 4.94%, Adani Ports & SEZ up by 4.86% and Mahindra & Mahindra up by 3.56%. On the flip side, SBI Life Insurance down by 3.24%, Tata Steel down by 2.72%, Titan Company down by 2.35%, Bajaj Finserv down by 2.30% and JSW Steel down by 1.66% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 92.35 points or 1.11% to 8,211.27, France’s CAC fell 50.63 points or 0.67% to 7,525.39 and Germany’s DAX lost 48.9 points or 0.26% to 19,055.20. 

Asian markets settled mostly down on Tuesday tracking Wall Street’s overnight fall as Treasury yields climbed above 4% for the first time since August and after a Federal Reserve official urged a cautious path on interest-rate cuts, while investors were awaiting key US inflation readings and the release of the Fed's latest meeting minutes this week for further cues on the Fed's rate trajectory. Middle East conflict concerns has also weighed on market sentiments. Hong Kong shares led regional losses as a highly anticipated announcement on plans to boost China's ailing economy disappointed investors. Japanese markets fell as stronger yen dampened exporters' shares. Data showed that Japanese inflation-adjusted wages fell in August, while household spending also declined, fuelled chances of the central bank raising interest rates any time soon. However, Chinese shares gained as trade resumed after a weeklong holiday.