Key gauges extend losses for 3rd straight session ahead of Fed outcome

Indian equity benchmarks continued their losing run for the third straight session on Wednesday as nervous investors braced for the US Federal Reserve's interest rate decision due later in the day. Markets made a negative start and extended losses as the day progressed amid foreign fund outflows. Foreign Institutional Investors (FIIs) offloaded equities worth Rs 6,409.86 crore on Tuesday, according to exchange data. Some concern came as the Global Trade Research Initiative (GTRI) stated that India's gold imports have surged alarmingly, posing a potential threat to its trade balance and economic stability, and the government should take action to address this issue. It said the imports are driven by multiple factors, including growing investment demand, tariff reductions, and loopholes in trade agreements and this surge has raised significant economic concerns, distorting the trade balance, weakening the rupee, and widening the current account deficit. 

Markets continued to reel under pressure in late afternoon session as traders were anxious with a private report stating that India’s foreign aid has dipped post-pandemic but has also become more varied than before. The average aid per annum declined to Rs 5,011 crore in the four years since FY22 as compared with Rs 5,805 crore in the four years leading up to Covid. Adding to the worries, US President-elect Donald Trump has set the stage for a potential trade conflict with India, threatening to impose reciprocal tariffs if the country continues to levy high taxes on American goods. Traders took a note of a CAG audit report stating that the commerce ministry needs to properly monitor the scheme to promote exports, EPCG, as it not only allows duty-free imports of capital goods but also grants a long gestation period for meeting the export obligation. Traders overlooked Finance Minister Nirmala Sitharaman’s statement that the lower-than-expected Gross Domestic Product (GDP) growth of 5.4 per cent in the second quarter (Q2) was a ‘temporary blip’ and the economy will see healthy growth in the coming quarters. She said India has seen ‘steady and sustained’ growth and its GDP growth rate has averaged 8.3 per cent in the last three years.

On the global front, European markets were trading higher despite data showing that U.K. inflation rose to an eight-month high in November. The consumer price index posted an annual growth of 2.6 percent in November, up from 2.3 percent in October. Asian markets ended mostly higher on Wednesday as investors waited to see what comes of the Federal Reserve meeting later in the day. Back home, on the sectoral front, sugar stocks were in watch as industry body ISMA said sugar production declined 17 per cent to 61.39 lakh tonnes till December 15 of the current marketing year that started in October as against 74.05 lakh tonnes in the corresponding period of the preceding year, mainly due to fall in output in Maharashtra.  

Finally, the BSE Sensex fell 502.25 points or 0.62% to 80,182.20, and the CNX Nifty was down by 137.15 points or 0.56% to 24,198.85.         

The BSE Sensex touched high and low of 80,868.02 and 80,050.07 respectively. There were 8 stocks advancing against 22 stocks declining on the index. 

The broader indices ended in red; the BSE Mid cap index fell 0.61%, while Small cap index was down by 0.76%.

The few gaining sectoral indices on the BSE were Healthcare up by 0.58% and IT up by 0.13%, while Utilities down by 2.06%, PSU down by 1.93%, Power down by 1.78%, Capital Goods down by 1.56% and Metal down by 1.44% were the top losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 0.64%, Sun Pharma up by 0.63%, TCS up by 0.55%, Tech Mahindra up by 0.50% and HCL Technologies up by 0.40%. On the flip side, Tata Motors down by 3.03%, Power Grid Corporation down by 2.56%, NTPC down by 2.09%, JSW Steel down by 2.02% and Adani Ports &SEZ down by 1.79% were the top losers.

Meanwhile, ICRA in its latest report has said that the domestic gold jewellery consumption in value terms is expected to continue its growth momentum in the current financial year and is likely to witness an on-year rise of 14-18 per cent. It said gold jewellery consumption growth had witnessed a growth of 18 per cent in 2023-24, primarily driven by realisations even as volume growth was subdued.

According to the report, while gold prices were volatile, improving consumer sentiments and festive-led demand aided consumption growth in the recent months. Moreover, it stated a sharp 900 bps cut in import duty in the Union Budget in July 2024, and consequent correction in gold prices for a brief period led to some pre-buying of jewellery as well as bars and coins during the second quarter of FY25, which is generally a seasonally weak quarter. This, coupled with higher number of auspicious and wedding days, and favourable monsoons aiding better rural output, is likely to help jewellery demand growth in H2 FY25.

ICRA Vice President and Sector Head - Corporate Ratings, Sujoy Saha said ‘The organised market is projected to record a healthy YoY expansion of 18-20 per cent in FY25. Planned store additions with focus on tier II and III cities, rising gold prices, shift in preferences towards branded jewellery and some likely pre-buying in the fourth quarter of FY25 on account of higher number of auspicious days in the first quarter of FY26 shall drive growth. The customs duty cut is also expected to disincentive unofficial imports, thus supporting the growth in organised trade.’

The CNX Nifty traded in a range of 24,394.45 and 24,149.85. There were 17 stocks advancing against 33 stocks declining on the index.

The top gainers on Nifty were Trent up by 2.48%, Dr. Reddy's Lab up by 2.34%, Cipla up by 1.39%, Wipro up by 1.00% and Reliance Industries up by 0.73%. On the flip side, Tata Motors down by 2.92%, Power Grid Corporation down by 2.46%, Bharat Electronics down by 1.95%, NTPC down by 1.83% and JSW Steel down by 1.77% were the top losers. 

European markets were trading higher; UK’s FTSE 100 increased 21.92 points or 0.27% to 8,217.12, France’s CAC rose 14.3 points or 0.19% to 7,380.00 and Germany’s DAX gained 41.3 points or 0.2% to 20,287.67.

Asian markets ended mostly higher on Wednesday ahead of outcome of the Federal Reserve meeting later in the day, but relatively hawkish Fed rate cut is expected. Beyond the Federal Reserve, central bank meetings in Japan, Thailand, Indonesia and Philippines are also due this week. Chinese shares gained after reports that China is planning a record budget deficit for 2025 and that the State-owned Assets Supervision and Administration Commission has urged state-owned firms to improve market value management of listed companies. Hong Kong shares jumped with expectations that Chinese stimulus measures will help spur consumption. Although, Japanese shares declined as the BoJ is likely to keep its benchmark interest rates unchanged this week. Investors will pay close attention to BoJ Governor Kazuo Ueda’s press conference to know about whether and how much the central bank will raise key borrowing rates in 2025.