Post Session: Quick Review

Indian markets managed some last moment bounce back that lifted the major indices out of red and close the session with modest gains after falling in last couple of days, otherwise the trade remained choppy and the markets came well off their session’s high, due to the extended selling pressure in blue-chip stocks. The early gains were generated on good macro data of consumer inflation and industrial output, amid gloom over the parliamentary logjam halting the goods and services tax bill and the yuan devaluation worries, but the markets lost the strength as the trade proceeded. Inflation based on the consumer price index (CPI) fell sharply in July to its lowest in the current series, strengthening the case for an interest rate cut soon. However, traders grew concerned as the government's biggest tax reform Goods and Services Tax (GST) proposal could not get passed and the monsoon session of the parliament ended mostly non-productive. Amid the pandemonium in Parliament, the goods and services tax bill remained stuck in the Rajya Sabha. However, the government is reportedly keeping open its option of reconvening the House after Parliament's monsoon session is adjourned sine die and a Cabinet Committee on Parliamentary Affairs will meet to take a call on convening the special session of Parliament to push for the passage of the GST Bill.

On the global front, while the US markets managed a flat closing recovering from their day’s low, most of the Asian markets made a positive close after China’s central bank eased concern about a disorderly devaluation of the yuan. The People’s Bank of China said it supports a strong, stable yuan in the long term and there’s no basis for depreciation to persist and that it will step in to control large fluctuations. The European markets taking the cues from Asian markets rebounded after their biggest slump since October.

Back home, there were huge rounds of volatility in the markets and towards the end, markets momentarily dipped into red, however there was some recovery in the final moments and benchmarks managed a close higher by about a quarter percent. Traders even ignored the news report that a government appointed committee suggested that there was no legal basis to retrospectively impose the controversial minimum alternate tax on foreign investors. Markets also came under pressure due to rupee depreciation, which paring all its early gains breached the key 65 mark against the US dollar. Selling in the rupee has intensified over the last three days following China's unexpected devaluation of its currency. Metal continued their plunge on fear of increased import from China after Yuan devaluation. SAIL, Vedanta, NALCO, Jindal Steel, Tata Steel and Hindalco were the major losers from the metal pack. There was some buzz in the telecom stocks, after   the government approved the much-awaited spectrum sharing guidelines, which are expected to address the issue of mobile phone call drops and also optimise the use of radio frequency spectrum for telecom services. However, it also said that spectrum sharing would be allowed only for the access service providers in the first instance in a Licensed Service Area (LSA), where both the licensees are having spectrum in the same band. Also, Spectrum sharing will be restricted to sharing by only two licensees subject to the condition that there will be at least two independent networks provided in the same band. Idea Cellular ended lower by 2%, Bharti Airtel lost over 3% and RCom plunged by over 9%.Consumer durables that had gained in early morning after IIP data showed sharp rebound of 16% in consumer durables segment, which witnessed contraction in 10 of the 12 months through July, too lost its pace and ended marginally in red.

There was some stock specific movements too that kept the markets in action, Nestle India surged by over 2.5% after the Bombay high court ruled in favour of Nestle in its appeal challenging Indian food safety regulator FSSAI’s findings that the group's Maggi instant noodles contained excess lead. The court said the FSSAI, would have to justify its ban of the popular snack and also ordered fresh tests to be conducted on Maggi.

The BSE Sensex ended at 27622.82, up by 110.56 points or 0.40% after trading in a range of 27496.29 and 27791.10. There were 18 stocks on gainers side against 12 stocks on the losers side on the index. (Provisional)

The broader indices were trading in green and red; the BSE Mid cap index was up by 0.09%, while Small cap index down by 0.62%. (Provisional)

The gaining sectoral indices on the BSE were Bankex up by 1.07%, Auto up by 0.74%, PSU up by 0.37%, INFRA up by 0.29%, Oil & Gas up by 0.13%, while Metal down by 2.65%, Realty down by 0.58%, TECK down by 0.54%, IT down by 0.19%, Consumer Durables down by 0.18% were the losing indices on BSE.(Provisional)

