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Key gauges end Tuesday's trade slightly in red

Indian equity benchmarks ended Tuesday's session slightly in red despite scaling record highs earlier in the day. Domestic equity markets began trading with gains taking support from the commerce ministry’s data showing that growing for the second consecutive month, the country's exports rose 6.16 per cent year-on-year to $27.45 billion in January 2021 following healthy growth in pharma and engineering sectors. Trade deficit during the month narrowed to $14.54 billion from $15.3 billion in January 2020. It was $15.44 billion in December 2020. Imports in January 2021 rose 2 per cent to $42 billion. Some support also came with a private report that economic activity is on the verge of normality after getting severely hit by COVID-19 and Indian GDP will grow at 13.5 per cent in FY22. Sentiments remained positive with India Ratings and Research in a report stated that the aggregate fiscal deficit of states is likely to be at 4.3 per cent of the gross domestic product (GDP) in 2021-22 compared to 4.6 per cent in 2020-21. The rating agency has revised the outlook on state finances to stable for FY22 from stable-to-negative.

The benchmarks gave up all their in afternoon deals on account of a selling in private bank and IT stocks. However, losses remained capped as traders took some solace with S&P Global Ratings’ statement that India is on track for an economic recovery in the fiscal year ending March 2022. It said in a report titled 'Cross-Sector Outlook: India's Escape From Covid' that consistently good agriculture performance, a flattening of the Covid-19 infection curve and a pickup in government spending are all supporting the economy. Separately, the Department of Expenditure under the Ministry of Finance has released the 16th weekly instalment of Rs 5,000 crore to the States on Monday to meet the Goods and Services Tax (GST) compensation shortfall.

On the global front, Asian markets ended mostly higher on Tuesday as expectations for more fiscal stimulus and optimism about swifter economic recovery following a drop in new coronavirus cases and the faster rollout of COVID-19 vaccines across the world lifted the markets. Besides, upbeat corporate news and minutes from the Reserve Bank of Australia's February 2 monetary policy meeting that showed Australia's economy is recovering from the Covid-19 pandemic at a faster than expected pace generated positive sentiment. European markets were trading mostly in green, as underlying sentiment was underpinned by falling coronavirus infection rates, successful rollouts of Covid-19 vaccines in many countries and the possible easing of lockdown restrictions in England. Investors kept a wary eye on bond yields and awaited the release of German ZEW survey results and fourth quarter Eurozone GDP data for directional cues.

Back home, on the sectoral front, IT industry stocks edged lower despite industry lobby Nasscom’s statement that the Indian IT industry revenues are set to grow by 2.3 per cent to $194 billion in FY2020-21 and the exports will go up by 1.9 per cent to $150 billion. Banking stocks ended in red amid RBI data showed bank credit grew 5.93 per cent to Rs 107.05 lakh crore, while deposits rose 11.06 per cent to Rs 147.98 lakh crore in the fortnight ended January 29.

Finally, the BSE Sensex fell 49.96 points or 0.10% to 52,104.17, while the CNX Nifty was down by 1.25 points or 0.01% to 15,313.45.

The BSE Sensex touched high and low of 52,516.76 and 51,863.61, respectively and there were 14 stocks advancing against 16 stocks declining on the index. 

The broader indices ended in green; the BSE Mid cap index gained 0.19%, while Small cap index was up by 0.43%.

The top gaining sectoral indices on the BSE were Power up by 3.41%, Utilities up by 3.29%, Metal up by 3.08%, Energy up by 1.65%, Oil & Gas up by 1.55%, while IT down by 0.95%, TECK down by 0.84%, FMCG down by 0.70%, Consumer Durables down by 0.58% and Bankex down by 0.53% were the top losing indices on BSE.

The top gainers on the Sensex were Power Grid Corporation up by 6.24%, ONGC up by 5.44%, NTPC up by 2.94%, Kotak Mahindra Bank up by 1.78% and Reliance Industries up by 1.33%. On the flip side, Axis Bank down by 2.42%, ICICI Bank down by 2.30%, Nestle down by 1.50%, Infosys down by 1.50% and SBI down by 1.17% were the top losers.

Meanwhile, India Ratings and Research (Ind-Ra) in its latest report has said that the aggregate fiscal deficit of states is likely to be at 4.3 percent of the gross domestic product (GDP) in 2021-22 compared to 4.6 percent in 2020-21. It had earlier forecast FY21 fiscal deficit of states to be at 4.5 percent but revised it later due to a sharper-than-expected contraction of 6.1 percent y-o-y in the nominal GDP.

The agency has revised the outlook on state finances to stable for FY22 from stable-to-negative. It estimates the nominal GDP to grow 14.5 per cent in FY22, and believes a gradual pick-up in revenue collections could lead to an improvement in the capital expenditure from FY22. It noted that due to the economic downturn, even the union government finances are under pressure, leading to a lower-than-budgeted devolution of Rs 5.50 lakh crore to states in FY21 (revised estimate: RE) as against the budget estimate (BE) of Rs 8.03 lakh crore.

Ind-Ra said although it estimates the aggregate revenue receipt of the states to grow 8.4 per cent y-o-y in FY22 from a decline of 0.6 per cent in FY21 (f), the revenue deficit would persist in FY22. It expects the aggregate revenue deficit of states to come in at 1.5 per cent of GDP in FY22 as against FY21 (f) of 3.2 per cent. The pressure on the debt burden is likely to persist in FY22 due to a combination of revenue deficit, some pick-up in capex and repayment of past market borrowings.
The CNX Nifty traded in a range of 15,431.75 and 15,242.20 and there were 26 stocks advancing against 24 stocks declining on the index. 

The top gainers on Nifty were Power Grid Corporation up by 6.26%, ONGC up by 4.98%, Tata Steel up by 3.79%, Hindalco up by 3.64% and NTPC up by 2.78%. On the flip side, ICICI Bank down by 2.34%, Axis Bank down by 2.20%, Eicher Motors down by 1.63%, Nestle down by 1.60% and Tata Motors down by 1.30% were the top losers. 

European markets were trading mostly in green; UK’s FTSE 100 increased 5.60 points or 0.08% to 6,761.71 and France’s CAC increased 5.59 points or 0.1% to 5,791.84, while Germany’s DAX decreased 2.32 points or 0.02% to 14,107.16.

Asian markets ended mostly higher on Tuesday as expectations of quicker global economic recovery with optimism for more fiscal stimulus from United States and successful rollouts of Covid-19 vaccines in many countries kept the sentiments positive. Japanese shares gained, supported by exporters as weaker yen boosts sentiment. Meanwhile, Markets in Taiwan and China were closed for the Lunar New Year holidays.