Indian equity benchmarks opened in the red on Tuesday, snapping a four-day winning streak on worries about the risk of global recession after poor economic data worldwide pushed Wall Street lower, and other Asian stocks continued that weak trend.
The 30-share BSE Sensex opened over 100 points lower, while the broader NSE Nifty was down about 0.4 per cent early on Tuesday.
Among the Sensex constituents, Tata Steel, UltraTech Cement, ICICI Bank, Tech Mahindra, HDFC and Axis Bank were the biggest laggards in early trade.
However, Asian Paints, ITC, Hindustan Unilever, Reliance Industries, IndusInd Bank and State Bank of India were among the gainers.
In the previous session, the BSE Sensex had closed 545 points higher at 58,116, while the NSE Nifty gained 182 points to settle at 17,340.
Analysts expect the robust capital inflow from foreign institutional investors (FIIs) seen in recent days to continue and buoy Indian equities.
Foreign institutional investors remained net buyers in the capital markets as they bought shares worth ₹ 2,320.61 crore on Monday, as per exchange data.
“There is a possibility that the market could edge higher as the trading progresses on some positive catalysts like the US treasury yields falling in the overnight trades, robust July GST collections, and foreign investors continuing to take exposure to local equities over the past few weeks,” said Prashanth Tapse, Senior Vice President for Research at Mehta Equities.
“In fact, on Monday, FIIs bought shares worth ₹ 2,321 crore and were also buyers in Friday’s trade to the tune of ₹ 1,046 crore. The sentiments are likely to be buoyed by better-than-expected Q1 earnings from India Inc, easing China Covid curbs, and hopes of a less hawkish Federal Reserve going ahead,” he added.
Meanwhile, India’s Finance Minister Nirmala Sitharaman told parliament on Monday the country will not slip into recession or stagflation, after opposition parties raised concerns about rising inflation and its impact on the economy.
In domestic trading, the Nifty metal index fell 1.2 per cent and was the worst performing sub-index. If the losses hold, it is set to snap four straight sessions of gains.
Cigarettes-to-hotel conglomerate ITC Ltd rose over 2 per cent after the company late on Monday reported a 38 per cent year-on-year jump in quarterly profit.
But oil prices and Asia stocks edged lower on Tuesday, continuing a decline on Wall Street overnight, as investors worried about global demand following weak manufacturing data in several countries.
“Data releases over the past 24 hours have provided further evidence the global economy is slowing,” National Australia Bank strategist Rodrigo Catril wrote in a note to clients, as reported by Reuters.
“Signs of a slowdown are building” in the United States, while “China’s reopening activity burst is over,” he said.
All eyes will also be on Friday’s outcome of the RBI’s rate-setting meeting.
A Reuters poll showed a rate hike on Friday was almost certain, but there was no consensus on the size of a rate increase.
“We do expect the RBI to go for a 25 bps hike in repo rate this time. This will bring it to the pre-covid level of 5.15 per cent. A 25 bps hike will indicate that inflation has peaked and though high will not go up significantly. Any aggressive move of say 50 bps will indicate that inflation peak has not yet been achieved and hence that can send a different signal to the market, said Madan Sabnavis, Chief Economist Bank of Baroda.
“Under the present situation of global prices coming down, we do not expect any change in forecasts of either inflation or GDP,” he added.
But on the global front, the week began with China, Europe and the United States reporting weakening factory activity, with that in the US decelerating to its lowest level since August 2020.
That sank crude, with Brent futures edging down to $99.74 on Tuesday after losing almost $4 overnight. US West Texas Intermediate futures also eased to $93.67, extending Monday’s almost $5 slide.
There were also jitters about an escalation in Sino-US tension with US House of Representatives Speaker Nancy Pelosi set to begin a visit to Taiwan against the objections of China, which regards the self-governed island as a breakaway province.
US e-mini stock futures pointed to a 0.31 per cent lower restart for the S&P 500, which stumbled 0.28 per cent overnight.
MSCI’s broadest index of Asia-Pacific shares retreated 0.8 per cent, Chinese blue chips dropped 1.06 per cent and Hong Kong’s Hang Seng lost 1.1 per cent.
Australian equities declined amid an uncertain outlook for commodity demand – which also weighed on crude oil prices – while the local dollar hovered near its highest versus its US counterpart since mid-June with the central bank widely expected to deliver a third consecutive half-point interest rate hike later in the day.