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Halting a three-day winning streak, Indian equity benchmarks came under heavy selling pressure and settled with losses of over a percent on Friday. The markets had a weak start and selling accentuated throughout the session as Former Reserve Bank of India Governor D Subbarao said the concern today was that the low interest rates and the enormous liquidity available in the system could potentially disrupt financial stability. He added that the challenge for central banks and for the Reserve Bank of India was to juggle between maintain price stability, supporting growth and employment, preserving financial stability and all this in a globalised world. Some concern also came as Finance Minister Nirmala Sitharaman’s statement that the Indian economy suffered the biggest contraction due to the COVID-19 pandemic, but the government has been able to contain retail inflation at 6.2 percent. She also said that the Indian economy suffered Rs 9.57 lakh crore loss due to the pandemic, compared to a loss of Rs 2.12 lakh crore during the global meltdown in 2008-09.

Market participants overlooked Union Revenue Secretary Tarun Bajaj’s statement the country's fiscal deficit will come down once revenues start to grow. He said that the government had adopted a loose fiscal policy on the backdrop of increased capital expenditure. Traders also paid no heed towards RBI report that the consumer confidence has shown gradual improvement for the third successive round of the survey. The Reserve Bank of India (RBI) said the current situation index (CSI) increased marginally on the back of better sentiments on general economic situation, household income and spending. Meanwhile, the Reserve Bank of India (RBI) Governor Shaktikanta Das has urged banks and NBFCs to continue the process of augmentation of capital and building up of appropriate buffers to meet future uncertainties.

On the global front, Asian markets settled mostly lower on Friday, European markets were trading lower as traders reacted to data from the U.S. that showed a bigger than expected increase in U.S. consumer price growth, fueling concerns that the Federal Reserve will increase interest rates more aggressively to fight elevated inflation. Traders also remain worried and cautious amid the rapid spread of the coronavirus Omicron variant in most countries and the likely economic impact. Back home, on the sectoral front, textile industry stocks were in focus as India Ratings and Research (Ind-Ra) said reduction in impact of Covid-19's third wave, as well as accelerated re-opening activities, will boost textile demand in FY23. There was some reaction in healthcare industry stocks as the Reserve Bank of India (RBI) proposed to extend the term-liquidity facility of Rs 50,000 crore offered to emergency health services by three months till June 30, 2022.

Finally, the BSE Sensex fell 773.11 points or 1.31% to 58,152.92 and the CNX Nifty was down by 231.10 points or 1.31% to 17,374.75.  

The BSE Sensex touched high and low of 58,447.15 and 57,914.10, respectively. There were 5 stocks advancing against 25 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 1.84%, while Small cap index was down by 1.90%.

The top losing sectoral indices on the BSE were IT down by 2.55%, TECK down by 2.41%, Consumer Durables down by 2.29%, Realty down by 2.01%, Basic Materials down by 1.67%, while there were no gaining sectoral indices on the BSE.

The top gainers on the Sensex were Indusind Bank up by 0.94%, Tata Steel up by 0.52%, NTPC up by 0.51%, Mahindra & Mahindra up by 0.09% and ITC up by 0.09%. On the flip side, Tech Mahindra down by 2.94%, Infosys down by 2.71%, HCL Technologies down by 2.16%, Ultratech Cement down by 2.16% and Wipro down by 2.07% were the top losers.

Meanwhile, India Ratings and Research (Ind-Ra) has said that reduction in impact of Covid-19's third wave, as well as accelerated re-opening activities, will boost textile demand in next financial year (FY23). It cited that reduction in logistics issues for export demand will aid in keeping healthy demand. It mentioned domestic demand for all the textile sub-sectors has continued to improve from 2QFY22, after a slight dip in 1QFY22. The increased demand momentum along with the supply chain issues has increased the realizations.

Demand for cotton remained all-time high in 2HFY21, leading to reduced opening stock for the new cotton season. The rise in prices of cotton has led spinners to accumulate the stock. Furthermore, it said that demand for MMF (man-made fibre) has continued to increase, mainly due to the rise in cotton prices, leading to a shift of demand from cotton to MMF, to an extent. The demand momentum sustained for home textiles in the domestic market because of improved consumer spending.

In addition, it cited that textile exporters in the cotton yarn segment continued to witness an improvement during 7MFY22 with volumes exceeding 47 per cent YoY over FY21. It expects export volumes to remain higher for FY22 over FY20 and FY21, on back of an increasing demand for Indian yarn. The export of fabric and apparel also recovered to the Pre-Covid levels during 8MFY22 and is likely to sustain with the opening up of economies and the adoption of 'China Plus One' strategy by importing countries.

The CNX Nifty traded in a range of 17,454.75 and 17,303.00 and there was 5 stocks advancing against 45 stocks declining on the index.  

The top gainers on Nifty were Indian Oil Corporation up by 1.79%, Indusind Bank up by 0.48%, Tata Steel up by 0.28%, NTPC up by 0.18% and BPCL up by 0.04%.  On the flip side, Grasim Industries down by 3.39%, Tech Mahindra down by 3.05%, Infosys down by 2.82%, UPL down by 2.43% and HCL Technologies down by 2.39% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 55.66 points or 0.73% to 7,616.74, France’s CAC decreased 80.33 points or 1.13% to 7,021.22 and Germany’s DAX decreased 97.81 points or 0.63% to 15,392.63.

Asian markets settled mostly lower on Friday, followed by overnight sell-off in Wall Street as surging US inflation fuelled worries about bets for more aggressive interest rate hikes by the Federal Reserve. Data showed that consumer prices surged an annual 7.5 percent last month, marking the biggest annual increase in inflation in 40 years. Meanwhile, St. Louis Federal Reserve President James Bullard said the data had made him dramatically more hawkish and he would prefer a 50-bps rate hike in March and wants a full percentage point of interest rate hikes by July 1. Chinese markets closed lower as Shares and bonds of Chinese property developer Zhenro Properties declined heavily on redemption worries. Japanese markets were closed for National Foundation Day holiday.

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