Sensex, Nifty open in red as investors cautious ahead of Fed meet

Indian equity benchmarks made negative start on Tuesday tracking weakness in Asian counterparts following the mixed cues from Wall Street overnight, as traders remain concerned about the ongoing economic uncertainties in China amid lack of adequate financial policy measures. They also seemed reluctant to make significant moves ahead of the US Fed's upcoming interest rate decision tomorrow. The Bank of Japan and the Bank of England are also scheduled to make their policy announcements on Thursday. Sensex and Nifty soon extend losses and are trading lower with cut of around half a percent each in early deals with index heavyweight Reliance Industries losing over a percent. 

Traders are concerned as data released by the commerce department showed that India’s trade deficit reached a record high of $37.8 billion in November, amid a surge in merchandise imports, mainly driven by a 4.3-time jump in inbound shipments of gold. Imports increased by 27% to a record of almost $70 billion during the month. On the other hand, exports contracted 4.8% to a 25-month low of $32.1 billion in November. The contraction came in a month after witnessing robust 17% Y-o-Y growth in October, which was due to inventory-building by the West ahead of the Christmas season. 

On the sectoral front, gold related stocks are in focus as commerce ministry data showed that the country's gold imports in November reached a record high of $14.86 billion, registering a four-fold increase, mainly on account of festival and wedding demands. Gold imports stood at $ 3.44 billion in November 2023. In stock specific developments, RVNL climbed as the company bags orders worth Rs 270 crore. Texmaco Rail traded with traction as the company bags Rs 187 crore order.

The BSE Sensex is currently trading at 81350.92, down by 397.65 points or 0.49% after trading in a range of 81337.05 and 81613.64. There were 8 stocks advancing against 22 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.15%, while Small cap index was up by 0.06%.

The top gaining sectoral indices on the BSE were Realty up by 1.20%, Capital Goods up by 0.15%, Industrials up by 0.09%, Consumer Discretionary up by 0.07% and Power up by 0.06%, while Energy down by 0.56%, Bankex down by 0.48%, Telecom down by 0.45%, Oil & Gas down by 0.42% and Metal down by 0.34% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 0.93%, Adani Ports & SEZ up by 0.41%, Tech Mahindra up by 0.37%, Titan Company up by 0.33% and Hindustan Unilever up by 0.30%. On the flip side, Reliance Industries down by 1.01%, Bajaj Finserv down by 0.99%, Bharti Airtel down by 0.89%, Nestle down by 0.82% and HDFC Bank down by 0.71% were the top losers.

Meanwhile, CRISIL in its latest report has said that India’s gross domestic product (GDP) growth is likely to align with the long-term trend of 6.5-7 per cent as technical factors that caused fluctuations begin to normalise. While the post-pandemic period saw a sharp rebound and significant variations in GDP growth, these irregularities are now settling down, signalling a return to stability. Post-pandemic, different economic segments recovered at varied speeds. The government’s focus on infrastructure spending played a pivotal role in driving economic recovery by creating multiplier effects. Additionally, strong corporate and bank balance sheets and healthy external markets contributed to India’s economic resilience.

However, certain technical factors disrupted GDP growth patterns in recent years. For instance, net product taxes were impacted by a surge in government subsidies during the pandemic, and swings in commodity prices led to volatility in the GDP deflator. These disruptions caused GDP growth to surge to 8.2 per cent last fiscal while creating a divergence with gross value added (GVA) growth. The current fiscal year has seen these technical factors normalize, leading to slower GDP growth. Net tax growth, a major contributor to GDP growth last fiscal, has slowed significantly due to a high base.

In the first half of this fiscal, net product taxes grew by just 3.3 per cent, compared to 10.5 per cent in the same period last year. This reduced the contribution of net taxes to GDP growth from 77 basis points (bps) last year to 25 bps this year. The GDP deflator, which measures inflation-adjusted GDP, is also stabilizing. It rose to 2.7 per cent on-year in the first half of this fiscal, compared to a low of 0.8 per cent last year. A key factor driving this increase is the rise in wholesale price index (WPI) inflation, which averaged 2.7 per cent in the first half, up from -1.7 per cent in the same period last year. This normalization is moderating real GDP growth but also reducing distortions between nominal and real GDP figures.

While normalisation of technical factors has slowed GDP growth, high interest rates and fiscal consolidation have also contributed to the moderation. Yet, the main macroeconomic drivers remain strong. Private consumption, which accounts for 56.3 per cent of GDP, grew by 6.7 per cent in the first half of this fiscal compared to 4.1 per cent last year. Fixed investment growth, although slower at 6.5 per cent compared to 10.1 per cent last year, continues to maintain a larger share of GDP than in the pre-pandemic decade. CRISIL projects GDP growth for the current fiscal to range between 6.5-7 per cent, aligning with India’s pre-pandemic trend. Improving consumption demand, bolstered by a healthy monsoon and rural recovery, is expected to drive growth momentum. While growth this fiscal may be lower than last year’s 8.2 per cent, it is anticipated to be more balanced across sectors, indicating a healthier trajectory for the economy.

The CNX Nifty is currently trading at 24521.00, down by 147.25 points or 0.60% after trading in a range of 24514.35 and 24624.10. There were 8 stocks advancing against 42 stocks declining on the index.

The top gainers on Nifty were Cipla up by 1.49%, Tata Motors up by 0.73%, Bharat Electronics up by 0.63%, Tech Mahindra up by 0.49% and HCL Technologies up by 0.16%. On the flip side, Shriram Finance down by 2.32%, Bajaj Finserv down by 1.35%, Grasim Industries down by 1.31%, Reliance Industries down by 1.29% and Bharti Airtel down by 1.12% were the top losers.

Asian markets are trading mostly in red; Hang Seng declined 80.14 points or 0.41% to 19,715.35, Jakarta Composite plunged 43.09 points or 0.6% to 7,215.54, KOSPI dropped 24.45 points or 0.99% to 2,464.52 and Shanghai Composite fell 19.44 points or 0.58% to 3,366.89 and Straits Times was down by 18.32 points or 0.48% to 3,802.71. On the other hand, Nikkei 225 surged 83.64 points or 0.21% to 39,541.13 and Taiwan Weighted was up by 81.64 points or 0.35% to 23,121.54.