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Benchmarks continue to trade in red terrain in morning deals
May-24-2022

Indian equity benchmarks continued to trade in red terrain in morning deals, on account of selling in frontline blue chip counters. Traders remained cautious with Moody's Investors Service stated that the prolonged high temperatures, which are affecting much of the northwest of the country, will curb wheat production and could lead to extended power outages, exacerbating already high inflation and hurting growth, are credit negative for India. Some pessimism also came in as ICRA Ratings said the economic growth may have slowed to 3.5 per cent in fourth quarter of 2021-22 from 5.4 per cent in the previous three-month period due to the impact of higher commodity prices on margins, decline in wheat yields and on higher base. However, losses remain capped as some support came with Niti Aayog CEO Amitabh Kant’s statement that India is in the midst of a major transformation in the digital space, and a strong political leadership and the commitment to continue with radical reforms would play a key role in taking the country to a leadership role in the global economy.

On the global front, Asian markets are trading mostly in red, as a cautious undertone prevailed as the odds narrowed on a July rate rise by the ECB. Lingering concerns around China's zero-COVID policy and increasing concerns over the potential for a recession also weighed on sentiment. Besides, the latest survey from Jibun Bank showed the manufacturing sector in Japan continued to expand in May, albeit at a slower pace with a manufacturing PMI score of 53.2. That's down from 53.5 in April, although it remains above the boom-or-bust line of 50 that separates expansion from contraction.

The BSE Sensex is currently trading at 54088.53, down by 200.08 points or 0.37% after trading in a range of 54021.27 and 54463.13. There were 9 stocks advancing against 21 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell 0.61%, while Small cap index was down by 0.63%.

The top gaining sectoral indices on the BSE were PSU up by 0.11%, Bankex up by 0.10% and Auto up by 0.07%, while IT down by 1.39%, TECK down by 1.38%, FMCG down by 1.06%, Healthcare down by 1.02% and Capital Goods down by 0.91% were the top losing indices on BSE.

The top gainers on the Sensex were Power Grid Corporation up by 1.67%, Mahindra & Mahindra up by 1.08%, Dr. Reddy's Lab up by 1.02%, Indusind Bank up by 0.73% and SBI up by 0.65%. On the flip side, Hindustan Unilever down by 2.73%, Tech Mahindra down by 1.91%, Infosys down by 1.90%, Bajaj Finserv down by 1.64% and HCL Technologies down by 1.49% were the top losers.

Meanwhile, Ratings agency Icra has said that steel industry has been hit by a moving train as government cracks the whip and imposes export duty to reign in elevated prices. Almost 95 per cent of India's finished steel export basket has been hit with 15 per cent export duties. It noted domestic steel prices could potentially correct by 10-15 per cent in the coming months as demand enters the seasonally weak monsoon quarter.

Further, it said expansion plans of many steelmakers could also be impacted if the duties are maintained in the medium term.  Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, Icra, said in FY22, Indian mills recorded a 25 per cent year-on-year growth in finished steel exports as they took the benefit of elevated seaborne prices. Europe, Vietnam and the Middle East were the three largest destinations for Indian steel exports, together accounting for around 50 per cent of India's overall steel exports.

He added ‘We believe that many of these destinations would become less attractive now as mills evaluate the economics of a higher duty. Additionally, with steel export offers for deliveries to Europe being higher by 10-11% over more competitive markets like South-East Asia and the Middle East, the adverse impact of the new export duties on steel exports to Europe would be relatively less severe than that of South-East Asia and the Middle Eastern markets.’ The government hiked the duty on exports of iron ore by up to 50 per cent and a few steel intermediaries to 15 per cent. It also announced waiving of customs duty on the import of some raw materials, including coking coal and ferronickel, used by the steel industry.

The CNX Nifty is currently trading at 16152.40, down by 62.30 points or 0.38% after trading in a range of 16117.10 and 16262.80. There were 13 stocks advancing against 37 stocks declining on the index.

The top gainers on Nifty were Power Grid Corporation up by 1.67%, Dr. Reddy's Lab up by 1.22%, JSW Steel up by 1.12%, Mahindra & Mahindra up by 0.89% and SBI up by 0.77%. On the flip side, Divi's Lab down by 5.44%, Grasim Industries down by 4.47%, Hindustan Unilever down by 2.39%, Infosys down by 1.76% and Bajaj Finserv down by 1.67% were the top losers.

Asian markets are trading mostly in red; Hang Seng decreased 340.19 points or 1.66% to 20,129.87, Nikkei 225 slipped 221.94 points or 0.82% to 26,779.58, Taiwan Weighted dropped 146.02 points or 0.9% to 16,010.39, Shanghai Composite declined 39.91 points or 1.27% to 3,106.95 and KOSPI fell 29.77 points or 1.12% to 2,617.61.

On the flip side, Straits Times advanced 1.77 points or 0.06% to 3,215.42 and Jakarta Composite soared 74.19 points or 1.08% to 6,914.97.
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