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Markets wipe out initial gains to end flat
May-06-2024

Indian equity benchmarks failed to hold on to their initial gains to end flat on Monday as traders turned worried amid growing uncertainty over the delay in rate cuts and persisting higher inflation. Key gauges started the day on an optimistic note after data from National Securities Depository (NSDL) showed that foreign portfolio investors (FPIs) have again returned as net buyers in the Indian stock market in May. Till May 3, they bought equities worth Rs 1,156 crore in India. In April, FPIs turned net sellers in Indian stocks, as the ongoing geopolitical crisis in the Middle East then likely pushed investors to take money off their portfolios. Traders also took note of report that growth in India's dominant services industry softened in April but remained sturdy on robust domestic and foreign demand, lifting business confidence to a three-month high. The HSBC final India Services Purchasing Managers' Index, compiled by S&P Global, fell to 60.8 in April from 61.2 in March, confounding a preliminary estimate for a rise to 61.7. Despite the decline in the headline reading, the figure still marked one of the fastest growth rates in just under 14 years.

However, markets witnessed gradual selloff which led markets to end flat as market participants started booking profits at higher levels. PSU banks underperformed due to the Reserve Bank of India’s (RBI) tighter norms on lending to projects under development. The broader indices also witnessed major selling pressure due to valuation concerns and profit booking. Cautiousness also remained on Dalal Street as RBI said India’s forex reserves dropped $2.412 billion to $637.922 billion as on April 26, in the third consecutive weekly decline in the reserves. Meanwhile, India has urged the Asian Development Bank (ADB) not to overlook its focus on reduction of remaining poverty while promoting sustainable growth for the member nations in the Asia Pacific region. Making intervention at the Board of Governors Business Session at the 57th Annual Meeting of ADB, India's Temporary Alternate Governor Vikas Sheel said the bank has played a critical role in facilitating measures of faster economic development, reducing poverty and promoting regional cooperation while effectively addressing the challenges and delivery of global public goods.

On the global front, European markets were trading higher, as weaker-than-expected April U.S. jobs report released on Friday boosted the case for rate cuts by the third quarter. Asian markets ended in green, after the private sector in Hong Kong continued to expand in April, although at a slower pace, with a services PMI score of 50.6. That's down from 50.9 in March, although it remains above the boom-or-bust line of 50 that separates expansion from contraction. The growth in output was supported by businesses working through their existing orders, which led to a seventh successive monthly reduction in the level of outstanding work.

Back home, banking stocks remained in focus as the Reserve Bank of India's weekly statistical supplement showed Indian banks' loans rose 19% in the two weeks to April 19 from a year earlier, while deposits rose 13.3%. As per the data, outstanding loans fell Rs 98,700 crore ($11.84 billion) to Rs 16,400,000 crore in the two weeks to April 19. Oil prices also remained in focus on the prospects of Saudi Arabian price hikes and rising tensions in the Middle East.

Finally, the BSE Sensex rose 17.39 points or 0.02% to 73,895.54 and the CNX Nifty was down by 33.15 points or 0.15% points to 22,442.70.

The BSE Sensex touched high and low of 74,359.69 and 73,786.29 respectively. There were 19 stocks advancing against 11 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.95%, while Small cap index was down by 1.06%.

The top gaining sectoral indices on the BSE were Realty up by 2.71%, TECK up by 0.77%, IT up by 0.65%, Healthcare up by 0.51% and FMCG up by 0.50%, while Consumer Durables down by 3.85%, PSU down by 2.91%, Oil & Gas down by 2.07%, Energy down by 1.93% and Utilities down by 1.76% were the top losing indices on the BSE.

The top gainers on the Sensex were Kotak Mahindra Bank up by 5.01%, TCS up by 2.13%, Hindustan Unilever up by 1.80%, Mahindra & Mahindra up by 1.47% and Sun Pharma up by 1.40%. On the flip side, Titan down by 7.18%, SBI down by 2.86%, NTPC down by 2.31%, Power Grid down by 1.22% and Larsen & Toubro down by 1.06% were the top losers.

Meanwhile, India’s services sector activity growth eased during the month of April but still one of the strongest growth rates seen in just under 14 years, amid favourable economic conditions, demand strength and rising intakes of new work. According to the survey report, the seasonally adjusted HSBC India Services PMI Business Activity Index fell to 60.8 in April from 61.2 in March. Further, the HSBC India Composite PMI Output Index -- which measures both manufacturing and services -- also eased to 61.5 in April as against 61.8 in March. 

The survey report noted that a few service providers in India showed an increased appetite for new hires in April, buoyed by rising inflows of new business. However, with several companies indicating that payroll numbers were sufficient for current requirements, the rate of job creation was marginal and softer than that seen at the end of the previous fiscal year. Outstanding business meanwhile increased for the twenty-eighth consecutive month in April, albeit at a slight pace that was softer than in March and broadly aligned with the average over this sequence.

On the price front, wage pressures and higher food prices led to another increase in cost burdens, which firms partially passed on to their customers. However, charge inflation eased from March's near seven-year high. Meanwhile, confidence among service providers towards the year-ahead outlook for business activity improved to a three-month high. Marketing efforts and efficiency gains, alongside plans to price competitively and predictions that demand conditions will remain favourable, boosted optimism.

The CNX Nifty traded in a range of 22,409.45 and 22,588.80. There were 24 stocks advancing against 26 stocks declining on the index.

The top gainers on Nifty were Britannia up by 6.68%, Kotak Mahindra Bank up by 5.02%, TCS up by 2.02%, Hindustan Unilever up by 1.77% and Mahindra & Mahindra up by 1.46%. On the flip side, Titan down by 7.18%, Adani Enterprises down by 3.96%, BPCL down by 3.11%, Coal India down by 2.95% and SBI down by 2.84% were the top losers.

European markets were trading higher; France’s CAC rose 61.05 points or 0.77% to 8,018.62 and Germany’s DAX gained 157.19 points or 0.87% to 18,158.79.

Asian markets finished in green on Monday, supported by weaker dollar, dipping bond yield notes, and rally in tech sector stocks. Shanghai stocks soared with optimism over continued jump in April manufacturing and service activity of China followed by the report of a private survey. Moreover, investor sentiments got kindled with the combination of earnings recovery, cheap valuations, and signs of new policy support from Beijing to ease a prolonged property crisis. Stock markets of Japan and South Korea were closed for holidays.

Asian Indices

Last Trade            

Change in Points

Change in %      

Shanghai Composite

3,140.72

35.90

1.14

Hang Seng

18,578.30

102.38

0.55

Jakarta Composite

7,135.89

1.17

0.02

KLSE Composite

1,597.39

7.80

0.49

Nikkei 225

--

--

--

Straits Times

3,303.19

10.26

0.31

KOSPI Composite

--

--

--

Taiwan Weighted

20,523.31

192.99

0.94
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