Domestic indices continue to trade deeply in red

Domestic equity markets continued to trade deeply in red in afternoon deals on account of selling by funds and retail investors. Hectic selling in Asian Paints, Infosys, JSW Steel, Bajaj Finance and Bajaj Finserv companies’ stocks dragged the Sensex and Nifty to trade below their psychological 79,300 and 24,000 levels respectively. Negative cues from the global markets weighed on domestic sentiments. Traders were cautious as the dollar index, which measures the US currency against a basket of six currencies, climbed a two-year high after the US Fed policy decision. Meanwhile, a private report said that the Reserve Bank of India (RBI) may face a tougher path for cutting interest rates in February. The report attributed this to a shift in the U.S. Federal Reserve's stance on rate cuts, which has reshaped global monetary policy expectations. On the BSE sectoral front, traders were seen pilling up positions in Healthcare and Oil & Gas, while selling was witnessed in IT, TECK, Bankex, Metal and Capital Goods. 

On the global front, Asian markets were trading in red after the U.S. Federal Reserve delivered its third consecutive rate reduction and signaled fewer rate cuts ahead. Meanwhile, Investors assessed the Bank of Japan’s decision to keep its policy rate unchanged at 0.25% for the third straight meeting. Back home, in the stock specific development, Asian Paints slipped after two top executives resigned from their positions.   

The BSE Sensex is currently trading at 79264.26, down by 917.94 points or 1.14% after trading in a range of 79020.08 and 79516.17. There were 3 stocks advancing against 27 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.37%, while Small cap index down by 0.32%.

The only gaining sectoral indices on the BSE were Healthcare up by 0.62% and Oil & Gas up by 0.50%, while IT down by 1.51%, TECK down by 1.30%, Bankex down by 1.06%, Metal down by 0.95%, Capital Goods down by 0.91% were the top losing indices on BSE.

The few gainers on the Sensex were Sun Pharma up by 0.40%, Power Grid up by 0.17% and Maruti Suzuki up by 0.09%. On the flip side, Asian Paints down by 2.38%, Infosys down by 2.21%, JSW Steel down by 2.05%, Bajaj Finance down by 2.02% and Bajaj Finserv down by 1.92% were the top losers.

Meanwhile, Director General of Foreign Trade (DGFT) Santosh Kumar Sarangi has said that the country's high interest rates are a big deterrent for exporters community and the commerce ministry is working with its finance counterpart to help them at this front. He said that the department of commerce has been struggling to convince the finance ministry regarding the relevance of the Interest Equalisation Scheme (IES) and the extent to which it is maintaining manufacturing competitiveness.  

Sarangi said there are many studies which suggest that very high collateral demand by financial institutions is a big deterrent for MSMEs to access institutional finance and that deters them from getting into the export market. He said ‘so how do we ensure collateral free or a subsidised collateral arrangement for MSMEs is something that the department of commerce is working with the department of expenditure.’ He noted that India has high interest rates vis-a-vis its peer nations. The repo rate in India is 6.5 per cent, whereas in many Southeast Asian nations, it is between 2.5 per cent and 3.5 per cent. He said ‘so this has been a big deterrent for our exporters, especially MSMEs, to become export competitive’. The IES has been able to partially neutralise the very high interest rates that 'our exporters face. As of now, the scheme is there till December 31, 2024.’

He said ‘we hope our negotiations with the finance ministry is able to convince them that this actually a huge intervention for MSMEs and it allows them not only to stay afloat in the market but to ensure that their integration with the global marketplace is much better and stronger’. The scheme helps exporters from identified sectors and all MSME manufacturer exporters to avail of rupee export credit at competitive rates at a time when the global economy is facing headwinds. 

Exporters get subsidies under the Interest Equalisation Scheme for pre- and post-shipment rupee export credit.  The scheme was started on April 1, 2015, and was initially valid for five years up to March 31, 2020. It has been continued thereafter, including a one-year extension during Covid-19, and with further extensions and fund allocations. The scheme is fund-limited, and benefits to individual exporters were earlier capped at Rs 10 crore per annum per IEC (Import Export Code). Now the cap is Rs 50 lakh. After recording double-digit growth in October, India's exports in November contracted by 4.85 per cent year-on-year to $32.11 billion, while the trade deficit widened to an all-time high of $37.84 billion due to a record surge in gold imports.

The CNX Nifty is currently trading at 23960.25, down by 238.60 points or 0.99% after trading in a range of 23870.30 and 24004.90. There were 11 stocks advancing against 39 stocks declining on the index.

The top gainers on Nifty were Dr. Reddy's Lab up by 3.62%, BPCL up by 2.46%, Cipla up by 1.30%, Hero MotoCorp up by 1.28% and Trent up by 0.77%. On the flip side, Asian Paints down by 2.37%, Infosys down by 2.23%, JSW Steel down by 2.10%, Grasim Industries down by 2.01% and Bajaj Finserv down by 2.00% were the top losers.

All Asian markets were trading lower; Hang Seng declined 141.26 points or 0.72% to 19,723.29, Jakarta Composite plunged 116.04 points or 1.66% to 6,991.84, Shanghai Composite weakened 11.07 points or 0.33% to 3,371.14, Straits Times fell 18.24 points or 0.48% to 3,761.38, KOSPI dropped 48.34 points or 1.98% to 2,436.09, Nikkei 225 slipped 240.65 points or 0.62% to 38,841.06 and Taiwan Weighted lost 236.42 points or 1.03% to 22,932.25.