Key gauges fall for 2nd day on unabated foreign fund outflows

Indian equity benchmarks ended in negative territory for the second consecutive session on Thursday dragged down by losses in IT, TECK and Consumer Durables stocks. Ongoing foreign fund outflows and lackluster corporate earnings also contributed to a decline in market sentiment. Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Wednesday, as they offloaded shares worth Rs 4,613.65 crore. After making a cautious start, key gauges slipped into red and traded under pressure throughout the day as traders got anxious with the government data showing that the growth in production of eight key infrastructure sectors slowed down to 2 per cent in September as against 9.5 per cent in the same month last year. However, the output growth is positive against a contraction of 1.6 per cent in August. 

Key indices extended fall in late afternoon deals, as traders were cautious ahead of HSBC India Manufacturing Purchasing Managers' Index (PMI) data, which is scheduled to be released on November 04.  Besides, in a cautious outlook for the upcoming fiscal year, India Ratings and Research (Ind-Ra) projects a decline in inflation for FY25, yet it emphasizes that immediate rate cuts from the Reserve Bank of India (RBI) are unlikely. Traders took a note of the government data showing that the Centre’s fiscal deficit at the end of the first half of financial year FY25 touched 29.4 per cent of the full-year target. In absolute terms, fiscal deficit - the gap between government’s expenditure and revenue - was at Rs 4,74,520 crore at September-end. Traders overlooked report that India and Saudi Arabia have discussed ways to enhance cooperation in areas of fertilizers, petrochemicals, and mining to boost trade and investments. These sectors were discussed during a meeting between Commerce and Industry Minister Piyush Goyal and Saudi Minister for Industry and Mineral Resources Bandar bin Ibrahim Alkhorayef in Riyadh. The bilateral trade between the two countries stood at $43 billion in 2023-24 as against $53 billion in 2022-23.

On the global front, European markets were trading lower as investors assessed the latest batch of earnings and awaited the closely watched preliminary euro zone inflation reading for clues to the ECB's rate trajectory. Asian markets ended mostly down on Thursday as investors reacted to mixed earnings from U.S. technology companies and signals from the Bank of Japan that further rate rises were still on the horizon. 

Finally, the BSE Sensex fell 553.12 points or 0.69% to 79,389.06, and the CNX Nifty was down by 135.50 points or 0.56% to 24,205.35. 

The BSE Sensex touched high and low of 80,044.95 and 79,287.93 respectively. There were 4 stocks advancing against 26 stocks declining on the index.

The broader indices ended mixed; the BSE Mid cap index fell 0.34%, while Small cap index was up by 1.62%.

The top gaining sectoral indices on the BSE were Industrials up by 2.15%, Capital Goods up by 2.14%, Healthcare up by 1.86%, Utilities up by 0.68% and Power up by 0.17%, while IT down by 2.55%, TECK down by 2.34%, Consumer Durables down by 0.93%, Bankex down by 0.65% and FMCG down by 0.55% were the top losing indices on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 6.38%, Power Grid Corporation up by 0.86%, JSW Steel up by 0.76% and Mahindra & Mahindra up by 0.71%. On the flip side, Tech Mahindra down by 4.54%, HCL Technologies down by 3.89%, TCS down by 2.80%, Infosys down by 2.48% and Asian Paints down by 1.97% were the top losers.

Meanwhile, India Ratings and Research (Ind-Ra) has said that it projects a decline in inflation for FY25, yet it emphasizes that immediate rate cuts from the Reserve Bank of India (RBI) are unlikely. According to Ind-Ra, the persistent pressure of elevated food prices continues to drive inflation, suggesting that any potential reduction in interest rates will hinge on evidence of stable inflation trends nearing the RBI’s target of 4 percent. As such, market participants may need to brace for a prolonged period without rate cuts in the near future.

While inflation and weak industrial activity weigh on the economy, there are positive signs in rural demand, driven by improved real wages for rural labourers in July and August 2024, and above-normal rainfall in most of the country. These factors are expected to boost consumption demand. Devendra Kumar Pant, Chief Economist at Ind-Ra, said 'The slow growth of net taxes in 1QFY25 coupled with sticky inflation is a major challenge being faced by the Indian Economy in FY25. Rising real wages have the ability to increase consumption demand led economic growth. The situation is still evolving, and festive sales is a key monitorable for a growth revision in FY25.’

Above-normal monsoon rainfall in 2024 has improved water reservoir levels, which could boost agriculture. However, weak industrial growth and declining net taxes-reaching a 16-quarter low-continue to weigh on the economy. Actions by major economies also impact India’s outlook. The US Federal Reserve’s interest rate cuts and China’s economic stimulus provide some relief, though tensions in West Asia could add uncertainty.

The CNX Nifty traded in a range of 24,372.45 and 24,172.60. There were 16 stocks advancing against 34 stocks declining on the index. 

The top gainers on Nifty were Cipla up by 9.50%, Larsen & Toubro up by 6.23%, ONGC up by 2.04%, Dr. Reddy's Lab up by 1.93% and Mahindra & Mahindra up by 1.61%. On the flip side, HCL Technologies down by 3.61%, Tech Mahindra down by 3.58%, TCS down by 2.68%, Asian Paints down by 2.35% and Infosys down by 2.17% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 17.67 points or 0.21% to 8,201.94, France’s CAC fell 98.01 points or 1.3% to 7,413.10 and Germany’s DAX lost 145.1 points or 0.74% to 19,332.97.

Asian markets ended mostly down on Thursday as investors awaited US non-farm payrolls figures, inflation data and next week's presidential election for insight into the Federal Reserve’s interest rate stance. Stock markets of Singapore and Malaysia were closed for Diwali holiday and Taiwanese markets were shuttered due to a typhoon. Meanwhile investors are reacted to mixed earnings from US tech companies and economic reports, while the Bank of Japan kept its benchmark rate unchanged at 0.25% as Japan's political instability raised uncertainty. Although, Chinese shares gained ahead of the National People's Congress meeting on November 4-8, where investors awaiting details of stimulus measures. China's manufacturing sector returned to expansion in October after five consecutive months of contraction as the government policy support boosted business activity and bolstered market confidence.