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Informist, Thursday, May 22, 2025

By Gopika Balasubramanium

MUMBAI – The benchmark equity indices closed sharply lower Thursday, tracking losses across global markets due to growing concern about the fiscal strength of the US. Analysts attributed the market's fall to "sentiment-driven action", as worries about the rising debt of the US government deepened after the Rules Committee of the US House of Representatives cleared President Donald Trump's proposed tax cuts and spending bill, which is expected to exert further pressure on the country's already sizeable fiscal deficit.

The non-partisan Congressional Budget Office estimates that the bill will add $3.8 trillion to the US debt of $36.2 trillion over the next decade, Reuters reported. The committee's clearance for the bill came amid widespread political contention and worries about a likely slowdown in the US economy. There have been concerns about the country's fiscal structure, which deepened after Moody's Ratings downgraded the long-term credit rating of the US due to the rise in government debt and interest payment ratios over the past decade, which have ballooned to significantly higher levels compared to other similarly rated countries.

This has been pushing US Treasury yields higher. The rise in the yields makes US Treasury notes more attractive for foreign investors, leading to worries that investors may switch their investments from emerging markets, analysts said. Thursday, the Nifty 50 closed at 24609.70 points, down more than 200 points or 0.8%. Analysts had indicated that a close above 24400 points was crucial for the index to rise further. The BSE Sensex also ended 0.8% lower at 80951.99 points.

Almost 53% of the 2,949 stocks traded on the National Stock Exchange ended lower. The broader market indices also closed in the red, with the Nifty Midcap 50 ending nearly 1% lower and the Nifty Smallcap 50 closing slightly lower. Barring the Nifty Media and Nifty India Defence, all other sectoral indices also closed lower. The Nifty FMCG and Nifty IT were the worst hit.

All 10 constituents of the Nifty IT index closed lower. Large-caps such as Tech Mahindra, Wipro, Tata Consultancy Services, and Infosys closed 1-2% lower. Analysts said the proposed US tax-cut bill is likely to add to inflationary pressure in the country, which is already heightened by Trump's tariffs. They said this may add to the risk of US economic growth slowing down and is likely to delay interest rate cuts by the US Federal Reserve. According to the CME FedWatch Tool, there is a 95% possibility that the US central bank will hold the interest rate for the fourth consecutive time at its two-day policy meeting in June.

Any pressure on US economic growth will impact US-based clients' information technology spending, impacting the financial performance of Indian tech majors, analysts said. Many of these companies earn more than half of their overall revenue from the US.

Among Nifty 50 stocks, Oil and Natural Gas Corp. was the worst hit, ending nearly 3% lower after the company's net profit for the March quarter missed the Street's estimate by a wide margin. IndusInd Bank ended higher, recovering from a 4% intra-day fall after the bank reported a INR 22.36 billion loss for the March quarter, much higher than the the INR 4.12 billion loss the Street had expected. Brokerages maintained their cautious outlook on the stock and said there are concerns about the lender's growth, especially when there is uncertainty about senior management transitions.

Among other stocks, NTPC Green Energy ended over 6% higher, extending its rise for the second straight session after the company's net profit for the quarter nearly tripled on year to INR 2.33 billion. Shares of Colgate-Palmolive (India) ended almost 7% lower after the company's net profit and revenue declined on year.

Among Nifty 500 stocks, Tata Teleservices (Maharashtra) ended 11% higher after a media report said Tata Sons may need to infuse fresh capital into the loss-making telecom arm to help it pay INR 192.56 billion in adjusted gross revenue dues to the government by March. Shares of Garden Reach Shipbuilders closed 10% higher after hitting an over-10-month high of INR 2797.40. The stock surged after the company emerged as the lowest bidder for the construction of next-generation corvettes for the Indian Navy.

* Of the Nifty 50 stocks, 8 rose and 42 fell

* Of the Sensex stocks, 4 rose and 26 fell

* On the NSE, 1,275 stocks rose, 1,582 fell, and 92 were unchanged

* On the BSE, 1,741 stocks rose, 2,178 fell, and 167 were unchanged

* Nifty FMCG: down 1.4%; Nifty IT: down 1.3%; Nifty India Defence: up 2.1%

BSE                                               NSE

Sensex: 80951.99, down 644.64 points or 0.8%      Nifty 50: 24609.70, down 203.75 points or 0.8%

End

Edited by Rajeev Pai

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