Indian equity benchmarks closed a percent lower each for the second straight session on Wednesday as rising bond yields and negative global cues spooked investors. The benchmark indices opened lower, as traders were concerned with a private report that the third wave of the COVID-19 pandemic is likely to peak in India on January 23 when the country will record nearly 7.2 lakh cases per day. Some cautiousness also came in as the SBI Business Activity Index declined to 101 as on January 17 from 109 in the week ended January 10. The latest reading, even as the country is in the midst of the third wave of the pandemic, is the lowest since November 15. Besides, stock exchange data showed that foreign investors remained net sellers in the Indian equity markets as they offloaded stocks worth Rs 1,254.95 crore on Tuesday. Key gauges continued to reel under selling pressure in second half of trading session, as traders were worried with a top WHO official said that it is not possible to end the COVID-19 virus as such viruses never go away and end up becoming part of the ecosystem, but asserted that it is possible to end this year the public health emergency caused by COVID-19 with a collaborative approach to fix inherent inequities in the system. Sentiments remained down-beat with ratings agency ICRA's report that states are shelling out more for debt funds, with the weighted average cost for their debt auctions hardening by 9 basis points (bps) to touch 7.24 per cent, the highest level so far this fiscal, during the auctions on January 18, 2022. Adding more pessimism, Crisil Ratings said disruptions due to the third COVID wave could shave off as much as 200 basis points from the growth in assets under management of housing finance companies in the current and next financial years. Finally, the BSE Sensex fell 656.04 points or 1.08% to 60,098.82 and the CNX Nifty was down by 174.65 points or 0.96% to 17,938.40.

The US markets ended lower on Wednesday amid rising Treasury yields and worries over inflation and looming interest rate hikes after US Treasury yields hit fresh two-year highs amid Fed rate hike expectations. The 10-year Treasury yield rose to 1.84%, continuing a sharp increase this year and pressuring the tech sector particularly hard. The Nasdaq Composite fell, bringing its decline from its November high to more than 10% as investors continue to dump tech shares as interest rates spike to start the new year. Nasdaq's pullback from its November high has been lead by growth stocks whose valuations ballooned during the pandemic. Shares of Peloton are off more than 80% from their highs. Zoom Video has shed more than 70%. Moderna, DocuSign and Paypal are all down more than 40% from their highs. On the economic data front, new residential construction in the US unexpectedly saw a notable increase in the month of December, according to a report released by the Commerce Department. The report said housing starts jumped 1.4 percent to an annual rate of 1.702 million in December from a revised rate of 1.678 million in November. Street had expected housing starts to drop to a rate of 1.650 million from the 1.679 million originally reported for the previous month. The Commerce Department also said building permits spiked by 9.1 percent to an annual rate of 1.873 million from a revised rate of 1.717 million in November. Building permits, an indicator of future housing demand, were expected to drop to a rate of 1.701 million from the 1.712 million originally reported for the previous month.

Crude oil futures ended higher on Wednesday, magnifying their previous sessions' rally, as an outage on a pipeline from Iraq to Turkey increased concerns about an already tight supply outlook amid worrisome geopolitical troubles in Russia and the United Arab Emirates. Turkey's state pipeline operator Botas said that it cut oil flows on the Kirkuk-Ceyhan pipeline after an explosion on the system. The cause of the explosion is not known. The pipeline carries crude out of Iraq, the second-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), to the Turkish port of Ceyhan for export. Benchmark crude oil futures for February delivery rose $1.22 or 1.43 percent to settle at $86.65 a barrel on the New York Mercantile Exchange. Brent crude for March delivery increased $0.93 or 1.06 percent to settle at $88.44 a barrel on London's Intercontinental Exchange.

Erasing previous three session losses, Indian rupee ended considerably higher against dollar due to selling of the US currency by exporters and banks. Traders shrugged off ratings agency ICRA's latest report stating that the states are shelling out more for debt funds, with the weighted average cost for their debt auctions hardening by 9 basis points (bps) to touch 7.24 per cent, the highest level so far this fiscal, during the auctions on January 18, 2022. Compared to the previous week, the cost has gone up by 9 bps. From the first auctions in January, the cut-offs have been trending over 7 per cent. On the global front, sterling held close to a 23-month high against the euro and edged up against the dollar after higher-than-expected British inflation data added to pressure on the Bank of England to raise interest rates next month. Finally, the rupee ended 74.43 (Provisional), stronger by 15 paise from its previous close of 74.58 on Tuesday.

The FIIs as per Wednesday's data were net sellers in equity segment, while net buyers debt segment. In equity segment, the gross buying was of Rs 6236.09 crore against gross selling of Rs 6832.78 crore, while in the debt segment, the gross purchase was of Rs 692.95 crore against gross selling of Rs 318.91 crore. Besides, in the hybrid segment, the gross buying was of Rs 18.22 crore against gross selling of Rs 10.08 crore.

The US markets ended lower on Wednesday on fears of a tighter monetary policy amid inflation worries as oil prices continue to soar. Asian markets are trading mostly in green on Thursday shrugging off overnight losses on Wall Street. Indian markets fell on Wednesday due to weakness in IT, consumer and select financial shares. Today, the markets are likely to start session in red following overnight fall on Wall Street. There will be some cautiousness with Rating agency Icra's statement that while there is some evidence of the economic recovery becoming broad-based in the third quarter of fiscal 2022, it is yet to attain the durability being sought by the Monetary Policy Committee (MPC) as a precursor to policy transmission. The agency expects the real GDP to expand 6-6.5 per cent year-on-year in the third quarter of FY2022 (+8.4 per cent in Q2 FY2022). Traders may take note of report that India will push for a waiver of certain provisions of the global intellectual property rights agreement for Covid-19 medicines and products at a mini ministerial meeting called by the World Trade Organization to firm up its pandemic response. However, some support may come later in the day as the Reserve Bank of India's (RBI) digital payments index (DPI), which was launched in January 2021 to indicate the extent of digitisation of payments across the country, shows that the index for September 2021 stood at 304.06 against 270.59 in March. This indicates the rapid adoption and deepening of digital payments across the country. Meanwhile, the government is examining a proposal to increase the validity of the Emergency Credit Line Guarantee Scheme (ECLGS), which is now set to expire in March. Textile industry stocks will be in focus as a joint report by global consulting firm Kearney and The Confederation of Indian Industry (CII) said Indian textile exports can hit $65 billion if industry majors take the right steps and there is proper execution of government schemes. There will be some reaction in aviation industry stocks as DGCA data showed that domestic airlines flew 83.8 million passengers in 2021 registering a growth of 33 per cent over the previous year. In 2020 airlines had transported 63 million passengers. Oil & gas industry stocks will be in limelight as India's production of crude oil, which is refined to produce petrol and diesel, continued to decline in December 2021, with lower output from state-owned ONGC leading to a near 2 per cent drop. There will be some result announcements to keep the markets in action.

Support and Resistance: NSE (Nifty) and BSE (Sensex)

Nifty Top volumes

• HCL Technologies has launched a dedicated Intel Ecosystem unit to help build focused, innovative and industry-tailored solutions for Intel clients.  
• Bharti Airtel has added 13,18,251 customers in November 2021.
• Tata Motors has forayed into the CNG segment with the launch of Tiago and Tigor trims, priced between Rs 6.09 lakh and Rs 8.41 lakh respectively (ex-showroom Delhi). 
• Coal India's actual coal dispatch under the five e-auction windows at 77.4 MT jumped ahead by 31% during April-December'21 compared to 59 MTs corresponding Period Year ago.