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Indian equity benchmarks closed in the red for second straight day on Friday dragged by heavy selling across the board. Indices opened a day with a strong gap down on weak global cues. The mood on the street remained cautious with the labour ministry’s statement that retail inflation for farm workers and rural labourers rise marginally to 3.92 per cent and 4.09 per cent in July, as compared to the previous month. The numbers in June had stood at 3.83 per cent and 4 per cent, respectively. Traders were also worried, after industry body FIEO said that bilateral trade with Afghanistan has been impacted and Indian exporters are concerned about their payments as banking services and remittances may face restrictions due to the ongoing situation in that country. 

Sentiments remained fragile in late afternoon session, even as rating agency ICRA’s report stated that India's Gross domestic product (GDP) growth is estimated to come at the deceptively high level of 20 percent and the gross value added (GVA) will register a growth of 17 percent for the April-June 2021 quarter (Q1FY22) but is far below the same in the pre-COVID times. Besides, India Ratings and Research (Ind-Ra) has revised upwards its 2021-22 (FY22) GDP growth forecast to 9.4 per cent, considering the surprisingly faster recovery after the second wave of COVID, higher exports and sufficient rainfall. Traders failed to take some support with Union Commerce and Industry Minister Piyush Goyal’s statement that exports have reached nearly $15 billion for the first half of August, after posting the highest-ever monthly performance in July at $35 billion. He said “It will be a record-breaking year for exports. Exports are engaging with new products, new services, new markets and the world is looking at India as a trusted partner. 

On the global front, Asian markets ended mostly lower on Friday following the mixed cues overnight from Wall Street, with falling commodity prices, renewed worries about slowing global economic recovery and uncertainty over Federal Reserve policy moves keeping investors nervous. The alarming spread of the highly contagious coronavirus variants in the region is also hurting sentiment. European markets were trading lower as separate data showed a surprise fall in U.K. retail sales last month. Sales volumes fell by 2.5 percent from June, marking the biggest drop since January when Britain returned to lockdown. Back home, on the sectoral front, sugar industry’s stocks were in focus as rating agency ICRA said firmed-up global prices have brightened the prospects of sugar exports from India for the 2021-22 marketing year starting October, even without the government subsidy. For the last two years, sugar exports have been undertaken with a government subsidy for a mandated quantity alone. About 6 million tonne quota was fixed for the 2020-21 marketing year (September-October) and mills have exported more than 90 per cent of it so far. Stocks related to Fertiliser industry also were in action, as rating agency ICRA in its latest report has said that even as there has been an 11 per cent decline in primary fertiliser sales volume during the first four months of FY2021-22, it is likely to improve and expected to be only marginally lower than the previous financial year.

Finally, the BSE Sensex fell 300.17 points or 0.54% to 55,329.32, while the CNX Nifty was down by 118.35 points or 0.71% to 16,450.50.   

The BSE Sensex touched high and low of 55,543.16 and 55,013.98, respectively and there were 8 stocks advancing against 22 stocks declining on the index.  

The broader indices ended in red; the BSE Mid cap index fell 1.91%, while Small cap index was down by 1.83%.

The only gaining sectoral indices on the BSE were FMCG up by 2.23%, while Metal down by 6.90%, Basic Materials down by 3.88%, Realty down by 3.50%, Industrials down by 2.32% and Capital Goods were the top losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 5.37%, Asian Paints up by 3.64%, Nestle up by 3.40%, Bajaj Finance up by 1.71% and HDFC up by 0.43%. On the flip side, Tata Steel down by 8.27%, SBI down by 3.07%, Dr. Reddy's Lab down by 2.81%, Sun Pharma down by 2.78% and Kotak Mahindra Bank down by 2.68% were the top losers.

Meanwhile, rating agency ICRA in its latest report has said that India's Gross domestic product (GDP) growth is estimated to come at the deceptively high level of 20 percent and the gross value added (GVA) will register a growth of 17 percent for the April-June 2021 quarter (Q1FY22) but is far below the same in the pre-COVID times. It said the low base of the last year, when the GDP had contracted by close to 24 percent, conceals the impact of the second wave of COVID-19 infections.

According to the report, economic activity is boosted by robust government capital expenditure, merchandise exports, and demand from the farm sector. It also said the GVA is estimated to contract 15 percent when compared to the preceding March quarter, which shows the impact of the second wave. It added that the double-digit expansion expected in YoY terms in Q1FY22 is deceptively high, as it benefits inordinately from last year's contracted base.

Based on its assessment of volumes and available earnings, ICRA is forecasting a GVA expansion in the industry at a considerable 37.5 percent, led by construction and manufacturing, which experienced significantly fewer curbs in the just-concluded quarter compared to the situation during last year's stringent nationwide lockdown. With a contraction in the Government of India's (GoI's) non-interest non-subsidy revenue expenditure and continued impairment in demand for contact-intensive services, the agency expects GVA in the services sector to post a relatively lower expansion of 12.7 percent in Q1FY22.

The CNX Nifty traded in a range of 16,509.55 and 16,376.05 and there were 8 stocks advancing against 42 stocks declining on the index.  

The top gainers on Nifty were Hindustan Unilever up by 4.86%, Britannia Industries up by 4.14%, Asian Paints up by 3.55%, Nestle up by 3.11% and Bajaj Finance up by 1.42%. On the flip side, Tata Steel down by 8.85%, JSW Steel down by 7.19%, Hindalco down by 5.84%, UPL down by 5.02% and Tata Motors down by 4.01% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 12.95 points or 0.18% to 7,045.91, France’s CAC decreased 22.05 points or 0.33% to 6,583.84 and Germany’s DAX decreased 71.05 points or 0.45% to 15,694.76.

Asian markets ended mostly lower on Friday, driven by lingering worries over the Delta coronavirus variant and prospects of an early stimulus tapering by the US Federal Reserve. Chinese shares ended lower due to heavy sell off in tech stocks as regulatory uncertainty surrounding the sector lingers. While the People's Bank of China (PBoC) left its benchmark lending rate unchanged as widely expected. China’s one-year loan prime rate (LPR) and five-year LPR were both left unchanged at 3.85% and 4.65%, respectively, on Friday. Japanese shares settled lower, dragged down by automakers and their related sectors after Toyota Motor said it would slash global production for September by 40 percent due to chip crisis.

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