Benchmarks extend previous session jubilation on Wednesday

Extending their previous session’s jubilation, Indian equity benchmarks ended the Wednesday’s trade with a gain of over one and half a percent buoyed by firm global cues coupled with some key policy announcements. Markets, after a gap-up opening, managed to trade firm throughout the session and ended above their crucial 25,700 (Sensex) and 7,800 (Nifty) levels. Sentiments remained up-beat with Chief Economic Advisor Arvind Subramanian’s statement that Indian economy will grow at the highest rate and also remain an attractive investment destination. Traders were also getting some support with Organisation for Economic Cooperation and Development (OECD) statement that India is expected to see “firming growth” while the outlook for China continues to deteriorate.

Traders also drew some comfort with Finance minister Arun Jaitley’s statement that it was important to stay on the path of reform and build momentum to achieve higher economic growth and that he still wants to implement a new goods and services tax (GST) by next April 1, though he also said that there will be no extension of the monsoon session and the government has asked the president to prorogue the session. Meanwhile, Prime Minister in a meeting with Indian industry asked them to take risk and invest more, as his government was stepping up investment in infrastructure and improving ease of doing business to attract global investment.

On the global front, European counters have made a firm start and were trading with a gain of around two percent in early deals boosted by a rally in Asian markets, amid hopes of further support from the Chinese government. Asian markets extended their global rally on Wednesday, with markets in China stabilising and Japanese stocks posting their biggest one-day gain since the height of the global financial crisis in 2008.

Back home, there was broad based buying witnessed in the markets and apart from the blue chips, the broader markets too equally participated in the rally. Recovery in Indian rupee too supported the sentiments. The rupee firmed up against the US dollar and was trading at 66.38 at the time of equity markets closing as compared to Tuesday’s close of 66.55, tracking gains in domestic equity markets.

Buying in metal counter too aided the sentiment after investors' sentiment toward China took a positive turn. Stocks related to telecom space too ringed loud after the Cabinet approved spectrum trading guidelines, which will allow telecom companies to buy and sell telecom spectrum from each other. Jewellery stocks too edged higher after Union Cabinet gave its approval for introduction of Gold Monetization Scheme, as announced in the Union Budget 2015-16.

The NSE’s 50-share broadly followed index Nifty rose by over one hundred and thirty points and ended above the psychological 7,800 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex rose by over four hundred points to finish above the psychological 25,700 mark. Broader markets too traded with traction and ended the session with a gain of around two percentage points. The market breadth remained in favour of advances, as there were 1,981 shares on the gaining side against 713 shares on the losing side while 107 shares remain unchanged.

Finally, the BSE Sensex surged by 401.71 points or 1.59% to 25719.58, while the CNX Nifty soared by 130.35 points or 1.70% to 7818.60.

The BSE Sensex touched a high and a low 25820.56 and 25553.61, respectively. The BSE Mid cap index was up by 1.94%, while Small cap index was up by 1.84%.

The top gaining sectoral indices on the BSE were Metal up by 3.54%, Auto up by 2.92%, Realty up by 2.76%, Power up by 2.31% and Consumer Durables up by 2.25%, while there were no losers on the sectoral index.

The top gainers on the Sensex were Hindalco up by 7.97%, Vedanta up by 6.85%, NTPC up by 5.50%, Tata Steel up by 4.57% and Tata Motors up by 3.98%. On the flip side, Sun Pharma down by 0.63%, GAIL India down by 0.41% and Wipro down by 0.23% were the top losers. 

Meanwhile, Moody's Investors Service has said that India's current account deficit (CAD) is likely to remain low on account of decline in oil prices, which has dropped by nearly 60% over the past one year to around $45-46 per barrel, easing pressure on India's huge oil import bill. Though, it also said that a slow recovery in industrial output and investment will drag economic growth to 7% in the current financial year. India's current account deficit (CAD), difference between the inflow and outflow of foreign exchange, has narrowed significantly from 4.8% in 2012 to 1.4% in 2014. It said that 'We expect this trend to continue, supported by lower oil import costs.'

Moody's has reduced its projection for India’s growth to 7% in 2015 and 7.5% in 2016 from 7.5% and 7.6%, based on high frequency indicators suggesting that the recovery in industrial output and investment is slow, and bank credit growth still subdued. In the first quarter of current financial year India's economy grew at 7% and government expects the economy to grow at 8-8.5% in the fiscal ending March 2016.

Moody’s further stated that the risk of a weaker monsoon and potential for higher food price inflation narrowed the scope for more significant monetary easing in the first half of the year. However, it said that “our expectation is that despite its slower than anticipated pace, the direction of recovery is positive, which is reflected in our 2016 forecast”. Besides, it has lowered growth forecasts for many Asia Pacific (APAC) sovereigns, citing that subdued global growth, exacerbated by weaker demand from China. 

 The CNX Nifty touched a high and low 7846.05 and 7764.55 respectively.

The top gainers on Nifty were NMDC up by 8.26%, Hindalco up by 7.70%, Vedanta up by 6.52%, NTPC up by 5.81% and Tata Steel up by 4.44%. On the flip side, Bosch down by 0.66%, Tech Mahindra down by 0.63%, Sun Pharma down by 0.54%, Power grid down by 0.48%, Wipro down by 0.28% were the top losers.

European Markets were trading in the green; France’s CAC was up by 2.50%, Germany’s DAX was up by 1.72% and UK's FTSE was up by 1.87%.

The Asian markets closed in green on Wednesday with Japan’s Nikkei 225 Stock Average rising to its highest level since October 2008 as the rally was triggered by a mix of investors betting that a recent sell-off in stocks was overdone, and the promise of further tax cuts. China’s imports tumbled in August, raising concerns about the health of the world’s second-largest economy and its contribution to global growth. The data will add to the pressure on Beijing policymakers trying to ensure China’s economy avoids a hard landing, though authorities will take some comfort that their efforts to steady the country’s stock markets. Imports dived 13.8 percent from a year earlier, and a tenth consecutive monthly drop, reflecting both lower global commodity prices and sluggish demand. Chinese Trade Balance rose to 60.24B, from 43.03B in the preceding month. China’s economy still faces relatively large downward pressure, the head of the country’s top economic planner stated adding that the largest problem facing the Chinese economy now is industrial overcapacity. Indonesia is set to announce what President Joko Widodo called a massive deregulation package, aimed at luring more investment and supporting a currency that has weakened to 17-year lows. In March, after the rupiah hit its lowest level since 1998, Widodo launched his first policy package which included a plan to impose temporary anti-dumping import duties and waive visa for dozens of countries.  Indonesia’s economic growth in the second quarter dropped to 4.67 percent its slowest since 2009, with prices for commodity and energy exports remaining weak.