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Snapping four day winning streak, Indian equity benchmarks ended Tuesday’s trade in red terrain with frontline gauges ending below their crucial 49,200 (Sensex) and 14,900 (Nifty) levels. Markets started the day on pessimistic note amid concerns that the second wave of the coronavirus pandemic could bring down India's GDP growth. Sentiments also remained down beat after domestic rating agency Crisil warned India's economic growth may slip to 8.2 per cent in FY22 if the second wave peaks in end of June, maintaining its baseline estimate of 11 per cent uptick in activity. Adding more pessimism, State Bank of India’s economic research arm warned that a huge buildup of carry positions could negatively impact the exchange rate and lead to inflation. Besides, Regulator Sebi came out with disclosure requirements under business responsibility and sustainability reporting, covering environmental, social and governance perspectives, which will be applicable on the top 1,000 listed entities by market capitalisation.

However, markets pared some of their initial losses in noon deals but recovery proved short lives as sentiments turned fragile as World Health Organziation states that the coronavirus variant first identified in India last year was being classified as a variant of global concern, with some preliminary studies showing that it spreads more easily. The WHO has said the predominant lineage of B.1.617 was first identified in India in December, although an earlier version was spotted in October 2020. Traders were also remained anxious as Fitch Ratings said that there are growing indications that India's latest wave of Covid-19 infections will add to risks among financial institutions (FIs) by sapping near-term momentum from the economic recovery. Measures announced by the Reserve Bank of India (RBI) on May 5 will provide some relief to FIs in the next 12 to 24 months, but largely at the expense of postponing the recognition and resolution of underlying asset-quality problems. 

Weak opening in European counters too dampened sentiments. European markets were trading lower, joining a global selloff on heightened inflation fears. Asian markets settled mostly lower on Tuesday, after China's consumer price inflation rose moderately at a slower-than-expected pace in April, while producer prices grew at the fastest pace in more than three years driven by higher commodity prices. Consumer price inflation rose to 0.9 percent in April from 0.4 percent in March, the National Bureau of Statistics reported. On a monthly basis, consumer prices dropped 0.3 percent versus an expected fall of 0.2 percent.

Back home, India continues to witness decline in the number of daily Covid-19 cases. The country recorded 329,517 infections, taking its tally to almost 23 million, Wordometer showed. On a positive note, more than 19 million patients have recovered. On the sectoral front, banking stocks were in focus as the Reserve Bank came out with modified guidelines that allow sound private sector banks to undertake government business, whether at the Centre or in states. According to the modified norms, scheduled private sector banks, which are not under the Prompt Corrective Action (PCA) framework of the RBI, can undertake government business after executing an agreement with the central bank.

Finally, the BSE Sensex declined 340.60 points or 0.69% to 49,161.81, while the CNX Nifty was down by 91.60 points or 0.61% to 14,850.75.

The BSE Sensex touched high and low of 49,304.47 and 48,988.18, respectively and there were 11 stocks advancing against 19 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.60%, while Small cap index was up by 0.80%.

The top gaining sectoral indices on the BSE were Utilities up by 2.74%, Oil & Gas up by 2.68%, PSU up by 2.44%, Power up by 1.97% and Energy up by 1.14%, while Metal down by 1.07%, Bankex down by 1.02%, IT down by 0.71%, TECK down by 0.67% and Telecom down by 0.52% were the top losing indices on BSE.

The top gainers on the Sensex were NTPC up by 4.60%, ONGC up by 3.69%, Power Grid Corporation up by 1.66%, Sun Pharma up by 1.39% and Ultratech Cement up by 1.27%. On the flip side, Kotak Mahindra Bank down by 3.00%, HDFC down by 2.68%, Tech Mahindra down by 1.53%, Bajaj Finance down by 1.28% and Titan Company down by 1.27% were the top losers.

Meanwhile, domestic rating agency Crisil has warned India's economic growth may slip to 8.2 per cent in FY22 if the second wave peaks in end of June, maintaining its baseline estimate of 11 per cent uptick in activity. The agency made it clear that the risks to its 11 per cent growth forecast are ‘firmly tilted downwards’, and presented two likely scenarios. If the second wave peaks in May-end, the GDP expansion will come at 9.8 per cent, and can go down to 8.2 per cent in current fiscal if the peaking happens in June-end.

As per official estimates, the economy contracted by 7.6 per cent in FY21, because of the national lockdown. There have been a slew of downward revisions in growth estimates after the emergence of the second wave, which has overwhelmed the healthcare apparatus and also led to localised lockdowns across the country. It acknowledged the lockdowns are less restrictive right now, but the expanse of area under such measures is increasing with the ingress of the virus into the rural areas where healthcare infrastructure is weak.

It said the ongoing fiscal will be a story of two halves growth in the first one till September will be supported by a base effect despite the spread of the pandemic, while growth will be better spread in the second half stretching from October-March 2022. Besides, the agency said two ‘gigantic challenges’ confront the country, including the spread of the second wave and vaccination. On the former, it said while the second wave have been bigger spreaders globally, but added that the death rates are falling in India with the rise in infections. However, India ranks lowest among fully vaccinated populations, it said, recommending that rendering jabs to half of the population by festivities in October would be good.

The CNX Nifty traded in a range of 14,771.40 and 14,900.00 and there were 22 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were Coal India up by 5.88%, NTPC up by 4.64%, Indian Oil Corporation up by 4.59%, ONGC up by 3.69% and BPCL up by 1.88%. On the flip side, JSW Steel down by 3.22%, Hindalco down by 3.04%, Kotak Mahindra Bank down by 2.98%, HDFC down by 2.65% and Divis Lab down by 1.59% were the top losers.

European markets were trading lower, UK’s FTSE 100 decreased 162.39 points or 2.28% to 6,961.29, France’s CAC decreased 124.33 points or 1.95% to 6,261.66 and Germany’s DAX was down by 320.45 points or 2.08% to 15,079.96.

Asian markets settled mostly lower on Tuesday following tech sell-off on Wall Street overnight with worries about accelerating US inflation. Japanese shares ended lower amid concerns surrounding the nation's worsening situation of the corona-virus pandemic, while domestic firms’ lacklustre corporate earnings also adding downward pressure on market sentiments. Hong Kong shares declined as factory-gate inflation in mainland China fuelled concerns about tightening monetary policy. Reports showed Chinese consumer prices in April jumped 0.9 percent from a year ago, slightly missing the 1 percent forecast. However, the producer price index surged 6.8 percent and well above forecast of 6.5 percent.

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