Benchmarks stage strong recovery to end flat

Indian equity benchmarks staged a smart recovery on Monday and ended the session on quiet note, pairing almost all of their early losses, supported by short-covering in beaten down but fundamentally strong stocks. Nevertheless, traders remained cautious ahead of the near-month September derivatives contracts expiry on Thursday, as traders roll-over positions to the October 2015 series. Earlier, the markets made a gap-down start tracking weak global cues, but recovering from initial hiccups started moving higher to end flat, even though there were bouts of profit taking witnessed at continuous intervals.

Progress of monsoons with IMD reports stating that the overall monsoon deficit has dropped to 14% of the benchmark long-period average (LPA) from 16% acted as a positive trigger. Traders also got some support with a report of SBI Research, that the three conditions that influence action on rate cut seem to be fulfilled. Benign food inflation, sufficient transmission of policy rates and spread of normal/excess monsoon over 64 percent of the country makes a case for at least 25 bps cut in repo rate. RBI, which has lowered the benchmark rate by 75 basis points so far this year in three installments, is scheduled to hold its next bi-monthly monetary policy meet on September 29. Some support also came with Finance Minister Arun Jaitley’s statement that the government is confident of the new GST regime to roll out from the next fiscal and expressed confidence about an early resolution of pending disputes on direct taxes front.

Firm opening in European counters too supported the domestic markets. CAC, DAX and FTSE were trading with a gain of around a percent in early deals on hopes that European Central Bank may give clues on the need for further stimulus for the euro area. Meanwhile, clearer-than-expected victory for Greece’s governing Syriza party in the country’s latest general election leaves investors free of the potential uncertainty of a less decisive outcome. However, Asian markets fell, but China proved an exception to the downtrend, with the Shanghai Composite index ending higher by around 2%.

Back home, recovery in Indian rupee too supported the sentiments. The rupee was at 65.66 per dollar at the time of equity markets closing as compared to 65.67 per dollar level on Friday.  Meanwhile, foreign portfolio investors (FPIs) net bought shares worth Rs. 643.51 crore last Friday, as per provisional data released by the stock exchanges. Banking space edged higher with major banking stocks surging over a percent. There was sudden surge in IDBI Bank on report that government is considering privatisation of state-owned lender on the lines of Axis Bank. The government presently holds 76.5 per cent in IDBI Bank.

The NSE’s 50-share broadly followed index Nifty dipped marginally to end below its psychological 8,000 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex rose by over twenty points to finish below the psychological 26,200 mark. Broader markets, however, outperformed benchmarks and ended the session with gain of around a percent. The market breadth remained in favour of advances, as there were 1604 shares on the gaining side against 1034 shares on the losing side while 133 shares remain unchanged.

Finally, the BSE Sensex declined by 25.93 points or 0.10% to 26192.98, while the CNX Nifty lost 4.80 points or 0.06% to 7977.10.

The BSE Sensex touched a high and a low 26233.46 and 25972.54, respectively. The BSE Mid cap index was up by 0.44%, while Small cap index was up by 1.21%.

The top gaining sectoral indices on the BSE were Infrastructure up by 1.36%, Power up by 1.08%, Bankex up by 0.80%, PSU up by 0.78% and Capital Goods up by 0.50%, while FMCG down by 0.76%, Oil & Gas down by 0.27%, Consumer Durables down by 0.19% and Metal down by 0.08% were the losing indices on BSE.

The top gainers on the Sensex were Maruti Suzuki up by 2.64%, Hindalco up by 2.43%, Axis Bank up by 2.05%, SBI up by 1.16% and GAIL India up by 0.99%. On the flip side, Reliance Industries down by 1.94%, Mahindra & Mahindra down by 1.43%, ITC down by 1.32%, Bharti Airtel down by 1.14% and Dr. Reddys Lab down by 1.11% were the top losers.

Meanwhile, the US government has expressed that to attract investments from across the world it is important for India to ease its business environment and also to simplify its tax regime. Nisha Desai Biswal, US Assistant Secretary of State for South Asian Affairs said ahead of the maiden bilateral Strategic and Commercial Dialogue (SCD) in Washington on September 22 that for India to achieve its goal of sustainable growth and development, it must assure global markets and international investors that it is open for business. She further stated that efforts to simplify its tax code and increase the ease of doing business will pay huge dividends. Biswal spoke at the launch of a report, 'India's Rise: A Strategy for Trade-Led Growth'compiled by Fred Bergsten, founding director of Peterson Institute of International Economics.

Biswal said that ease of doing business, IPR, proposed bilateral investment treaty and India's entry into groupings such as Asia-Pacific Economic Cooperation and Trans Pacific Partnership are expected to dominate the maiden SCD. External affairs minister Sushma Swaraj and commerce minister Nirmala Sitharaman will represent India at the SCD. Biswal said that the Modi government can give signs to show its commitment to reforms, such as the strengthening of Intellectual Property Rights (IPR) and added that in order to innovate, attract investment and compete the Indian firms creating those new technologies will need strong IPR protection.

According to Bergsten’s report, India can clinch the growth mark of 8% to 10% growth by liberalizing its trade regime as desired by the Prime Minister Narendra Modi. This will help in creating jobs and assist India in reducing poverty. It further stated that India could increase exports by $500 billion a year by joining the next stage of the Trans-Pacific Partnership trade agreement.

Biswal further said that if India and US can complete a bilateral investment treaty, it would become India's highest-standard investment agreement which would attract much-needed capital for a variety of sectors, including infrastructure, energy, health and education. In a bid to make the tax regime simpler and aid ease of doing business in the country, the government is already striving to get two important bills Goods and Services tax and the Land Acquisition Bill in the parliament.

The CNX Nifty touched a high and low 7987.90 and 7908.35 respectively.

The top gainers on Nifty were Hindalco up by 3.16%, Maruti Suzuki up by 2.43%, Power Grid up by 2.40%, Axis Bank up by 2.39% and GAIL India up by 1.83%. On the flip side, Reliance Industries down by 1.97%, Bosch down by 1.46%, Dr. Reddys Lab down by 1.27%, Grasim Industries down by 1.23% and Asian Paints down by 1.19% were the top losers.

European Markets were trading mostly in the green; France’s CAC was up by 0.69% and UK's FTSE was up by 0.32%, while Germany’s DAX was down by 0.83%. 

The Asian markets closed mostly in red on Monday, amid fresh concerns over the outlook for global growth. Nikkei stock exchange was closed on account of ‘Respect for the Aged Day’ holiday. China’s Vice Finance Minister Shi Yaobin stated that the country’s stock market and foreign-exchange fluctuations are short term and the country can maintain a medium to high economic growth rate. Yaobin added that a string of downbeat activity data combined with wild price swings in the stock markets and a surprise currency devaluation in August have fuelled fears that the Chinese economy may be slowing more sharply than was expected earlier, putting Beijing’s 2015 growth target of 7% at risk. South Korea’s National Assembly Budget Office (NABO) cut its 2016 economic growth forecast to 3.0% from 3.3%, noting it might fare better than this year, but could be curbed by offshore developments. The parliamentary budget office estimate was revised down from the forecast of 3.3% for next year it made in May. It also revised this year’s growth forecast to 2.6% from 3.0%.