More Stories

Informist, Thursday, Aug 8, 2024

By Alina Geogy

MUMBAI – Benchmark indices failed to hold onto Wednesday's gains amid continued fears of recession in the US and after the Reserve Bank of India expressed caution on inflation. Further, weak cues from global markets also affected investor sentiment, with technology stocks among the worst hit globally. 

The Reserve Bank of India's Monetary Policy Committee kept the policy repo rate unchanged at 6.50% today and also maintained its "withdrawal of accommodation" stance, in line with expectations of the market. However, RBI Governor Shaktikanta Das emphasised on sticky inflation and raised concerns about food inflation, saying that persistently high food prices could spill over to core CPI. 

The RBI also cut the country's GDP growth projection for Apr-Jun to 7.1% from 7.3% estimated in June. However, it retained its GDP growth projection for 2024-25 (Apr-Mar) at 7.2%.

"Noisy food inflation back home and a still elusive 4% inflation target formed the base for the RBI decision-making with scepticism on a relatively slower and uneven pace of disinflation", Madhavi Arora, lead economist at Emkay Global Financial Services, said in a report. "While the policy stance continues to be actively disinflationary, the policy prerogative needs to be flexible to ensure financial stability amid the fluid global narratives," she said.

On Wednesday, benchmark indices rebounded and ended with over 1% gains after positive commentary from officials of the US Federal Reserve and Bank of Japan. However, the gains were short-lived, as the US and most Asian markets took a plunge again today over recession concerns. There are concerns about recession in the US economy as indicated by US jobs data released last week--which showed that the unemployment rate in July rose to a three-year high.

Today, the Nifty 50 and Sensex closed 0.7% lower each at 24117 points and 78886.22 points, respectively. Shares of LTIMIindtree and Infosys were among the major laggards on the index today, closing over 4% and nearly 3% lower, respectively. This sector contributed the most to the fall in benchmark indices today.

Investors had hoped RBI would comment about potential rate cuts, which could be beneficial for the IT sector, analysts said. However, RBI Governor Das' statement highlighted worries over inflationary pressures instead, which hit sentiment for IT stocks, they said. Sentiment around shares of LTIMindtree was weak after Nuvama Institutional Equities predicted that it, along with shares of drugmaker Divi's Laboratories, would be displaced by shares of Trent and Bharat Electronics in the Nifty 50 index in the upcoming September rejig.

These possible changes would lead to inflows into Trent and Bharat Electronics to the tune of $500 mln and $440 mln, respectively, the brokerage said. Meanwhile, the brokerage expects LTIMindtree and Divi's Laboratories to experience outflows of $210 mln and $260 mln, respectively.

Further, investors are also eyeing rate cut announcements by the US Federal Reserve. There is a 70.5% probability that the US central bank will cut interest rates by 50 basis points in its September meeting, according to the CME FedWatch Tool.

Meanwhile, shares of HDFC Bank were among the top gainers in the Nifty 50, which helped limit the fall in the index. Shares of other lenders such as IndusInd Bank and Axis Bank also rose. There were some statements and proposals by the central bank that are expected to help lenders and corporates alike, analysts said. Some of these proposals include setting up a public repository of digital lending applications to check unauthorised lenders and reduction in the duration of the cheque clearing cycle.

The RBI said that the proposed public repository of digital lending applications being operated by regulated entities would be available on the central bank's website. This public repository would be aimed at preventing unauthorised lending apps, it said.

The apex bank also proposed reducing the current cheque clearing cycle of up to two working days to only a few hours. The proposed measure will improve the efficiency of cheque clearing, reduce settlement risk for participants, and enhance customer experience, the RBI said. Quick clearing of cheques will lead to faster movement of money and help businesses, a research analyst at a domestic brokerage firm said.

Further, RBI decreased the frequency of credit information reports to be provided by credit institutions to the credit information companies to a fortnightly basis or shorter intervals instead of a monthly basis. This can help lenders assess risks associated with borrowers and reduce the risk of over-leveraging by borrowers, Das said.

Among stocks, Tata Motors ended 1.6% higher, becoming one of the major gainers in the Nifty 50. Moody's Ratings upgraded the company's corporate family rating and senior unsecured instruments' rating to "Ba1" from "Ba3". The rating agency also maintained the positive outlook on all ratings of the automobile manufacturer. 

Shares of BSE ended over 8% higher after hitting a one-week high as the exchange's consolidated net profit for Apr-Jun surged 148% sequentially. Its consolidated revenue also rose 24% on quarter and a whopping 180% on year due to a surge in revenue from equity derivatives transaction charges. The stock was among the top gainers in the Nifty 200 index. On the other hand, shares of Rail Vikas Nigam were the worst-hit in the Nifty 200 and ended nearly 5% lower after the company posted a nearly 35% on-year decline in net profit for Apr-Jun.

There were several stock-specific reactions in the broader market. Shares of Lemon Tree Hotels and Balaji Amines were the worst-hit in the Nifty 500 space. Shares of hotel chain operator Lemon Tree Hotels ended nearly 9% lower at a two-month low after the company's consolidated net profit in Apr-Jun fell more than expected. Shares of chemicals company Balaji Amines lost 7% after reporting an on-year and sequential fall in both topline and bottomline for the June quarter.

Shares of tyre manufacturer MRF recovered sharply from early losses and ended over 4% higher, gaining 5,786.05 rupees, after it announced its June quarter earnings. The company's net profit for Apr-Jun fell over 3% on year, falling less than what analysts had estimated.

The broader market indices ended lower today, but the fall was limited in comparison to the domestic benchmarks. These indices were higher during most of the session, especially after the monetary policy statement. However, they reversed gains in the second half of the session. The Nifty Smallcap 100 was the worst-hit among broader market indices, closing 0.4% lower. Meanwhile, the Nifty Midcap 50 fell the least among its peers, ending with 0.2% losses.

* Of the Nifty 50 stocks, 12 rose and 38 fell

* Of the Sensex stocks, 7 rose and 23 fell

* On the NSE, 1,188 stocks rose, 1,532 fell, and 69 were unchanged

* On the BSE, 1,759 stocks rose, 2,159 fell, and 96 were unchanged

* Nifty IT: down 1.9%; Nifty Metal: down 1.7%; Nifty Pharma: up 0.4%

BSE                                             NSE
Sensex: 78886.22, down 581.79 pts or 0.7%       Nifty 50: 24117, down 180.50 pts or 0.7%

End

Edited by Aditya Sakorkar

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.