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Indian equity benchmarks gave up their early gains and ended lower by over half percent on Wednesday as investors turned cautious ahead of the key US retail inflation data due later tonight.  Benchmark indices made optimistic start and stayed in green in first half of trading session, as traders took encouragement with the government data showed that India's factory output measured by the Index of Industrial Production (IIP) posted a robust growth of 19.6 per cent in May 2022, sharply higher from 7.1 per cent recorded in the previous month. Also, India's retail inflation eased marginally to 7.01 per cent in June from 7.04 per cent in the previous month helped by softening crude and edible oil prices. Traders took note of report that Finance minister Nirmala Sitharaman has asserted that the pointed attack on inflation will need to continue, and that she has been monitoring price pressure item by item, as elevated inflation ultimately crimps growth.   

However, key gauges entered into negative terrain in the afternoon session, as investor sentiments got hit a with a private report that the country's current account deficit is likely to touch $105 billion or 3 per cent of the GDP this fiscal, mainly due to continuously widening trade deficit. Some concern also came after private report lowered its India gross domestic product growth projection for 2023 by 70 basis points from 5.4% to 4.7% as economic recovery faces several headwinds.  Adding to the pessimism, domestic rating agency ICRA in its latest report has said that rising bond yields will force banks to report Mark-To-Market (MTM) losses of up to Rs 13,000 crore on their investment portfolios in the April-June quarter (Q1FY23).

On the global front, European markets were trading lower on fears that central bank moves to fight inflation would spark a recession. However, data showed earlier in the day that Eurozone industrial production rose 0.8 percent sequentially in May, well above expectation for a 0.2 percent increase. Asian markets ended mixed on Wednesday as investors awaited the release of a highly anticipated U.S. inflation report later in the day. Economists forecast headline inflation accelerated to 8.8 percent year-on-year in June, marking a 40-year high.

Back home, hotel industry stocks were in watch, as rating agency ICRA in its latest report has said that the hotel industry's revenues and margins are expected to return to pre-COVID levels in 2022-23 despite the potential impact on demand in case of further waves of the pandemic. Power stocks were in focus as India's power minister said the current global energy crisis is likely to go on for some time due to the cartelisation of the fossil fuel industry, not just because of the Ukraine conflict.

Finally, the BSE Sensex fell 372.46 points or 0.69% to 53,514.15 and the CNX Nifty was down by 91.65 points or 0.57% to 15,966.65.

The BSE Sensex touched high and low of 54,211.22 and 53,455.26, respectively. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.32%, while Small cap index was up by 0.04%.

The top gaining sectoral indices on the BSE were Healthcare up by 0.97%, FMCG up by 0.85%, Metal up by 0.83%, Basic Materials up by 0.69% and Consumer Discretionary up by 0.25%, while Utilities down by 1.71%, Power down by 1.71%, Oil & Gas down by 1.43%, Energy down by 1.26% and Telecom down by 1.07% were the top losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 1.97%, Asian Paints up by 1.70%, Kotak Mahindra Bank up by 1.40%, Sun Pharma up by 1.09% and NTPC up by 1.02%. On the flip side, Indusind Bank down by 3.42%, Bharti Airtel down by 2.87%, HDFC down by 2.53%, HDFC Bank down by 2.35% and Reliance Industries down by 1.77% were the top losers. 

Meanwhile, with consumer price inflation remaining high, Finance Minister Nirmala Sitharaman has said the government is watchful of the price situation and will continue the pointed attack on inflation. Retail inflation in June eased to 7.01 per cent in June. The print was lower than 7.04 per cent recorded in May but still higher than RBI's comfort level of 6 per cent.

She stated ‘As the RBI has estimated, till the start of the second half of the year, both the central bank and the government will have to be mindful. We will have to be mindful and watchful of how the price movement is. I will keep monitoring item by item to rein in prices for anything that goes haywire. This pointed attack on inflation will need to continue.’

Besides, ‘I see monsoon being favourable to agriculture. (Farm) Production will be good and rural demand will remain intact,’ Sitharaman said, remaining cautiously optimistic about inflation.

The CNX Nifty traded in a range of 16,140.00 and 15,950.15. There were 27 stocks advancing against 23 stocks declining on the index.

The top gainers on Nifty were Divi's Lab up by 2.62%, JSW Steel up by 2.29%, Hindustan Unilever up by 1.94%, Cipla up by 1.85% and Grasim Industries up by 1.66%. On the flip side, Indusind Bank down by 3.13%, HDFC Bank down by 2.53%, Bharti Airtel down by 2.46%, HDFC Bank down by 2.32% and Reliance Industries down by 1.71% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 54.27 points or 0.75% to 7,155.59, France’s CAC decreased 33.93 points or 0.56% to 6,010.27 and Germany’s DAX decreased 112.24 points or 0.87% to 12,793.24.

Asian markets ended mixed on Wednesday as investors cautiously awaiting the release of a highly anticipated US inflation report later in the day, which likely accelerated to a 40-year peak. Moreover, an overnight fall in Wall Street amid escalating fears about recession also added pressure on Asian market sentiments. South Korean shares gained on eased uncertainties about Bank of Korea's (BOK) rate decision. BOK delivered an unprecedented 0.5 percentage-point rate hike to combat fast-growing inflation pressure. Chinese shares traded almost flat with positive momentum despite renewed Covid-19 travel curbs in the country. Meanwhile, customs data showed that China's exports grew at their fastest pace in five months in June, and imports rose at a slower pace.

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