India’s benchmark indices end flat as Sensex closes above 58,000

India’s domestic benchmark indices ended flat on Tuesday after rising for four consecutive sessions due to multiple negative global cues. At close, Sensex ended 20.86 points or 0.04 per cent up at 58,136.36, while Nifty was up 5.40 points or 0.03 per cent at 17,345.

PSU bank index surged 2.5 per cent on Tuesday, while IndusInd Bank, Asian Paints and NTPC were among the major contributors in the Sensex. About 1,889 shares have advanced, 1,483 shares have declined, and 122 shares remained unchanged.

The BSE mid-cap and small-cap indices rose up to 0.5 per cent. However, the Nifty Realty Index fell 1.7 per cent.

“Global indicators did not favour bulls, with most Asian and Western markets trading over concerns of rising geopolitical tension between the US and China. Additionally, economic data point towards a decrease in demand, while major markets throughout the world are trading with recessionary fears.

“The domestic market, however, has proven resilient thanks to increased demand in heavyweights and a strengthening Indian rupee underpinned by falling US treasury yields and FIIs buying,” said Vinod Nair, Head of Research at Geojit Financial Services.

Asian stock markets ended in red due to mounting tension between the US and China over US House of Representatives Speaker Nancy Pelosi’s expected visit to Taiwan.

Dismal manufacturing readings from Asia and Europe have also raised concerns over a potential global recession. European shares fell on Tuesday as weak global factory data fanned economic slowdown fears.

MSCI World equity index, which tracks shares in 47 countries, fell 0.4 per cent, while the Euro STOXX 600 shed 0.7 per cent.

“Nifty seemed to have halted after four days of sharp rise. It may now consolidate/correct slightly before embarking on the next move; 17,173-17,390 could be the band for the Nifty in the near term,” said Deepak Jasani, Head of Retail Research, HDFC Securities.

RUPEE HIT HIGH: The Indian rupee hit more than a five-week high on Tuesday, as under-hedged exporters dashed to cover their positions, while falling US Treasury yields kept the dollar in check amid recession fears.

The partially convertible rupee ended the session at 78.7125 per dollar after touching 78.49, its highest since June 28, and has amassed gains of about 1.4 per cent over the past four trading sessions. On Monday, the unit had closed at 79.02.

“Exporters were hoping to liquidate their holdings when the rupee touches 80-81 but suddenly it appreciated a lot and ‘fear of missing out’ came into play which made them offload at this level,” said a trader at a state-backed bank.

Signs of a possible recession in the world’s biggest economy has been dragging on the dollar as it erased chances of large rate hikes by the Fed. It has also pulled US Treasury yields lower, which in turn hurt the greenback.

US Speaker Nancy Pelosi’s visit to Taiwan added to market jitters on the day, sending US yields to a four-month low.

That sentiment kept risk assets under pressure across Asia, but the Indian rupee was an outlier as it rose the most among its emerging market peers on a deluge of inflows.

With the US Fed sounding dovish last week, equities have reversed course and there’s optimism that they will contribute positively in August, the trader said. There are considerable inflows into the debt market, while the recent 5G telecom auction has also brought in billions of rupees, the person added.

Additionally, oil prices slipped below $100 per barrel on concerns over global fuel demand given the economic downturn, but this is good news for the rupee as according to traders it can potentially bring down India’s import bill by $5-$6 billion.

Investors now await the Reserve Bank of India’s monetary policy decision on Friday in which the central bank is expected to raise its key interest rate.

However, there was no consensus among analysts on the size of the move given the absence of any clear guidance from the central bank, according to a Reuters poll. Predictions from the 63 economists polled by Reuters ranged from a 25-bp to 50-bp hike.

Meanwhile India has eased coal import targets for utilities, according to a notice from the power ministry reviewed by Reuters, setting aside a target for them to import 10 per cent of their coal needs and marking yet another reversal in energy policy.

State government-run utilities and private power producers should instead decide by themselves how much coal they need to import, according to the notice, which was sent to government officials and private utilities on Aug. 1.

“It has been decided that now onwards, states/independent power producers and Ministry of Coal may decide the blending percentage after assessing the availability of domestic coal supplies,” the power ministry said.