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Indian equity benchmarks ended the weekly expiry session in the red with a loss of about a percent amid a selloff in global markets. The Sensex fell as much as 485 point and Nifty 50 index briefly tumbled below its important psychological level of 15,750.  After making cautious start, key indices witnessed selling pressure throughout the day, as rising coronavirus cases weighted down on market sentiments. India recorded a spike of 45,196 new infections, taking the total caseload to 30,708,092, according to Worldometer. Some concern also came as Fitch Ratings in its latest report said that It has cut India's growth forecast to 10 per cent for the current financial year (FY22), from 12.8 per cent estimated earlier, due to slowing recovery post-second wave of COVID-19. It said the challenges for the banking sector posed by the coronavirus pandemic have increased due to a virulent second wave in the first quarter of the financial year ending March 2022 (FY22). 

Indian bourses extended their losses in second half of the session, as investors were concerned with private report stating that the India's retail inflation likely to accelerate to seven-month high in June on rising food and fuel prices, staying above the Reserve Bank of India's comfort zone for a second straight month. While many of India's states have eased restrictions imposed to contain the coronavirus, supply-side disruptions remain and higher taxes on petroleum products continue to exert upward pressure on inflation. Sentiments remained pessimistic after Fitch Ratings in its latest report said localized lockdowns during the second wave kept economic activity from stalling to levels similar to those during 2020, but disruption in several key business centers has slowed the recovery and dented its expectations of a rebound to pre-pandemic levels by FY22. Meanwhile, Commerce and Industry Minister Piyush Goyal has called for a services trade agreement among friendly nations of the Indo-Pacific region as it can help liberalise domestic regulations and build capacity in sectors like e-commerce and IT. He also said India's trade with select Indo-Pacific economies increased to $262 billion in 2020 from $33 billion in 2001. However, he said, non-tariff measures act as major trade barriers in the region.

On the global front, Asian markets ended mostly lower on Thursday with fears over the fresh wave of COVID-19 infections in several Asian countries and concerns over China's crackdown on technology companies denting sentiment. European markets were trading lower as a shift to some kind of policy easing in China raised worries about softening growth momentum in the rest of this year. Inflationary concerns also weighed after the minutes from the Fed's June meeting showed the U.S. central bank has been caught off guard by the recent rise in inflation. Back home, on the sectoral front, select banking stocks were in focus as the Reserve Bank of India (RBI) imposed a monetary penalty on 14 banks, including State Bank of India (SBI), Bandhan Bank, IndusInd Bank, Bank of Baroda (BoB), Central Bank for non-compliance with certain provisions of directions issued by them. The penalty ranges from Rs 50 lakh to Rs 2 crore, with SBI being charged Rs 50 lakh and BoB Rs 2 crore. Pharma industry’s stocks were in watch as India Ratings and Research (Ind-Ra) has said the 14.1 per cent y-o-y growth in pharmaceutical market during June was led by a normalisation of demand post high growth months of April (51.5 per cent) and May (47.8 per cent). This was because of the lower base effect and Covid-induced demand during the second wave.

Finally, the BSE Sensex fell 485.82 points or 0.92% to 52,568.94, while the CNX Nifty was down by 151.75 points or 0.96% to 15,727.90.  

The BSE Sensex touched high and low of 53,103.03 and 52,428.84, respectively and there were 7 stocks advancing against 23 stocks declining on the index.    

The broader indices ended in red; the BSE Mid cap index fell 0.37%, while Small cap index was down by 0.09%.

The few gaining sectoral indices on the BSE were Utilities up by 0.57%, Power up by 0.21% while, Metal down by 2.43%, Bankex down by 1.39%, PSU down by 1.25%, Basic Materials down by 1.20%, Auto down by 0.98% were the losing indices on BSE.

The top gainers on the Sensex were Tech Mahindra up by 1.32%, Bajaj Auto up by 0.62%, Power Grid Corporation up by 0.15%, HCL Technologies up by 0.15% and NTPC up by 0.09%. On the flip side, Tata Steel down by 2.30%, Sun Pharma down by 1.96%, SBI down by 1.88% and ICICI Bank down by 1.83% and Dr. Reddy's Laboratories down by 1.65% were the top losers.

Meanwhile, domestic rating agency ICRA in its latest report has said that the banking system's gross non-performing assets (GNPAs) are set to decline to at least 7.1 percent by March 2022, as against 7.6 percent at FY21-end. The NPAs will go lower on higher recoveries and upgrades, and also faster credit growth. It also said that the fresh accretion to the NPAs will be higher in FY22 due to the absence of any regulatory dispensations like moratoriums.

The rating agency said the fresh NPA generation declined to Rs 2.6 lakh crore or 2.7 per cent of advances in FY21 compared to Rs 3.7 lakh crore or 4.2 per cent in FY20 and added that the same will be higher in FY22. It also said the headline asset quality numbers of banks do not reflect the underlying stress on the income and cash-flows of the borrowers impacted because of COVID-19 and various regulatory and policy measures such as the moratorium on loan repayment, standstill on asset classification and liquidity extended to borrowers under Emergency Credit Line Guarantee Scheme (ECLGS) had a positive impact on the reported asset quality of lenders.

In the absence of standstill on asset classification, ICRA expects the fresh NPAs generation to be higher, however, it also expects the recoveries and upgrades to improve in FY22, adding that the first half of the ongoing fiscal can see higher accretions due to the second wave of the pandemic. It also believed that the banks are relatively better placed to handle the stress from the second wave and hence it continue to maintain a stable outlook on the sector.

The CNX Nifty traded in a range of 15,885.75 and 15,682.90 and there were 7 stocks advancing against 43 stocks declining on the index.  

The top gainers on Nifty were Tech Mahindra up by 1.39%, SBI Life Insurance up by 0.89%, Eicher Motors up by 0.78%, Bajaj Auto up by 0.61% and HCL Technologies up by 0.11%. On the flip side, Tata Motors down by 3.45%, JSW Steel down by 3.13%, Hindalco down by 2.74%, Tata Steel down by 2.35% and ONGC down by 2.34% were the top losers.

European markets were trading lower;  UK’s FTSE 100 decreased 117.48 points or 1.64% to 7,033.54, France’s CAC decreased 132.00 points or 2.02% to 6,395.72 and Germany’s DAX decreased 229.53 points or 1.46% to 15,463.18.

Asian markets ended mostly lower on Thursday with concerns over the fresh wave of Covid-19 infections in several Asian countries. Chinese shares settled down after Chinese officials flagged the possibility of a reserve requirement ratio cut to support the economy, while China's crackdown on technology companies too hitting the markets again today. Hong Kong shares dropped as tech firms tumbled amid persistent regulatory fears. Malaysian shares declined after the biggest political party of the country's ruling coalition called for Prime Minister Muhyiddin Yassin to resign for failing to manage the Covid-19 pandemic. South Korean shares fell as the country reported its highest ever one-day rise in new Covid-19 cases, which prompting authorities to consider imposing a semi-lockdown in the capital Seoul.  Japanese shares diminished as the country’s plan to reintroduce a state of emergency for Tokyo to contain coronavirus infections ahead of Olympics.

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