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Indian equity benchmarks ended lower on Thursday after having run up for the last four consecutive session, with frontline gauges tumbling below their crucial 59,700 (Sensex) and 17,750 (Nifty) levels on sustained selling by funds and retail investors. The domestic markets witnessed a gap-down opening and extended their losses as rising Coronavirus cases in the country sparked fears of renewed curbs to contain the spread of the virus which may impact the nascent economic growth in the country. The sentiments remained down-beat as ICRA Ratings warned that the third wave of the pandemic is likely to shave 40 bps of the fourth quarter Gross Domestic Product (GDP) growth that may print in at 4.5-5 per cent. It said third wave of the pandemic has seen a massive spike in infections after the more infectious Omicron variant of the coronavirus appeared.

Frontline indices continued to trade in red terrain in afternoon deals, as traders remained cautious with report stating that the cost of debt-funds for the states has touched the highest level so far this fiscal with the weighted average cut-off crossing the 7.16 percentage points at the latest auctions, up 11 bps over the past week, reflecting the hardening yields even for the government securities. However, markets managed to cut some losses in late hour of trading session, as traders took some support with rating agency ICRA’s repost that a focussed road map, including timely interventions by the government, is necessary for the country in order to achieve the net zero target by 2070. It calls for timely interventions by the government and large capex/investments in GHG (greenhouse gas) emitting sectors like power, industry and transport. Traders took note that Union Minister of Commerce & Industry, Consumer Affairs, Food & Public Distribution and Textiles, Piyush Goyal called for transparency and the highest level of integrity in the stock markets, adding that this will empower households to look at greater incomes through investment besides encourage foreign investors. 

On the global front, Asian markets settled mostly lower on Thursday, while European markets were trading lower after the minutes from the Federal Reserve's most recent meeting suggested that most members of the committee were thinking interest rates would need to go higher, due to both inflation as well as a tight labor market which could be considered a sign of maximum employment. U.S. non-farm payroll data is set to be released on Friday, which would give further indication on how soon the central bank may raise rates. Back home, on the sectoral front, sugar stocks were in focus as the Centre issued guidelines for restructuring of loans taken by mills from the Sugar Development Fund (SDF), providing a moratorium for two years and then repayment in five years to eligible defaulting factories. There was some reaction in real estate industry stocks with a private report that housing sales across top eight cities rose 51 per cent last year, even as the office market continued to slump due to the COVID pandemic with gross leasing witnessing a 3 per cent fall.

Finally, the BSE Sensex fell 621.31 points or 1.03% to 59,601.84 and the CNX Nifty was down by 179.35 points or 1.00% to 17,745.90.          

The BSE Sensex touched high and low of 59,781.86 and 59,781.86, respectively and there were 7 stocks advancing against 23 stocks declining on the index.      

The broader indices ended mixed; the BSE Mid cap index fell 0.05%, while Small cap index was up by 0.01%.

The top gaining sectoral indices on the BSE were Telecom up by 1.31%, Auto up by 0.62%, Consumer Durables up by 0.41%, Utilities up by 0.34% and Oil & Gas up by 0.34%, while Realty down by 1.48%, IT down by 1.39%, Energy down by 1.29%, TECK down by 1.08%, Basic Materials down by 0.71% were the top losing indices on BSE.

The top gainers on the Sensex were Indusind Bank up by 1.74%, Bharti Airtel up by 1.46%, Maruti Suzuki up by 1.36%, Bajaj Finance up by 0.93% and Titan Company up by 0.79%. On the flip side, Tech Mahindra down by 2.56%, Ultratech Cement down by 2.49%, Reliance Industries down by 2.01%, HCL Technologies down by 1.99% and HDFC down by 1.88% were the top losers.

Meanwhile, ICRA Ratings has warned that the third wave of the pandemic is likely to shave 40 bps of the fourth quarter Gross Domestic Product (GDP) growth that may print in at 4.5-5 per cent. Third wave of the pandemic has seen a massive spike in infections after the more infectious Omicron variant of the coronavirus appeared. Admitting that it is too early to take a firm view as the third wave has just about started, the agency’s chief economist Aditi Nayar said given the early indications and the speed with which new infections are being reported, it can be surmised that there could be more mobility restrictions that will impact economic activities, especially in contact-intensive sectors.

However, she has retained the ‘full year GDP forecast at 9 per cent, with moderate downside risks’, and said anyways ICRA’s forecast was the lowest among the consensus numbers which vary from 8.5 to 10 per cent, with the RBI pegging it at 9.5 per cent. It is too early to revise the full year GDP growth down given the lack of data on the likely impact of the third wave. Besides, the government spending data for December is not out yet.

The agency has also retained Q3 growth forecast at 6-6.5 per cent, and said many high-frequency indicators have flattened in November, with slack emerging after the festive season and supply disruptions caused by heavy rainfall in the south. Nayar said ‘Our early analysis suggests that the impact of the Omicron wave may be limited to one quarter (Q4) in terms of the duration of the surge in fresh cases, as well as the economic impact given the better preparedness of governments, healthcare system and households.’ She also said given the recent surge in COVID-19 cases and widening of restrictions leading to heightened uncertainty, it is increasingly unlikely that the RBI will commence the much-delayed policy normalisation next month itself, unless inflation provides an acutely negative surprise.

The CNX Nifty traded in a range of 17,797.95 and 17,655.55 and there was 15 stocks advancing against 35 stocks declining on the index.

The top gainers on Nifty were UPL up by 2.21%, Indusind Bank up by 1.79%, Bajaj Auto up by 1.68%, Bharti Airtel up by 1.54% and Maruti Suzuki up by 1.24%. On the flip side, JSW Steel down by 2.98%, Ultratech Cement down by 2.67%, Shree Cement down by 2.59%, Tech Mahindra down by 2.51% and Adani Ports and SEZ down by 2.11% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 50.10 points or 0.67% to 7,466.77, France’s CAC decreased 83.21 points or 1.13% to 7,293.16 and Germany’s DAX decreased 162.83 points or 1% to 16,108.92.

Asian markets settled mostly lower on Thursday tracking sell-off in Wall Street overnight after the minutes from the US Federal Reserve's recent meeting signalled a possibility of earlier and faster interest rate hikes to cool inflation. Strong US ADP private payroll report sent Treasury yields higher also boosted expectations of early interest rate hikes. Chinese shares ended lower due to surge in Covid-19 infections. Data showed activity in China's services sector expanded at a faster pace in December. The services sector in China continued to expand in December, and at a faster pace, the latest survey from Caixin revealed with a services PMI score of 53.1 in December up from 52.1 in November. Meanwhile, Japan's services sector activity expanded at a slower pace in December. The final au Jibun Bank Japan Services Purchasing Managers' Index (PMI) dropped to a seasonally adjusted 52.1 from the prior month's 53.0, which was the highest reading since August 2019.

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