The Indian market ended lacklustre on May 23 amid mixed global cues even as investors remained cautious on concerns over inflation and prospects of aggressive rate hikes.
Besides, some market participants also seemed concerned over the prospects of additional borrowing by the government after the tax cuts on fuel prices.
In order to keep its fiscal math in shape, the Indian government is planning to borrow more than budgeted this financial year and reduce revenue expenditure, said a Mint report.
The Finance Minister of India on May 21 announced the cut on excise duty on petrol and diesel by ₹8 and ₹6 per liter, respectively, taking the excise duty to ₹20 and ₹15.8 from ₹28 and ₹21.8 per liter. As per the estimates of brokerage firm Motilal Oswal Financial Services, the government is likely to fall short on its excise duty collection by nearly ₹85,000 crore on account of this measure.
In April the government announced a fertilizer subsidy hike and now this reduction of duties on petrol, diesel and imported inputs to make steel and petrochemicals will mean the gross market borrowing of ₹14.3 lakh crore budgeted for FY23 won’t be enough for the year.
"The prolonged Russia-Ukraine conflict coupled with its consequences and inflationary pressures weighed heavily in the minds of investors and traders. Prospects of additional market borrowings by the government in the wake of the tax cuts on fuel to tame inflation also came to the forefront," said S Ranganathan, Head of Research at LKP securities.
Market benchmark Sensex opened 134 points higher and jumped 605 points higher to 54,931.30. However, the index failed to hold gains and ended 38 points, or 0.07 percent, lower at 54,288.61. The Nifty50 ended 51 points, or 0.32 percent, lower at 16,214.70.
Mid and smalllcaps underperform as the BSE Midcap and Smallcap indices fell 0.26 percent and 0.64 percent respectively.
In the 30-share pack Sensex, 20 stocks ended in the green and 10 stocks in the red.
Shares of Mahindra & Mahindra (up 4.14 percent), Maruti (up 4.07 percent), Hindustan Unilever (up 2.35 percent), Larsen & Toubro (up 2.21 percent) and Asian Paints (up 2.07 percent) ended as the top gainer in the Sensex index while Tata Steel (down 12.53 percent), Ultratech Cement (down 3.33 percent), ITC (down 1.93 percent), Power Grid (down 1.72 percent) and HDFC (down 1.40 percent) ended as the top laggards.
BSE Metal index cracked 8.33 percent, ending as the top loser among sectoral indices, followed by the Basic Materials index which suffered a loss of 4.08 percent.
Metal stocks suffered after the government hiked export duty on key steel products to 15 percent. However, in order to reduce the overall cost of domestic production of steel products, the government slashed the import duty on coking coal and anthracite from 2.5 percent to zero. Meanwhile, import duties for coke or semi-coke and ferronickel were lowered too, from 5 percent to zero and 2.5 percent to zero, respectively.
More than 90 stocks, including Adani Power, Chennai Petroleum Corporation, Hindustan Aeronautics, KSB, Mangalore Refinery and Petrochemicals, Nava Bharat Ventures and Ratnamani Metals & Tubes, hit their fresh 52-week highs in trade on BSE.
On the other hand, more than 60 stocks, including Tata Steel, NMDC, SAIL, JSW Steel, Manappuram Finance, JSW Holdings, Lupin and Hindustan Petroleum Corporation, hit their fresh 52-week lows in trade on BSE.
"The government and RBI are making persistent efforts to moderate future inflation. Government fiscal measures like a hike in customs duty on steel and similar steps on other products in the future will help to control inflation. However, the hawkish monetary and fiscal measures adopted by RBI and government will have a cascading effect on market and economy in the short to medium term," said Vinod Nair, Head of Research at Geojit Financial Services.
Disclaimer: The views and recommendations made above are those of individual analysts and not of MintGenie.
