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Benchmarks trade lower in early deals amid weak global cues
Oct-26-2020

Indian equity benchmarks made slightly negative start on Monday tracking weakness in global markets with rising coronavirus cases in the US as well in European countries. Markets are trading lower with minor cut in early deals on account of selling in Energy, Metal and Basic Materials counters. Traders were concerned with the minutes of the monetary policy committee's latest meeting showing that the second wave of COVID-19 remains a threat to the Indian economy, and the central bank believes monetary policy needs to remain accommodative despite inflationary pressures. Though, downside remained capped as the Reserve Bank of India (RBI) encourages investment in sovereign bonds as part of liquidity measures. The RBI is making longer-tenor sovereign bonds attractive again. Traders took note of report that industry body PHDCCI expects India’s GDP to contract by 7.9 percent in the current financial year and grow by 7.7 percent in 2021-22, assessing that the worst is over and the economy is on the verge of a slow recovery.

On the global front, most of the Asian markets were trading lower as investors keep a close eye on negotiations on a US stimulus package and rising Covid-19 cases in Europe and other parts of the world. The Hong Kong market is closed for a holiday. Back home, health sector stocks were in focus as government think tank Niti Aayog is looking at many reform ideas in the health sector, including aligning traditional and modern approaches for a larger good. In scrip specific development, Yes Bank gained on reporting Q2FY21 profit at Rs 129.4 crore as against the loss of Rs 600.1 crore.

The BSE Sensex is currently trading at 40601.24, down by 84.26 points or 0.21% after trading in a range of 40495.45 and 40724.40. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index lost 0.02%, while Small cap index was up by 0.51%.

The top gaining sectoral indices on the BSE were Telecom up by 0.97%, TECK up by 0.52%, IT up by 0.50%, Capital Goods up by 0.48%, Industrials up by 0.46%, while Energy down by 1.74%, Metal down by 1.46%, Basic Materials down by 0.39%, Realty down by 0.35%, Oil & Gas down by 0.29% were the top losing indices on BSE.

The top gainers on the Sensex were Indusind Bank up by 3.27%, Nestle up by 1.84%, Power Grid up by 1.15%, Bharti Airtel up by 1.07% and Larsen & Toubro up by 1.00%. On the flip side, Reliance Industries down by 2.08%, Tata Steel down by 1.74%, Bajaj Finance down by 0.96%, Asian Paints down by 0.80% and NTPC down by 0.64% were the top losers.

Meanwhile, Reserve Bank of India (RBI) Governor Shaktikanta Das has said that there is room for rate cut but monetary policy action would depend upon the evolving situation with regard to inflation which is currently above the tolerance level of the central bank. He said ‘I recognise that there exists space for future rate cuts if the inflation evolves in line with our expectations. This space needs to be used judiciously to support recovery in growth.’

Das has stated that the reconstituted Monetary Policy Committee (MPC), which met from October 7 to 9, had decided to keep the benchmark lending rates unchanged to revive growth on a durable basis and mitigate the impact of coronavirus disease (covid-19) pandemic on the economy, while ensuring that inflation remains within the target going forward. He also said after the sharpest contraction in economic activity in the first quarter of 2020-21, a number of high frequency indicators of economic activity for the second quarter suggest a sequential improvement. However, he said that there are downside uncertainties that could put sand in the wheels of this nascent recovery. He added that primary among them is the risk of a second wave of covid-19 pandemic. 

RBI Governor further said private investment activity is likely to be subdued, even as domestic financial conditions have eased significantly. He also said external demand is also expected to remain anaemic with sharp contraction in global economic activity and trade. As per RBI, the full year gross domestic product (GDP) is expected to contract by 9.5 per cent with a strong rebound next year. On the outlook for inflation, he said food inflation should moderate going forward on a combination of good kharif harvest and a favourable rabi season.

The CNX Nifty is currently trading at 11904.60, down by 25.75 points or 0.22% after trading in a range of 11877.00 and 11942.85. There were 25 stocks advancing against 25 stocks declining on the index.

The top gainers on Nifty were Indusind Bank up by 3.20%, Nestle up by 1.81%, Tata Motors up by 1.79%, Power Grid up by 1.20% and Eicher Motors up by 1.11%. On the flip side, JSW Steel down by 3.49%, Reliance Industries down by 2.11%, Hero MotoCorp down by 1.75%, Tata Steel down by 1.75% and GAIL India down by 1.26% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 lost 31.86 points or 0.14% to 23,484.73, Straits Times fell 2.42 points or 0.10% to 2,534.97, KOSPI declined 7.46 points or 0.32% to 2,353.35 and Shanghai Composite was down by 23.46 points or 0.72% to 3,254.54. On the other hand, Taiwan Weighted rose 30.24 points or 0.23% to 12,929.06 and Jakarta Composite increased 25.76 points or 0.50% to 5,137.95.

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