Key indices snap two-day rally on negative global cues

Indian equity benchmarks snapped two-day rally and closed marginally lower on Tuesday in line with weak global market trends amid concerns over tariff threats by US President-elect Donald Trump. Markets commenced the day on a firm note as traders took support with provisional exchange data showing that foreign institutional investors turned net buyers in Indian markets on Monday, snapping a record selling streak that had partly caused the country's benchmark indexes to confirm corrections earlier this month. FIIs were net buyers of stocks worth Rs 9,948 crore ($1.18 billion), after 38 consecutive sessions of being net sellers during which outflows totalled to about $16.5 billion. Some support also came as a government report said India expects food inflation to slow in the coming months, backed by a bumper summer crop harvest. 

However, key gauges erased all their gains in the morning trade and oscillated in a thin range throughout the day to end marginally lower, as some cautiousness came with the finance ministry’s report stating that India's economic outlook for the coming months is cautiously optimistic, with agriculture likely to benefit from favourable monsoon conditions, increased minimum support prices and adequate supply of inputs. Also, it said India’s export recovery may face challenges due to softening demand in developed markets. Some concern also came after a private report said that India's economy likely grew at its slowest pace in one-and-a-half years in the three months to end-September as weak consumption offset a strong recovery in government spending, which for years has helped drive growth.  

On the global front, Asian markets settled mostly down on Tuesday, while European markets were trading lower after U.S. President-elect Donald Trump said he plans to impose 25 percent tariffs on Mexico and Canada and an additional 10 percent on China on his first day in office, ramping up fears of a renewed trade war. Back home, on the sectoral front, tourism industry related stocks were in focus as the government said the contribution of tourism sector to the country's gross domestic product (GDP) for 2022-23 stood at five per cent. In a written response in the Lok Sabha, Union Tourism Minister Gajendra Singh Shekhawat also said that in 2023, the total foreign tourist arrivals stood at 9.52 million. 

Finally, the BSE Sensex fell 105.79 points or 0.13% to 80,004.06, and the CNX Nifty was down by 27.40 points or 0.11% to 24,194.50.      

The BSE Sensex touched high and low of 80,482.36 and 79,798.67 respectively. There were 13 stocks advancing against 16 stocks declining, while 1 stock remained unchanged on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.10%, while Small cap index was up by 0.62%.

The top gaining sectoral indices on the BSE were IT up by 1.11%, TECK up by 0.89%, Telecom up by 0.80%, Metal up by 0.58% and FMCG up by 0.57%, while Utilities down by 1.77%, Power down by 1.55%, Auto down by 1.26%, Oil & Gas down by 0.93% and Energy down by 0.59% were the top losing indices on BSE.

The top gainers on the Sensex were Asian Paints up by 1.79%, Infosys up by 1.73%, JSW Steel up by 1.11%, TCS up by 0.85% and Reliance Industries up by 0.60%. On the flip side, Adani Ports & SEZ down by 3.23%, Ultratech Cement down by 3.07%, Sun Pharma down by 2.48%, NTPC down by 1.90% and Mahindra & Mahindra down by 1.87% were the top losers.

Meanwhile, the Finance Ministry in its latest report has said that India's economic outlook for the coming months is 'cautiously optimistic', with agriculture likely to benefit from favourable monsoon conditions, increased minimum support prices and adequate supply of inputs. The October edition of Monthly Economic Review released by the Department of Economic Affairs said ‘Bright agricultural production prospects make the inflation outlook benign, despite existing price pressures in select food items’. Early November trends signalled moderation in key food prices, though geopolitical factors may continue to impact domestic inflation and supply chains.

It said a bumper kharif harvest is expected to lower food inflation in the coming months, and added that a favourable monsoon, adequate reservoir levels and higher minimum support prices are likely to boost rabi sowing and production. Amidst a clouded global background, and after a brief period of softening momentum over the monsoon months, the report said, many high-frequency indicators of economic activity in India have shown a rebound in October. These include indicators of rural and urban demand and supply side variables like Purchasing Managers' Index and E-way bill generation.

On the employment front, it said, the formal workforce is expanding, with notable increases in manufacturing jobs and a strong inflow of youth into organised sectors. With regard to the external front, it said, India's export recovery may encounter challenges due to softening demand in developed markets. However, it said, trade in the services sector is sustaining momentum. Net foreign direct investment inflows registered remarkable growth in the first five months of FY25. Supported by stable capital inflows, India's forex reserves increased by $64.8 billion so far during 2024, the second-largest increase after China amongst major forex reserve-holding countries.

The report said apart from the emerging indications of domestic growth and stability, the dynamics of global interest rates, earning growth and valuation, geopolitical developments and policy decisions of the next administration in the United States will determine the course of trade and capital flows. Recent developments in the ongoing conflict between Russia and Ukraine have caused some concern in financial markets with safe-haven assets such as US Treasuries and gold finding a bid, it said, adding, that geopolitical conditions remain fragile. The report said the global economy reveals a mixed outlook as 2024 draws to a close. Structural weaknesses in parts of Europe and China's slowdown continued to weigh on growth. In contrast, the US economy has surpassed earlier expectations, maintaining steady expansion.

The CNX Nifty traded in a range of 24,343.30 and 24,125.40. There were 23 stocks advancing against 27 stocks declining on the index.

The top gainers on Nifty were Shriram Finance up by 3.26%, Britannia Industries up by 2.20%, Asian Paints up by 1.87%, Bharat Electronics up by 1.86% and Infosys up by 1.61%. On the flip side, Adani Enterprises down by 4.02%, Adani Ports & SEZ down by 3.03%, Ultratech Cement down by 3.03%, Bajaj Auto down by 2.87% and Sun Pharma down by 1.98% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 30.52 points or 0.37% to 8,261.16, France’s CAC fell 50.91 points or 0.7% to 7,206.56 and Germany’s DAX lost 114.92 points or 0.59% to 19,290.28. 

Asian markets settled mostly down on Tuesday as American currency rallied after US President-elect Donald Trump said he plans to impose 25% tariffs on Mexico and Canada and an additional 10% on China on his first day in office. Meanwhile, investors were awaiting the release of Federal Reserve's preferred measure of inflation, the personal consumption expenditures (PCE) price index due on Wednesday. Japanese shares declined ahead of November inflation numbers from the Tokyo region due later in the week, while a stronger yen kept investors nervous. Seoul shares fell ahead of a Bank of Korea interest-rate decision on Wednesday. Moreover, Chinese shares slipped ahead of Chinese industrial profit data and purchasing managers index numbers due this week.