Sensex, Nifty to drop on U.S. rate hike concerns; RBL Bank, Axis Bank, RIL, HUL in focus

Indian benchmark indices, the BSE Sensex and the NSE Nifty, are likely to open sharply lower on Thursday, tracking sharp sell-off in global equities after the U.S. Federal Reserve’s December meeting minutes indicated that the central bank may raise interest rates sooner than expected. The bearish trends on SGX Nifty also signalled a negative opening for the Indian equities, with SGX Nifty futures trading 171 points, or 0.95%, lower at 17,802 on the Singapore Stock Exchange at 8:10 AM.

On Wednesday, Indian share market extended its gaining streak for the fourth straight session, undermining mixed cues from global peers. The BSE Sensex reclaimed the crucial 60,000 mark by rising 367 points, or 0.61%, to settle at 60,223 on January 5. The NSE Nifty rallied 120 points, or 0.67%, to close at 17,925, its highest level since November 17. On the sectoral front, all indices, barring IT, pharma and power, ended in positive terrain, while bank and metal stocks gained the most. The top gainers on the BSE Sensex pack were the Bajaj twins — Bajaj Finserv and Bajaj Finance — which ended 5.09% and 4.4% higher, respectively. Some of the other notable gainers included Bajaj Finance, Kotak Mahindra Bank, Axis Bank, Tata Steel, and HDFC bank, which gained between 2.5% to 4.5%.

Individual companies that will be in focus on Thursday include RBL Bank, Axis Bank, Reliance Industries, HUL, Colgate-Palmolive, Mahanagar Gas, NHPC, and others.

RBL Bank: The private lender has reported 5% year-on-year growth in gross advances to ₹59,941 crore as of December 31, 2021, as per the provisional data released by the bank. The lender had posted gross advances of ₹57,092 crore in the corresponding period a year ago.

Axis Bank: The private lender has sold 38 lakh shares of Orient Green Power Company at ₹22.40 per share through a bulk deal on NSE on Wednesday.

Reliance Industries Ltd (RIL): The share of the country’s most valued firm will be in focus on rating upgrade. Global credit rating agency Moody’s has assigned a Baa2 rating to RIL with a stable outlook. Meanwhile, S&P Global Ratings has assigned BBB+ with a stable outlook for the issuance of senior unsecured dollar-denominated fixed rate notes.

Hindustan Unilever (HUL): Shares of FMCG major will be in focus after the distributors association ended the boycott of HUL products after the company assured to address their concerns related to price disparity between the traditional distributors and organized business-to-business channel such as Walmart Best Price, Metro Cash and Carry.

Colgate-Palmolive: The oral care company has also initiated talks with distributors associations who are boycotting its certain products in Maharashtra over price disparity.

Mahanagar Gas: Life Insurance Corporation of India (LIC) has acquired an additional over 2% stake in the company via open market transactions. The insurer's stake in the company increased to 7.01% from 5% earlier.

NHPC: The state-owned hydropower major has inked an agreement with Green Energy Development Corporation of Odisha Ltd (GEDCOL) to form a joint venture (JV) for setting up a 500-megawatt (MW) floating solar power projects in Odisha.

Here are key things investors should know before the market opens today:

U.S. stocks slump as Fed flags faster rate hike

On Wall Street, all the three major U.S. indices closed lower in overnight trade after the Fed’s December policy meeting minutes indicated that it might raise interest rates sooner than expected. Policymakers also signalled that the central bank could also reduce its $8.5 trillion balance sheet to tame high inflation.

Reacting to the news, the S&P 500 fell 1.94%, while the Dow Jones Industrial Average dropped 1.07%. The tech-heavy NASDAQ Composite nosedived 3.34%, hitting its biggest one-day percentage loss since February.

Meanwhile, the yield on the US 10-year note surged to 1.7% on Wednesday, while the 2-year U.S. Treasury yield rose 0.82%.

Asian markets fall on weak cues from Wall Street

Shares in Asia-Pacific traded mostly lower on Thursday, mirroring weakness in Wall Street which slumped in overnight trade. Investors reacted sharply to meeting minutes released by the Federal Reserve signalled that the central bank may soon lift U.S. interest rates and also reduce its overall asset holdings to counter rising inflation.

Japan’s Nikkei was the biggest loser in the region’s major markets by falling over 2%, while the Topix index dipped 1.02%.

Hong Kong’s Hang Seng index dropped 0.33%, while Hang Seng-listed real estate major China Evergrande Group gained over 1% amid a report that the company will seek a six-month delay in making payments on an onshore bond.

In mainland China, the Shanghai composite shed 0.8%, while the Shenzhen component dipped 0.5%.

Meanwhile, South Korea’s KOSPI slipped 0.3%, and Australia’s ASX 200 tumbled 1.3%.

Crude oil prices fall as U.S. fuel stockpiles surge

Global benchmark Brent crude tumbled over 1% on Tuesday, reversing its previous session’s gain, as the U.S. fuel stockpiles rose amid falling demand. The market sentiment was also dented after OPEC+, a grouping of the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, stuck to planned production increases for February. The members were of the view that a fresh wave of Covid-19 would have only a mild impact on fuel demand.

During the early Asian trading hours, the U.S. West Texas Intermediate (WTI) crude futures were down 1.03% at $77 a barrel, while the Brent oil dropped 0.36% to $79.84 per barrel.

Rising Covid-19 cases

Investors will also keep an eye on rising cases of infectious Omicron variant of the coronavirus and development around it. India reported 58,097 fresh Covid-19 cases on Wednesday, a spike of 55% against the previous day's tally of 37,379 cases. Meanwhile, the death toll climbed to 4,82,551 with 534 more fatalities in the last 24 hours, the data showed.

According to a report by ICRA Ratings, the third wave of the pandemic may erode 40 bps off the fourth quarter GDP growth that may print in at 4.5-5%.

Meanwhile, IIFL Securities in a research note said, “In the near term, the rapid spread of Omicron can worsen lockdowns, supply bottlenecks, inflation and hence there could be sharper liquidity withdrawal by central banks.”

FIIs, DIIs remain net buyers for third day

Foreign institutional investors (FIIs) and domestic institutional investors (DIIs) emerged as net buyers in the Indian equity market for the third day on January 5. As per the data available on the NSE, FIIs purchased shares worth ₹336.83 crore, while DIIs net bought shares worth ₹1,271.95 crore.