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Indian equity benchmarks managed to close higher for the third straight session on Thursday, led by gains in index heavyweights like ITC, Larsen & Toubro and Asian Paints. The benchmarks fluctuated between gains and losses for most part of the day owing to volatility as weekly index futures and options expired. After making slightly positive start, key indices slipped into red as traders turned cautious amid reports of foreign fund outflows. Foreign institutional investors (FIIs) net sold shares worth Rs 579.27 crore, as per provisional data available on the NSE. Some anxiety also spread among investors with private report stated that India's retail inflation likely accelerated last month towards the upper limit of the Reserve Bank of India's target range as fruit and vegetable prices climbed. Adding to the pessimism, the Reserve Bank of India (RBI) admitted that credit growth is ‘very low’ given the size and growth rate of the economy and said for both the numbers to match, ‘the very very wide output gap’ has to close.  

Thereafter, the benchmarks recouped losses to trade in green terrain in second half of the session, as traders found some support with Pradeep Multani, President of PHD Chamber of Commerce and Industry’s statement that the accommodative policy stance at this juncture would not only pave the way for a double digit GDP growth in the current year 2021-22, but will also help in creating a strong, sustainable and vibrant economy going forward. Some solace also came with a private report stated that India's outbound goods shipments rose 44.24% year-on-year in the first week of December, led by a jump in exports of petroleum products, gems and jewellery and engineering goods. Merchandise exports were $8.5 billion during December 1-7.  Traders also took a note of report that Reserve Bank Governor Shaktikanta defended the central bank's more-than-anticipated dovish stance wherein the MPC unanimously voted to continue with an accommodative policy, saying ‘our overarching policy focus and priority now is supporting growth’ amid the threat of a third wave of COVID-19 and the legroom a cooling inflation print offers.

On the global front, Asian markets ended mostly higher on Thursday following the broadly positive cues from Wall Street, with investors weighing the effectiveness of existing vaccines against the Omicron variant of the coronavirus. Pfizer and BioNTech said early lab studies showed a third dose of their Covid-19 vaccine neutralises the variant. European markets were trading lower as worries about the economic impact of the Omicron coronavirus variant ebbed and data showed China's factory-gate inflation cooled slightly in November. Traders looked ahead to Friday's report of U.S. consumer inflation in November for additional clues on the Federal Reserve's next policy move.

Back home, on the sectoral front, insurance industry stocks were in focus as data from Irdai showed the gross direct premium written by non-life insurance companies rose by 5.5 per cent to Rs 15,743.22 crore in November. Besides, Power stocks were in action as Union power minister R K Singh approved 23 new inter-state transmission system projects worth Rs 15,893 crore. The new inter-state transmission system (ISTS) projects comprise 13 projects with an estimated cost of Rs 14,766 crore to be developed under Tariff Based Competitive Bidding (TBCB) and 10 projects with an estimated cost of Rs 1,127 crore to be developed under Regulated Tariff Mechanism (RTM). 

Finally, the BSE Sensex rose 157.45 points or 0.27% to 58,807.13 and the CNX Nifty was up by 47.10 points or 0.27% to 17,516.85.     

The BSE Sensex touched high and low of 58,889.96 and 58,340.85, respectively and there were 15 stocks advancing against 15 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.38%, while Small cap index was up by 0.80%.

The top gaining sectoral indices on the BSE were Capital Goods up by 1.98%, FMCG up by 1.46%, Energy up by 1.38%, Telecom up by 1.14%, Industrials up by 1.08% while, Bankex down by 0.53%, Finance 0.39%, Consumer Durables down by 0.27%, Realty down by 0.15% were the top losing indices on BSE.

The top gainers on the Sensex were ITC up by 4.60%, Larsen & Toubro up by 3.06%, Asian Paints up by 2.23%, Reliance Industries up by 1.59% and Mahindra & Mahindra up by 1.24%. On the flip side, HDFC Bank down by 1.67%, Titan Company down by 1.32%, Nestle down by 0.99%, NTPC down by 0.94% and Power Grid Corporation down by 0.83% were the top losers. 

Meanwhile, defending the central bank's more-than-anticipated dovish stance wherein the MPC unanimously voted to continue with an accommodative policy, Reserve Bank of India (RBI) Governor Shaktikanta Das has said that ‘our overarching policy focus and priority now is supporting growth’ amid the threat of a third wave of COVID-19 and the legroom a cooling inflation print offers. But, he also said ‘maintaining price stability is also our concern along with financial stability as we are an inflation-targeting central bank’. The RBI's Monetary Policy Committee (MPC) left the key policy rates unchanged for the ninth time in a row. The repo rate was left at 4 per cent, which was on expected lines, while the reverse repo, which has been the effective policy rate since the pandemic hit in March 2020, was kept unchanged at 3.35 per cent.

Das said retail inflation is likely to ease to around 5 per cent next fiscal on the back of government measures to ease supplies, reduction in fuel prices and prospects of good crops. For FY22, retail inflation is pegged at 5.3 per cent and should inch down to 4 - 4.3 per cent by end-FY23. He added that reduction in excise duty and VAT on petrol and diesel will bring about a ‘durable reduction in inflation’ by way of direct effect as well as indirect effect through lower transportation cost. Despite sounding cautious about the possible impact of the Omicron variant, the central bank chose to keep its growth forecast unchanged at 9.5 per cent for the current fiscal (6.6 per cent in Q3 and 6 per cent in Q4). However, it added that recovery is not yet strong enough to be self-sustaining as activities of only a few key sectors have reached pre-pandemic levels, while the more important consumer demand and private capex are still a far cry.

He admitted that the economy is facing several challenges in terms of market volatility, rising crude oil and commodity prices and supply side disruptions like container and chips shortages. He said ‘and we've factored in all these while remaining accommodative in our policy stance.’ On whether the RBI is risking losing its inflation fight as it continues to provide liquidity to an already fund-flushed market, Das said looking at the surging inflation in various major advanced economies amid the Omicron threat, ‘being cautious was the best option left for us’.

The CNX Nifty traded in a range of 17,543.25 and 17,379.60 and there was 26 stocks advancing against 24 stocks declining on the index.   

The top gainers on Nifty were ITC up by 4.91%, Larsen & Toubro up by 3.01%, Asian Paints up by 2.20%, UPL up by 1.97% and Britannia Industries up by 1.52%. On the flip side, HDFC Bank down by 1.79%, Titan Company down by 1.35%, Nestle down by 1.12%, SBI Life Insurance Company down by 0.99% and NTPC down by 0.98% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 14.93 points or 0.2% to 7,322.12, France’s CAC decreased 5.38 points or 0.08% to 7,009.19 and Germany’s DAX decreased 44.76 points or 0.29% to 15,642.33.

Asian markets ended mostly higher on Thursday tracking Wall Street’s gains overnight after drug makers BioNTech and Pfizer said a third shot of their vaccine was found to neutralise the new Omicron variant in preliminary tests. Meanwhile, investors focus is now shifting to the release of US inflation data on Friday and next week's US Federal meeting. Chinese shares settled higher as investors digested the latest inflation data with the producer price index grew 12.9% year on year, while the consumer price index grew 2.3% year-on-year and 0.4% month-on-month in November. However, Japanese shares declined as investors turned cautious ahead of Fed, BOJ meetings next week.

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