Benchmarks continue to trade in green in late morning session

Local equity markets, after paring some gains in early deals, have gained some momentum on sustained buying by funds and retail investors, following beginning of the August F&O series and a firming trend at other Asian markets. Sentiments got a boost with the report that the government notifying  composite cap in the FDI policy, allowing up to 49 per cent foreign portfolio investment (FPI) through the automatic route in most sectors, including brownfield pharmaceuticals, single-brand retail, insurance, pension and facsimile editions of foreign newspapers. Besides, some investors remained optimistic after the cabinet approved a bill on the goods and services tax that incorporates recommendations from a parliamentary panel, and after the Federal Reserve meeting ended with no major surprises. However, gains remained capped with research arm of global rating agency Moody’s warning that the economic expansion might slow down due to lack of reforms, though it has predicted a 7.6 percent growth rate for India.

On global front, most Asian markets advanced on a healthy batch of economic growth data out of the United States but Shanghai sank again after the previous day's sell-off. Investors also awaited more earnings from blue-chip companies and looked for signs of whether China's volatile stock markets were starting to take a toll on its economy. Back home, Indian rupee declined by 12 paise to 64.10 against the US dollar in early trade, extending weakness for the second day due to appreciation of the American currency overseas.

Back on street, all the sectoral indices led by Metal, Realty, Auto and PSU were trading in positive zone.  In scrip specific development, Shares of Dr Reddy's Laboratories have surged around 3% after the company reported a 13.67% jump in consolidated net profit at Rs 625.65 crore on the back of improved gross profit margins. On the other hand, shares of Exide Industries dipped after the company reported a 16.2% year-on-year (YoY) decline in net profit at Rs 155 crore for the quarter ended June 30, 2015, due to lower sales.

The market breadth on BSE was positive, out of 2305 stocks traded, 1447 stocks advanced, while 781 stocks declined on the BSE. 

The BSE Sensex is currently trading at 27898.12, up by 192.77 points or 0.70% after trading in a range of 27814.51 and 27965.52. There were 26 stocks advancing against 4 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.97%, while Small cap index up by 0.73%.

The top gaining sectoral indices on the BSE were Metal up by 1.63%, Realty up by 1.59%, Auto up by 1.29%, PSU up by 0.72% and Consumer Durables up by 0.70%, while there were no losers on the sectoral space.

The top gainers on the Sensex were Dr. Reddys Lab up by 3.27%, Lupin up by 2.58%, Coal India up by 2.53%, Mahindra & Mahindra up by 2.53% and Hero MotoCorp up by 2.12%. On the flip side, Reliance Industries down by 0.83%, Infosys down by 0.62%, BHEL down by 0.23% and Hindustan Unilever down by 0.13% were the top losers.

Meanwhile, Global rating agency, Moody’s in its latest report has said that though 7.5% GDP growth appears high, it is below India's potential. India’s true potential of GDP growth rate lies somewhere near 10%. The report though highlighted that green shoots are slowly emerging, but cautioned that the government's failure to deliver promised reforms is the major impediment and the political infighting is denting business confidence. It also warned that GDP growth is not likely to rise above 7.5% if the government continues to overpromise and not deliver.

Moody’s further pointed that key reforms like the land acquisition bill, flexible labour laws, and the goods and services tax have failed to pass parliament. These are unlikely to be delivered until later this year or even 2016. It added that land acquisition bill is a catalyst to investment and passing this bill will improve country’s business environment by speeding up the conversion of land for infrastructure use.

The rating agency in its report has also said that foreign firms are wary of investing in India, as lengthy delays in acquiring land tend to stall projects. If India wants to become a global economic powerhouses like china, reforms must be delivered promptly. These signs are not well for manufacturing.

Moody’s in its report has also expressed hopes that RBI will cut interest rates again this year and there could be two more 25 basis point rate cuts in 2015, as the rainfall deficit this season has not been as large as previously expected, which guides the RBI’s rate cycle.

The CNX Nifty is currently trading at 8467.30, up by 45.50 points or 0.54% after trading in a range of 8448.00 and 8489.30. There were 40 stocks advancing against 10 stocks declining on the index.

The top gainers on Nifty were Dr. Reddys Lab up by 3.15%, Cairn India up by 2.84%, Hero MotoCorp up by 2.70%, HCL Tech. up by 2.62% and Coal India up by 2.53%. On the flip side, Kotak Mahindra Bank down by 4.14%, Reliance Industries down by 0.93%, BPCL down by 0.85%, NMDC down by 0.83% and Infosys down by 0.73% were the top losers.

Most of Asian markets were trading in green; FTSE Bursa Malaysia KLCI was up by 0.76%, Nikkei 225 up by 0.13%, KOSPI Index up by 0.01%, Jakarta Composite up by 1.13% and Hang Seng was up by 0.4%. On the flip side, Straits Times was down by 1.3%, Shanghai Composite down by 0.98% and Taiwan Weighted was down by 0.43%.