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Indian equity benchmarks edged lower in a volatile session on Tuesday despite stable global cues. Weakness in heavyweights from the sectors like Energy, PSU, Oil & Gas and Banking dragged the benchmarks lower. Key indices started in the negative territory, as traders got anxious with Finance Secretary T V Somanathan’s statement that the entire revenue loss on account of reduction in excise duty on petrol and diesel by Rs 10 and Rs 5 a litre respectively will be borne by the Centre. Some concern also came as All India Financial Institutions (AIFI) said that with the ripple down effect of declining automobile sales, the forging industry is facing the heat with a sharp decline in demand which has resulted in substantial production cuts. 

However, key indices recouped most of their losses in afternoon session, taking support from data showing that merchandise exports grew for the eleventh consecutive month to $35.65 billion, up 43 per cent on-year in October, as external demand continued to remain robust. The preliminary data released by the commerce and industry ministry showed growth being driven by higher demand for items, primarily engineering goods, petroleum products, gems and jewellery, as well as organic and inorganic chemicals, among other items.  Some support also came as the Reserve Bank of India (RBI) in its article on the state of the economy has stated that the Indian economy is on the path of a durable recovery on the back of conducive monetary and credit conditions, the global headwinds notwithstanding.

But, key indices failed to hold recovery and once again slipped to lower levels even as Union Finance Minister Nirmala Sitharaman’s statement that the Centre would release double the monthly amount of tax devolution -- a total of Rs 95,082 crore -- in November to enable the states to step up their capex and spur economic growth close to double digits this fiscal year. Traders even overlooked Reserve Bank Deputy Governor Michael Debabrata Patra’s statement that India is better positioned to face external shocks emanating from increasing geopolitical tensions, the aftermath of the COVID pandemic and the inevitability of climate change.

On the global front, Asian markets ended mostly higher on Tuesday, while European markets were trading mostly in green, as traders reacted positively to news of the leaders of the U.S. and China in a virtual summit, even as some uncertainty about the near-term outlook for the markets continue on lingering inflation concerns. Back home, on the sectoral front, NBFCs stocks were in focus with a private report stating that reflecting rising festival-like demand, NBFCs sanctioned 17 per cent more loans in Q2FY22. The personal loan segment saw strong traction of 90 per cent, followed by consumer loan at 58 per cent. Stocks related to steel industry were in watch as Union Steel Minister Ram Chandra Prasad Singh said the domestic steel consumption is expected to touch the 160-million tonne (MT) mark by the financial year 2024-25. During the financial year 2020-21, the total finished steel consumption in the country was at 96.2 MT, and the same is expected to reach about 160 MT by 2024-25, and about 250 MT by 2030-31.

Finally, the BSE Sensex fell 396.34 points or 0.65% to 60,322.37 and the CNX Nifty was down by 110.25 points or 0.61% to 17,999.20. 

The BSE Sensex touched high and low of 60,802.79 and 60,199.56, respectively and there were 9 stocks advancing against 21 stocks declineng on the index.   

The broader indices ended mixed; the BSE Mid cap index fell 0.22%, while Small cap index was up by 0.18%.

The top gaining sectoral indices on the BSE were Auto up by 2.61%, Consumer Discretionary up by 0.95%, IT up by 0.44%, Capital Goods up by 0.44% and Industrials up by 0.28%, while Energy down by 2.12%, PSU down by 1.29%, Oil & Gas down by 1.22%, Bankex down by 1.00% and Realty down by 0.88% were the top losing indices on BSE.

The top gainers on the Sensex were Maruti Suzuki up by 7.31%, Mahindra & Mahindra up by 3.44%, Tech Mahindra up by 1.56%, Larsen & Toubro up by 0.42% and Bajaj Finance up by 0.31%. On the flip side, Reliance Industries down by 2.58%, SBI down by 2.31%, Ultratech Cement down by 2.20%, NTPC down by 2.08% and Indusind Bank down by 1.84% were the top losers.

Meanwhile, Reserve Bank of India (RBI) in its article on the state of the economy has stated that the Indian economy is on the path of a durable recovery on the back of conducive monetary and credit conditions, the global headwinds notwithstanding. Domestically, there have been several positives on the COVID-19 front, in terms of reduced infections and faster vaccinations. The article said the Indian economy is clearly differentiating itself from the global situation, which is marred by supply disruptions, stubborn inflation and surges of infections in various parts of the world. Notwithstanding the global headwinds, the article said mobility is rapidly improving, the job market is recouping, and overall economic activity is on the cusp of a strengthening revival.

It noted ‘Overall monetary and credit conditions stay conducive for a durable economic recovery to take root’. The global economic outlook remains clouded by uncertainty with headwinds from multiple fronts at a time when many economies are still struggling with nascent recoveries. There is a risk of faster policy normalisation by major central banks leading to tightening of financial conditions and stifling of growth impulses, the article said. The central bank said views expressed in this article are those of the authors and do not necessarily represent the views of the Reserve Bank of India. On capital markets, it said the Indian equity market has outperformed major equity indices in 2021 so far.

It said ‘the spectacular gains have raised concerns over overstretched valuations with a number of global financial service firms turning cautious on Indian equities’. Despite widespread concerns over valuations, the article said it is noteworthy that the percentage holding of private promoters in companies listed on NSE increased by nearly 50 basis points to 44.90 per cent at September-end 2021 from 44.42 per cent at June-end 2021. The article also said that although only 5.2 per cent of the budgeted disinvestment target of Rs 1.75 lakh crore has been achieved so far, ‘the sale of Air India has marked a turning point in the disinvestment programme of the government’.

The CNX Nifty traded in a range of 18,132.65 and 17,958.80 and there were 13 stocks advancing against 37 stocks declining on the index.

The top gainers on Nifty were Maruti Suzuki up by 7.28%, Mahindra & Mahindra up by 2.87%, Tata Motors up by 2.47%, Hero MotoCorp up by 1.92% and Tech Mahindra up by 1.32%. On the flip side, Shree Cement down by 3.19%, Reliance Industries down by 3.12%, Hindalco down by 2.54%, SBI down by 2.43% and Tata Consumer Products down by 2.31% were the top losers.

European markets were trading mostly in green; France’s CAC increased 14.66 points or 0.21% to 7,143.29 and Germany’s DAX increased 33.42 points or 0.21% to 16,182.06, while UK’s FTSE 100 decreased 2.36 points or 0.03% to 7,349.50.

Asian markets ended mostly higher on Tuesday as a virtual summit between US President Joe Biden and Chinese President Xi Jinping ended with a pledge to improve cooperation. Meanwhile, investors are awaiting speeches of US Federal Reserve officials this week for further clues on interest rates and monetary policy. Hong Kong shares gained as authorities in several mainland provinces appear to have relaxed rules to spur home sales. Japanese shares ended tad higher, but erased most of its early gains amid lack of major market moving cues. However, Chinese shares declined as the country battled its biggest corona-virus outbreak caused by the highly transmissible delta variant.

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