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EQUITY
Post Session: Quick Review
May-24-2022

Indian equity benchmarks witnessed a volatile trading session on Tuesday and ended with losses of over half percent, with Sensex and Nifty slipping below their crucial 54,550 and 16,150 levels, respectively. Markets made flat-to-positive start but soon erased gains to enter into negative territory, as traders turned cautious after 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. The agency said the hiccups in the recovery of the contact-intensive services attributable to the third wave of COVID-19 in the country may have also affected the economic growth in the quarter. Some concern also came with report stated that private equity investments in real estate fell by 62 per cent year-on-year to $1.18 billion during January-March period. The private equity (PE) inflows stood at $3.08 billion in the corresponding period of the last year.

However, key indices once again entered into green terrain and managed to keep head above water in noon deals, taking support from 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. Some support also came as a private report that the government’s cut in the fuel tax and measures to cool prices of iron, steel, coal, plastics and cement may drive down retail inflation in the short term. However, key gauges failed to hold gains and ended lower as some pessimism remained among traders 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.

On the global front, European markets were trading lower tracking declines in global stock markets with business expansion data for May renewing investor concerns over slowing economic growth and monetary policy tightening. Asian markets settled mostly lower on Tuesday as a further surge in coronavirus cases in Beijing ignited fears of economic slowdown amid supply chain concerns. Persistent inflation, looming interest rate hikes and the Ukraine war also weighed on market sentiment. Investors now look ahead to a speech from Jerome Powell on Tuesday and the latest Fed minutes on Wednesday for cues on the health and outlook for the global economy. Meanwhile, 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 ended at 53981.91, down by 306.70 points or 0.56% after trading in a range of 53886.28 and 54524.37. There were 8 stocks advancing against 22 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index fell 0.95%, while Small cap index was down by 1.12%. (Provisional)

The lone gaining sectoral index on the BSE was Bankex up by 0.26%, while IT down by 1.97%, TECK down by 1.81%, Utilities down by 1.76%, Power down by 1.70% and FMCG down by 1.47% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were HDFC up by 1.45%, Dr. Reddy's Lab up by 1.45%, Kotak Mahindra Bank up by 1.43%, HDFC Bank up by 1.28% and Power Grid Corporation up by 1.18%. On the flip side, Tech Mahindra down by 4.37%, Asian Paints down by 2.96%, HCL Technologies down by 2.91%, Hindustan Unilever down by 2.88% and Infosys down by 2.14% were the top losers. (Provisional)

Meanwhile, ICRA Ratings has expressed concerns over India’s economic growth and has 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.

It said the hiccups in the recovery of the contact-intensive services attributable to the third wave of COVID-19 in the country may have also affected the economic growth in the quarter. It noted that even the gross value added (GVA) at basic prices (at constant 2011-12 prices) in Q4 FY2022 seems to have eased to 2.7 per cent from 4.7 per cent in Q3 FY2022. The National Statistical Office (NSO) will release the fourth quarter numbers of fiscal 2022 on May 31.

ICRA’s Chief Economist Aditi Nayar said Q4 was a challenging quarter, with the Omicron-fuelled third wave of COVID-19 arresting the momentum in contact-intensive services, and a pervasive pressure on margins from higher commodity prices. Moreover, the heatwave adversely affected wheat output in March 2022. She said ‘we are apprehensive that both agriculture and industry will post a sub-1 per cent GVA growth in Q4 FY2022, whereas services growth will print at around 5.4 per cent’.

The agency further said that the recent cut in excise duties on petrol and diesel will help boost sentiments and improve consumers’ disposable incomes, while simultaneously cooling the CPI inflation. Last week, the government had cut excise duty on petrol by a record Rs 8 per litre and that on diesel by Rs 6 per litre to give relief to consumers battering under high fuel prices that has also pushed inflation to a multi-year high. Retail inflation, as measured by consumer price-based inflation (CPI), accelerated to an eight-year high of 7.79 per cent in April. ICRA projects the average CPI inflation for FY2023 at 6.5 per cent, pencilling in a 40 basis points repo rate hike in the June 2022 monetary policy review, amid a terminal rate of 5.5 per cent.

The CNX Nifty ended at 16130.80, down by 83.90 points or 0.52% after trading in a range of 16078.60 and 16262.80. There were 14 stocks advancing against 36 stocks declining on the index. (Provisional)

The top gainers on Nifty were Kotak Mahindra Bank up by 1.72%, Dr. Reddy's Lab up by 1.47%, HDFC up by 1.40%, HDFC Bank up by 1.29% and Power Grid Corporation up by 1.27%. On the flip side, Divi's Lab down by 6.01%, Tech Mahindra down by 4.12%, Grasim Industries down by 3.46%, ONGC down by 2.97% and Asian Paints down by 2.85% were the top losers. (Provisional)

European markets were trading lower; UK’s FTSE 100 decreased 24.62 points or 0.33% to 7,488.82, France’s CAC decreased 74.00 points or 1.16% to 6,284.74 and Germany’s DAX decreased 117.56 points or 0.83% to 14,057.84.

Asian markets settled mostly lower on Tuesday even after US President Joe Biden's comments that he was considering easing tariffs on Chinese goods. Market sentiments weakened further after social media platform Snap warned that it will miss earnings forecasts for the current quarter due to a faster than expected deterioration in macroeconomic conditions. Japanese shares slipped as a survey showed activity in the Japanese manufacturing sector grew at the slowest pace in three months in May amid supply bottlenecks, while Toyota announced a cut in its global production plan by one lakh in June amid chip crisis. Chinese shares settled lower after investment banks UBS Group and JPMorgan Chase downgraded their forecasts for China's economic growth this year. Hong Kong shares fell, led by declines from Chinese e-commerce giant Alibaba and video-sharing platform Kuaishou. Moreover, Seoul shares declined amid fears that the US central bank's tightening to curb inflation could hurt economic growth.

Asian Indices

Last Trade           

Change in Points

Change in %

Shanghai Composite

3,070.93-75.93-2.41

Hang Seng

20,112.10-357.96-1.75

Jakarta Composite

6,914.1473.361.07

KLSE Composite

1,531.30-11.23-0.73

Nikkei 225

26,748.14-253.38-0.94

Straits Times

3,195.04-18.61-0.58

KOSPI Composite

2,605.87-41.51-1.57

Taiwan Weighted

15,963.63-192.78-1.19
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