The top gainers on the Sensex were Mahindra & Mahindra up by 3.63%, Cipla up by 3.04%, Lupin up by 2.57%, Axis Bank up by 2.11% and Sun Pharma Inds. up by 1.67%. On the flip side, Vedanta down by 8.60%, Tata Steel down by 6.34%, Hindalco down by 5.32%, Bharti Airtel down by 2.83% and Tata Motors down by 1.63% were the top losers.(Provisional)

Meanwhile, Finance Minister Arun Jaitey, while tabling the Medium-Term Expenditure Framework Statement in the parliament, reiterated that the government is committed to pursuing subsidy reforms by efficient targeting of subsidies to the poor and needy while saving the ‘scarce financial resources’ for infrastructure and development needs.

Jaitey said that the macro-economic scenario has improved significantly on back of higher growth and subdued inflation, and exuded confidence that interest rates will decline in coming years. He added that Macro-economic outcomes have improved significantly, primarily with the revival of economic growth and subsidence of inflationary tendencies. He said “With fiscal deficit coming down, and easing of inflationary pressure, it's expected that interest rates would be falling in years to come.” Finance minister however cautioned that the Seventh Pay Commission award “poses a risk”.

As per the expenditure framework, the outlay on salary is estimated to go up to Rs 1.16 lakh crore in 2016-17 and Rs 1.28 lakh crore in 2017-18 from Rs 1 lakh crore this fiscal. In case of pension, the expenditure is estimated to rise to Rs 1.02 lakh crore in 2016-17 and Rs 1.12 lakh crore in 2017-18 from Rs 88,521 crore this fiscal. It was also reported that gross domestic saving declined from 33.9 percent in 2011-12 to 30.6 percent in 2013-14, while gross fixed capital formation came down from 31.4 percent in 2011-12 to 28.7 percent in 2014-15.

Jaitley further said that the government is committed to bringing down the fiscal deficit to 3.5 percent in 2016-17, and 3 percent in 2017-18. For the current fiscal, it has been pegged at 3.9 percent of GDP. He said 'Fiscal consolidation strategy of the government hinges on reclaiming high growth in gross tax revenues achieved in the past. This is also essential for creating space for financing programmes of the government.”

The CNX Nifty ended at 8383.15, up by 33.70 points or 0.40% after trading in a range of 8339.75 and 8429.50. 28 stocks advanced against 22 declining stocks on the index.(Provisional)

The top gainers on Nifty were Mahindra & Mahindra up by 3.59%, Cipla up by 3.13%, Tata Power up by 2.74%, Sun Pharma Inds. up by 2.52% and Lupin up by 2.49%. On the flip side, Vedanta down by 8.30%, Tata Steel down by 6.12%, Hindalco down by 5.11%, Bharti Airtel down by 2.68% and NMDC down by 2.35% were the top losers.(Provisional)

European markets were trading higher, UK’s FTSE 100 increased 39.2 points or 0.6% to 6,610.39, France’s CAC gained 80.34 points or 1.63% to 5,005.77, while Germany’s DAX surged by 169.41 points or 1.55% to 11,094.02.

The Asian markets closed in green on Thursday, after China reassured markets that it would not allow the yuan to plummet in the wake of surprise devaluation this week. China’s exports are expected to grow this year while the pace of decline in imports will ease in the latter part of the year. China will study new measures to support the trade sector as the sector still faces increasing downward pressure. South Korea’s finance ministry stated that Chinese economic trends and exports and their influence to South Korea are more important to the local economy than short-term movements of the yuan. The finance ministry’s comment was follow up on China’s decision to devalue the Chinese currency this week. Hong Kong’s economy is expected to have expanded slightly in the second quarter helped by consumption, but the outlook in coming months will be dampened by a slowdown in China, a drop in mainland tourists to the city and weak retail sales.  Prospects for the Asian financial centre could be further compounded if surprise Chinese yuan devaluation this week puts a deeper dent in tourists’ spending power. Economic growth for the April to June quarter is forecast to have expanded 2.1%. Malaysian GDP fell to a seasonally adjusted 4.9%, from 5.6% in the preceding month. Japan’s Core Machinery Orders fell and stood at -7.9%, from 0.6% in the preceding month.