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Indian equity benchmarks wiped off morning gains to end sharply lower on Monday, amid concerns over rising cases of Omicron virus in Europe and surging inflation across the world. The benchmarks staged a gap up opening, as traders took encouragement with the government data showing that India's industrial production rose 3.2 per cent in October 2021. As per the Index of Industrial Production (IIP) data by the National Statistical Office (NSO), the manufacturing sector's output grew 2 per cent in October. Buying further crept in as the finance ministry said India's economic recovery is expected to strengthen in the remaining quarters of the current fiscal year with the investment cycle kicking off, and projected 7% annual growth until the end of the decade. Adding to the optimism, Union minister Amit Shah said policies were framed after hours of brainstorming and studying all the aspects in order to bring back pre-pandemic levels of economic growth. He also said the policies which became hurdles in bringing industry, affected 'Make In India' or obstructed 'Atmanirbhar Bharat' were changed during the coronavirus period.

However, key indices succumbed to selling pressure in second half of trading session on account of profit booking. Domestic markets impacted as Reserve Bank of India (RBI) Governor Shaktikanta Das has cautioned depositors to be careful while chasing high returns as it comes with greater risk. Observing that depositors themselves also need to be very discerning, he said it is important to keep in mind that higher returns or higher interest rates are usually associated with higher risks. Traders also showed cautiousness with the reports that the government is unlikely to announce capital infusion for public sector banks (PSBs) in the upcoming Budget. Traders remained on sidelines ahead of the consumer price index (CPI) data to be released later in the day.

On the global front, Asian markets settled on a mixed note on Monday, as traders kept a keen eye on the upcoming Fed meeting this week for signals about the tapering of stimulus measures. European markets were trading mostly in green after China pledged to continue its prudent monetary policy and proactive fiscal policy, and keep growth within a reasonable range next year. Back home, on the sectoral front, power industry’s stocks were in focus as power ministry data showed that India's power consumption grew by 1.3 per cent in the first ten days of this month from December 1 to 10 to 34.23 billion units (BU) over the same period a year ago. Railways stocks were also in limelight with a private report that the Ministry of Railways will get Rs 20,000 crore under the second tranche of the supplementary demand for grants.

Finally, the BSE Sensex fell 503.25 points or 0.86% to 58,283.42 and the CNX Nifty was down by 143.05 points or 0.82% to 17,368.25.     

The BSE Sensex touched high and low of 59,203.37 and 58,242.80, 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 0.53%, while Small cap index was up by 0.24%.

The lone gaining sectoral indices on the BSE was Consumer Durables up by 0.01%, while Energy down by 1.75%, Realty down by 1.24%, Oil & Gas down by 1.23%, FMCG down by 0.86%, PSU down by 0.72% were the top losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 2.38%, Tech Mahindra up by 2.20%, Maruti Suzuki up by 1.20%, Power Grid Corporation up by 0.91% and Titan Company up by 0.37%. On the flip side, Bajaj Finance down by 3.10%, Bajaj Finserv down by 2.14%, Reliance Industries down by 2.00%, Mahindra & Mahindra down by 1.94% and Nestle down by 1.51% were the top losers. 

Meanwhile, Assuaging that the Omicron variant’s impact on the economy will be less severe due to rapid vaccination, Finance Ministry in its monthly Economic Review report has said that India will be among only a few economies in the world to rebound strongly from COVID-19 induced economic contraction of 2020-21. As per the report, real GDP in Q2 of FY2021-22 has grown by 8.4 per cent YoY, recovering more than 100 per cent of the pre-pandemic output in the corresponding quarter of FY2019-20. It added ‘India is among the few countries that have recorded four consecutive quarters of growth amid Covid-19 (Q3, Q4 of FY21 and Q1, Q2 of FY22) reflecting the resilience of the Indian economy. The recovery was driven by a revival in services, full-recovery in manufacturing and sustained growth in agriculture sectors’.

The report said the recovery suggests kick-starting of the investment cycle, supported by surging vaccination coverage and efficient economic management activating the macro and micro drivers of growth. It also said India’s economic recovery is expected to gain further strength in the remaining quarters of the financial year, as evident from 19 among 22 High Frequency Indicators (HFIs) in September, October and November of 2021 crossing their pre-pandemic levels in the corresponding months of 2019. The Finance Ministry said ‘Yet, Omicron, a new variant of COVID-19 may pose a fresh risk to the ongoing global recovery. However, preliminary evidence suggests that the Omicron variant is expected to be less severe and more so with increasing pace of vaccination in India’.

Observing that the COVID-19 pandemic has led to considerable human and economic costs setting countries back on their developmental goals, the latest review said the year 2021 is thus a ‘catch-up’ year for the global economy including India, trying to recover the pre-pandemic output level of 2019. The report said India has not only caught up with its pre-pandemic output of Q2, but is also expected to do so for the full year. Noting that the agriculture sector has been the foundation on which economic contraction in India was minimised in FY2020-21 and recovery sped up in FY2021-22, the report said rising production of food grains, increase in MSPs for both kharif and rabi crops in 2021-22 have also raised rural incomes.

The CNX Nifty traded in a range of 17,639.50 and 17,355.95 and there was 15 stocks advancing against 35 stocks declining on the index.   

The top gainers on Nifty were Axis Bank up by 2.39%, Tech Mahindra up by 2.24%, SBI Life Insurance up by 1.54%, Wipro up by 1.36% and Hidalco industries up by 1.00%. On the flip side, Bajaj Finance down by 2.99%, Bajaj Finserv down by 2.11%, Reliance Industries down by 1.93%, Mahindra & Mahindra down by 1.83% and Tata Consumer Products down by 1.78% were the top losers.

European markets were trading mostly in green; France’s CAC increased 21.32 points or 0.3% to 7,013.00 and Germany’s DAX increased 150.96 points or 0.97% to 15,774.27, while UK’s FTSE 100 decreased 1.92 points or 0.03% to 7,289.86.

Asian markets settled on a mixed note on Monday as investors are in cautious mood ahead of a Federal Reserve policy meeting later this week. Data showed US consumer inflation rose 6.8% year-over-year in November, reflecting the biggest jump since June of 1982 amid supply chain snarls and shortages. Another big rise in US inflation fuelled fears that the Federal Reserve would accelerate the pace of tapering its asset purchases this week. Chinese shares gained, while the yuan currency advanced after the nation's top decision makers signalled policies may become more pro-growth next year. Japanese shares rose with growing hopes of an economic recovery and after data showed the country's core machinery orders rose in October for the first time in three months.

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