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Markets continue sluggish trade amid concerns over possible widening of US’ federal deficit
May-22-2025

Indian equity markets have added some losses in late trade after longer-dated US Treasury yields hit their highest in 18 months on concerns that a new budget proposal could swell the country's federal deficit. Investors maintained risk averse approach after President Trump championed an extension of his 2017 tax cuts, which could add trillions to the federal governments already massive $36.2 trillion debt pile. Market participants wary that this could stretch the deficit even more, especially as interest payments continue to soar. Meanwhile, trader paid no heed towards HSBC Flash India PMI report showing private sector growth in India moved up a gear during May, boosted by acceleration in the service economy. The HSBC Flash India Composite Output Index -- a seasonally adjusted index that measures the month-on-month change in the combined output of India's manufacturing and service sectors -- surged to 61.2 in May from a final reading of 59.7 in April.

On the global front, Asian equity markets are trading mostly in red, tracking cues from Wall Street. European equity markets were trading lower as investors reacted to a US Treasury sell-off, mixed regional data and some disappointing earnings.

Back home, IT stocks have showed significant downside amid concerns over widening of US’ federal deficit, dragging BSE IT index down 1.53%.

The BSE Sensex is currently trading at 80564.38, down by 1032.25 points or 1.27% after trading in a range of 80518.09 and 81323.24. There were 2 stocks advancing against 28 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index plunged 0.89%, while Small cap index was down by 0.35%.

The lone gaining sectoral index on the BSE was Telecom up by 0.03%, while Energy down by 2.08%, Oil & Gas down by 1.91%, FMCG down by 1.64%, Consumer Durables down by 1.57% and IT down by 1.53% were the top losing indices on BSE.

The only gainers on the Sensex were Indusind Bank up by 0.29% and Bharti Airtel up by 0.04%. On the flip side, Mahindra & Mahindra down by 2.88%, Power Grid Corporation down by 2.41%, Tech Mahindra down by 2.32%, ITC down by 2.18% and NTPC down by 2.07% were the top losers.

Meanwhile, the HSBC Flash India PMI report has showed that private sector growth in India moved up a gear during May, boosted by acceleration in the service economy. There was also an improvement in business confidence for the first time since January. The HSBC Flash India Composite Output Index -- a seasonally adjusted index that measures the month-on-month change in the combined output of India's manufacturing and service sectors -- surged to 61.2 in May from a final reading of 59.7 in April. The HSBC Flash India Manufacturing PMI index also rose to 58.3 in May from 58.2 in April.

As per the report, goods producers indicated the slowest increase in output for three months during May, while service providers reported the fastest rise since March 2024. At the composite level, the latest upturn was the quickest in just over a year. The report further showcased reduced pressure on the operating capacities of Indian private sector companies, as outstanding business volumes rose at the slowest pace since September 2024. Service providers noted the weakest increase in backlogs for eight months and goods producers signaled no change since April.

On the inflation front, across the private sector, the rate of input cost inflation hit a five-month high and broadly converged to its long-run average. The acceleration was widespread across the manufacturing and service economies. Prices charged for Indian goods and services rose at a quicker rate in May, with the aggregate rate of inflation at a six-month high. Notably, manufacturing firms revealed the steepest increase in over 11-and-a-half years. Demand strength facilitated the pass-through of rising expenses to clients.

The CNX Nifty is currently trading at 24483.40, down by 330.05 points or 1.33% after trading in a range of 24473.30 and 24737.50. There were 2 stocks advancing against 48 stocks declining on the index.

The only gainers on Nifty were Indusind Bank up by 0.43% and Bharti Airtel up by 0.10%. On the flip side, ONGC down by 3.51%, Hindalco down by 3.01%, Mahindra & Mahindra down by 2.99%, Coal India down by 2.89% and Trent down by 2.61% were the top losers.

Asian markets are trading mostly in red; Hang Seng declined 283.47 points or 1.2% to 23,544.31, KOSPI dropped 31.91 points or 1.23% to 2,593.67, Shanghai Composite weakened 7.38 points or 0.22% to 3,380.19, Straits Times fell 2.95 points or 0.08% to 3,879.60, Taiwan Weighted lost 132.95 points or 0.61% to 21,670.96 and Nikkei 225 slipped 313.11 points or 0.85% to 36,985.87, while Jakarta Composite gained 29.78 points or 0.42% to 7,172.24.

European markets were trading lower; UK’s FTSE 100 decreased 60.24 points or 0.69% to 8,726.22, France’s CAC fell 56.06 points or 0.71% to 7,854.43 and Germany’s DAX lost 158.26 points or 0.66% to 23,964.14.
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