Post Session: Quick Review

Markets finally received a relief rally on Tuesday taking encouragement from Prime Minister Narendra Modi’s brainstorming session on how India can manage global economic turbulence, including opportunities for Asia's third-largest economy in China's market and growth woes, where Prime Minister asked India Inc to increase risk-taking appetite and step up investments, while Industry body Assocham told the PM that policymakers needed to act fast to 'bullet-proof' India from the global headwinds and called for a deep cut in interest rates and new duties to stop dumping of Chinese products, such as steel. BSE Sensex rebounded after falling to its lowest since early June in last session, as global markets too showed good recovery. The jubilant traders even overlooked Moody's Investors Service’s statement that India's current account deficit is likely to remain low supported by declining oil prices but a slow recovery in industrial output and investment would drag economic growth to 7 per cent in the current fiscal and 7.5 per cent in 2016, from 7.5 per cent and 7.6 per cent respectively based on high frequency indicators suggesting that the recovery in industrial output and investment is slow, and bank credit growth still subdued. Moody's has also lowered growth forecasts for many Asia Pacific (APAC) sovereigns, citing that subdued global growth, exacerbated by weaker demand from China.

On the global front, while there was absence of US trading, the Asian markets managed mostly a positive close on Tuesday, led by the Chinese market which bounced back in final hours and rallied for the first time in five days on speculation that state-backed funds bought shares after data showed signs of a weakening economy. In China, a report showed exports declined 6.1 percent in August. Later the European markets too made a positive start, rising for the second straight session led by commodity stocks, though traders were eyeing a report on gross domestic product growth for clues on the strength of the euro-area economy.

Back home, the markets coming out of their initial choppiness went for a humungous rally that looked gaining pace with every passing moment lacking any profit booking.  Sensex and Nifty not only reclaimed their crucial psychological levels of 25000 and 7,650  but snapped the session near the highs of the day on the back of value buying in banking, metal, capital goods and power stocks.  Metal stocks, especially steel moved higher after a government body found evidence that rising imports of some hot-rolled steel products from China, Japan, South Korea and Russia pose a threat to the domestic industry, potentially paving the way for an import levy known as a safeguard duty. IT pack too moved higher even though Infosys ended marginally in red. The second largest software services firm Infosys earlier reported that the US government has found no visa violations after a probe that began in June this year. The US had initiated investigation against Infosys and its larger rival Tata Consultancy Services (TCS) for possible violations of H-1B visa rules in June.

The BSE Sensex ended at 25347.96, up by 454.15 points or 1.82% after trading in a range of 24833.54 and 25411.00. There were 28 stocks in green against just 2 stocks in red on the index. (Provisional)

The broader indices too ended in green albeit with a lower margin to the benchmarks; the BSE Mid cap index was up by 1.01%, while Small cap index gained 0.63%. (Provisional)

The top gaining sectoral indices on the BSE were Bankex up by 3.68%, Power up by 3.37%, Capital Goods up by 3.33%, Realty up by 2.62%, Metal up by 2.34%, while Consumer Durables down by 1.22%, FMCG down by 0.75% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were GAIL India up by 6.73%, Tata Steel up by 6.00%, BHEL up by 5.87%, Axis Bank up by 5.32% and ICICI Bank up by 5.20%. On the flip side, Hindustan Unilever down by 2.01% and Infosys down by 0.12% were the two losers. (Provisional)

Meanwhile, the government has ruled out the possibility of additional financial burden of Rs 8,000-10,000 crore due to One Rank One Pension (OROP) scheme hurting the fiscal consolidation programme, saying there was 'space' to absorb it Minister of State for Finance Jayant Sinha has said that 'We have the fiscal space to be able to absorb this without having any impact of the fiscal deficit target of 3.9 percent. We have taken that into account as we have prepared the OROP scheme.  

Last week, the government had announced that it will implement OROP under which a uniform pension would be given to armed forces personnel retiring at the same rank with the same length of service and pension for defence personnel would be revised every five years. The scheme would be implemented from July 1, 2014. The arrears would be paid in four half-yearly installments. However, all widows, including war widows, will be paid in one installment. There are estimated 6.5 lakh war widows and over 27 lakh ex-defence personnel who will benefit from the OROP scheme.

Jayant Sinha also stated that the actual payout in arrears for implementation of the scheme from July 1, 2014 as well as the recurring burden is being worked out. For the current year, the outgo is estimated at Rs 8,000-10,000 crore. In the current financial year, the government aims to restrict fiscal deficit at 3.9 percent of GDP. As per the fiscal consolidation road map, the fiscal deficit is to be brought down to 3 percent of GDP by 2017-18.

The CNX Nifty ended at 7701.85, up by 143.05 points or 1.89% after trading in a range of 7539.50 and 7720.90. There were 46 stocks on gainers side against 4 stocks on decliners’ side on the index. (Provisional)

The top gainers on Nifty were Yes Bank up by 7.19%, GAIL India up by 6.85%, BHEL up by 6.15%, Tata Steel up by 6.05% and Axis Bank up by 5.47%. On the flip side, Cairn India down by 2.17%, Hindustan Unilever down by 2.12%, BPCL down by 1.05% and Tech Mahindra down by 0.20% were the top losers. (Provisional)

European markets were trading with good gains, France’s CAC increased 90.3 points or 1.98% to 4,639.94, UK’s FTSE 100 was up by 105.21 points or 1.73% to 6,179.73 and Germany’s DAX surged by 228.07 points or 2.26% to 10,336.68.

The Asian markets barring KOSPI Composite and Nikkei closed in green on Tuesday. Japan’s economy shrank less than expected in the second quarter although capital expenditure fell more than originally forecast, keeping policymakers under pressure to do more to energize the fragile recovery. The world’s third-largest economy shrank an annualized 1.2 percent in April-June, less than the initial estimate of a 1.6 percent contraction. Japanese policymakers are clinging to the hope that companies will use the record profits they earned from a weak yen and lower energy costs to boost wages and investment, generating a positive cycle of rising income and higher spending. Japan’s Economy Watchers Current Index fell to a seasonally adjusted 49.3, from 51.6 in the preceding month. Chinese Trade Balance rose to 60.24B, from 43.03B in the preceding month. Manila-based multilateral lender Asian Development Bank has committed $2.2 billion in loans for Indonesia next year, up 40 percent from this year’s figure, to support the country’s development plan.