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Indian equity benchmarks snapped two-day losing streak and ended higher on Tuesday aided by market heavyweight Mahindra & Mahindra, Bajaj Finserv and Titan Company. After making cautious start, key gauges traded in green terrain, as the finance ministry has notified the consolidated rules for overseas investment by Indian entities to promote ease of doing business. The Foreign Exchange Management (Overseas Investment) Rules, 2022 will subsume extant regulations pertaining to Overseas Investments and Acquisition and Transfer of Immovable Property Outside India Regulations, 2015. Some support also came with a private report stating that the Centre may release about Rs 30,000 crore soon as GST (goods and services tax) compensation for June 2022, the last month of the five-year guaranteed compensation pledged by the Union government.

However, key gauges slipped into red terrain in afternoon deals, as foreign institutional investors sold Rs 453.77 crore in the Indian markets on August 22. Some cautiousness also came in as a recent study by the Reserve Bank of India (RBI) shows project loan demand by Indian companies for capex in 2021-22 (FY22) did not pick up like it did in the preceding years. Domestic sentiments remained pessimistic, as the government introduced new set of rules for domestic entities, including companies and large family offices and start-ups, opting for overseas direct investment route (ODI), which could impact their acquisition decisions in a big way. But, key gauges erased losses to end higher, taking support from private report stating that The Reserve Bank's rate setting panel is likely to opt for slowing down the pace of hikes and increase the repo rate by 0.25 per cent in September. The central bank has already hiked the repo rate by 1.40 per cent in three consecutive actions since May this year, in response to the uncomfortably high inflation which has been consistently breaching upper end of the tolerance band set by the government to the RBI.

On the global front, European markets were trading lower as the deepening energy crisis in the region fueled recession fears. Besides, survey results showing that Europe's two largest economies both probably contracted in August. The composite purchasing managers indexes for Germany and France hit a 26-month low and 18-month low, respectively. Asian markets settled mostly lower on Tuesday as investors waited for Fed Chair Jerome Powell's comments on inflation and the rate outlook at the upcoming annual Jackson Hole economic symposium. Surging natural gas prices in Europe also added to the angst over global growth.

Back home, auto components industry stocks were in focus as industry body ACMA said Indian auto components industry clocked its highest-ever turnover of Rs 4.2 trillion in 2021-22, registering a growth of 23 per cent on the back of strong performance in exports and aftermarket. Diamond industry related stocks were in watch with a private report that India, which cuts or polishes about 90% of the diamonds sold in the world, is ramping up sales of laboratory-made gems as demand from the US surges and they become more accepted in other markets.

Finally, the BSE Sensex rose 257.43 points or 0.44% to 59,031.30 and the CNX Nifty was up by 86.80 points or 0.50% to 17,577.50.

The BSE Sensex touched high and low of 59,199.11 and 58,172.48, respectively. There were 21 stocks advancing against 9 stocks declining on the index. 

The broader indices ended in green; the BSE Mid cap index rose 1.03%, while Small cap index was up by 0.78%.

The top gaining sectoral indices on the BSE were Metal up by 2.08%, Auto up by 1.70%, PSU up by 1.51%, Consumer Durables up by 1.44% and Energy up by 1.28%, while IT down by 1.67% and TECK down by 1.35% were the few losing indices on BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 3.78%, Bajaj Finserv up by 2.75%, Titan Company up by 2.60%, Tata Steel up by 2.38% and SBI up by 2.12%. On the flip side, TCS down by 2.10%, Infosys down by 2.09%, HCL Technologies down by 1.25%, Hindustan Unilever down by 1.14% and Tech Mahindra down by 1.12% were the top losers.

Meanwhile, the finance ministry has notified the consolidated rules for overseas investment by Indian entities to promote ease of doing business. The Foreign Exchange Management (Overseas Investment) Rules, 2022 will subsume extant regulations pertaining to Overseas Investments and Acquisition and Transfer of Immovable Property Outside India Regulations, 2015. The finance ministry said ‘In view of the evolving needs of businesses in India, in an increasingly integrated global market, there is need of Indian corporates to be part of global value chain. The revised regulatory framework for overseas investment provides for simplification of the existing framework for overseas investment and has been aligned with the current business and economic dynamics’.

It said clarity on Overseas Direct Investment (ODI) and Overseas Portfolio Investment (OPI) has been brought in and various overseas investment related transactions that were earlier under approval route are now under automatic route, significantly enhancing ‘ease of doing business’. The new rules have included overseas investment in International Financial Services Centre (IFSC) by person resident in India. It said a person resident in India may make overseas investment in an IFSC in India within the limits. A person resident in India can make contribution to an investment fund or vehicle set up in an IFSC as OPI. It further said that a resident individual may make ODI in a foreign entity, including an entity engaged in financial services activity, (except in banking and insurance), in IFSC, if such entity does not have subsidiary or step down subsidiary outside IFSC where the resident individual has control in the foreign entity.

The ministry said that an authorised dealer bank including its overseas branch may acquire or transfer foreign securities in accordance with the terms of the host country or host jurisdiction, as the case may be, in the normal course of its banking business. Any resident individual can make ODI by way of investment in equity capital or OPI subject to the overall ceiling under the Liberalised Remittance Scheme of the Reserve Bank. Currently, the LRS permits $2,50,000 outward investment by an individual in a year. With regard to corporate, it said an Indian entity can make OPI not exceeding 50 per cent of its net worth as on the date of its last audited balance sheet. It also said corporates can make ODI by way of investment in equity capital for the purpose of undertaking bonafide business activity.

The CNX Nifty traded in a range of 17,625.55 and 17,345.20. There were 42 stocks advancing against 8 stocks declining on the index.  

The top gainers on Nifty were Mahindra & Mahindra up by 4.10%, Eicher Motors up by 3.17%, Bajaj Finserv up by 3.01%, Titan Cmpanyo up by 2.75% and Tata Steel up by 2.71%. On the flip side, Infosys down by 1.74%, TCS down by 1.59%, Divi's Lab down by 1.33%, Hindustan Unilever down by 1.21% and HCL Technologies down by 0.98% were the top losers.

European markets were trading lower;  UK’s FTSE 100 decreased 28.92 points or 0.38% to 7,504.87, France’s CAC decreased 10.42 points or 0.16% to 6,368.32 and Germany’s DAX decreased 8.37 points or 0.06% to 13,222.20.

Asian markets settled mostly lower on Tuesday, tracking losses in Wall Street overnight ahead of US Fed Chair Jerome Powell's comments on inflation and the rate outlook at the upcoming annual Jackson Hole economic symposium. Further, surging natural gas prices in Europe stoked global recession fears and added pressure on market sentiments. Japanese shares declined after a PMI survey showed Japan’s manufacturing activity growth slowed to a 19-month low, as new orders continue to decline. Chinese shares dropped amid rising Covid-19 cases and extended power curbs in China, while investors fretted that recent support measures were not sufficient to prop up its beleaguered real-estate market.

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