Benchmarks trim gains; trade continues in green

After getting a gap-up start, Indian equities trimmed gains but continued to trade in green in the late morning session on account of profit booking in frontline counters. Sentiment weakend further as IT stocks came under strong pressure after the rupee hit an 11-month high of 58.38. However, banking, power, capital goods and PSU stocks saw strong buying action as investors sold some of the holdings in defensives like Teck and pharma to move into cyclicals. Meanwhile, some support crept into Dalal Street as Nomura and Citigroup raised their targets for India's benchmark BSE index after the opposition Bharatiya Janata Party led by Narendra Modi thundered to victory in general election. Moreover, Goldman Sachs also raised its 12-month target for the NSE index to 8,300 from 7,600, implying a 15.2 percent upside from current levels.

On global front, Asian markets were trading mixed as concerns about slower growth in the world's second-biggest economy checked risk appetite and took a large slice off Australian equities. Moreover, US markets gained on Friday as the pace of US house construction jumped in April to its highest level since November, exceeding all analysts’ forecasts, the commerce department reported. Back home, trading is likely to remain range-bound this week and investors' focus will shift to policy announcements from the new government and selection of Cabinet ministers. The market breadth on BSE was positive, out of 2254 stocks traded, 1519 stocks advanced, while 651 stocks declined on the BSE.

The BSE Sensex is currently trading at 24231.19 up by 109.45 points or 0.45% after trading in a range of 24427.10 and 24215.75. There were 20 stocks advancing against 10 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 1.91%, while Small cap index gained 2.84%.

The gaining sectoral indices on the BSE were PSU up by 4.64%, Metal up by 4.39%, Power up by 4.07%, Capital Goods up by 3.90% and Realty up by 3.71%. On the flip side, IT down by 4.84%, Healthcare down by 3.79%, Teck down by 3.53% and FMCG down by 1.91% were the losing indices on BSE.   

The top gainers on the Sensex were Coal India up by 6.90%, Tata Power up by 6.51%, SSLT up by 6.40%, ONGC up by 5.03% and  Hindalco up by 5.02%. On the flip side, Wipro down by 4.96%, TCS down by 4.88%, Infosys down by 4.58%, Dr Reddys Lab down by 4.56% and Sun Pharma down by 3.56%.

Meanwhile, Standard & Poor (S&P) Ratings Services has underscored that the new Indian government's reform initiatives in economic and fiscal policies over next two to three months would have significant implications on the country’s sovereign credit rating. It has further highlighted that key challenge for the new government would be to regain fiscal prudence in a sustainable way, which could be achieved by implementation of Goods and Service Tax (GST) that would help stabilize government’s revenues.

In S&P’s view, NDA's strong showing indicates that it will have a reasonably good political platform to tackle structural issues. However, it has emphasized that new government would face hurdles in sustaining growth in the medium to long term, which includes reviving investor confidence, managing fiscal consolidation, regaining fiscal prudence, improving the current account balance and boosting the banking sector's financial strength.

The rating agency also noted that the outgoing United Progressive Alliance (UPA) government recently expanded the food subsidy system and its fuel subsidy reforms are incomplete. It also acknowledged government’s attempt to shore up its non-tax revenues by accelerating divestments of shares in government-owned companies, increasing dividend receipts from government-owned companies, and delaying payments, such as fuel subsidies.

Nevertheless, the rating agency further warned that if the next government fails to lift confidence, the task of turning the economy around would be heavier. It added the glimpse of this could be gauged from announcement of revised budget, which would be keenly watched not only by Dalal Street, but also global rating agency, including S&P, which is the only of the three major credit agencies to have India with a 'negative outlook' for its 'BBB-minus' rating, implying any downgrade would send the country to below investment grade.

The CNX Nifty is currently trading at 7,234.60 up by 31.60 points or 0.44% after trading in a range of 7,290.35 and 7,223.60. There were 34 stocks advancing against 16 declining on the index.

The top gainers of the Nifty were Coal India up by 7.57%, SSLT up by 6.63%, Tata Power up by 6%, Hindalco up by 5.35% and BPCL up by 5.23%. On the flip side, Wipro down by 5.43%, TCS down by 4.94%, HCL Tech down by 4.93%, Infosys down by 4.59% and Dr. Reddy's Laboratories down by 4.45% were the major losers on the index.

Asian equity indices were trading mixed; Shanghai Composite declined by 1.52%, Hang Seng slipped 0.50%, Nikkei 225 dropped 0.38% and Seoul Composite was down by 0.01%. On the flip side, Jakarta Composite rose 0.05%, KLSE Composite gained by 0.25%, Straits Times strengthened by 0.03% and Taiwan Weighted was up by 0.07%.