Post Session: Quick Review

Indian markets extended their gaining streak on Tuesday, recovering from the lows of the day with buying interest returning to the street on hopes of some policy resolution after outlining the roadmap of the BJP-led government for the coming months, Finance Minister Arun Jaitley said that the Goods and Services Tax (GST) will be a “top priority” and he hopes to take the Bankruptcy Code to Parliament in the Winter session. Prime Minister Narendra Modi too in a speech to Indian and German businesses said that government hopes to roll out a new GST in 2016. Earlier, the markets made a positive start on supportive global cues, aided by FMs statement that India has now reached a situation where it is no longer satisfied with a 6 to 8 percent growth rate and most Indians believe that “my normal is eight plus (growth rate), probably closer to nine per cent” and higher.

The global markets showed mostly a positive trend and after the US markets extended the rally, the Asian markets followed the trend with indices in the region continuing to believe that weak data will pressure central banks in Europe and Japan to provide more stimulus and will delay the US Fed in its pursuit to begin withdrawing monetary stimulus. Japan’s Nikkei rose to a 2-1/2-week high. The European markets however made a soft start after German factory orders unexpectedly fell in August in a sign that Europe’s largest economy is vulnerable to weaker growth in China and other emerging markets.

Back home, markets after giving up their early gains were trading in range that some weak economic data dragged them to red towards the mid of the session, as the MNI India Consumer Sentiment Indicator fell 3.2% to 115.3 in September from 119.1 in August, the lowest level since the survey began in November 2012. Also, the growth in India’s private sector output slowed in September as both manufacturing and service sectors witnessed sluggish rise amid softer demand conditions across the country. Nikkei survey said that India’s Services PMI slowed to 51.3 in September from 51.8 in August. However, after the knee-jerk reaction markets once again started recovering led by buying among pharma and consumer durable shares. Though, further upside was capped due to selling among banks, tech and IT stocks on profit taking. In non sectoral gauges sugar continued its upmove after reports that the government is working on a new subsidy scheme to be implemented in the current 2015-16 season, to boost export of surplus sugar and help mills clear dues of over Rs 12,000 crore to farmers. All the major sugar stocks showed smart rally Renuka Sugar surged by around 13%, Bajaj Hindusthan too was up by 13%, Balrampur Chini gained 9%, Triveni Engineering was up by 13%%, Dhampur Sugar Mills zoomed by over 16% and Dwarikesh Sugar gained 13%.

The BSE Sensex ended at 26930.65, up by 145.10 points or 0.54% after trading in a range of 26751.25 and 27010.27. There were 19 stocks in green against 11 stocks in red on the index. (Provisional)

The broader indices too ended in green; the BSE Mid cap index was up by 0.35%, while Small cap index gained 0.75%. (Provisional)

The top gaining sectoral indices on the BSE were Consumer Durables up by 4.37%, FMCG up by 2.42%, Metal up by 1.97%, Oil & Gas up by 1.91%, PSU up by 1.06% while, IT down by 1.18%, TECK down by 0.82%, Bankex down by 0.24% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were Tata Motors up by 5.81%, ITC up by 4.32%, Coal India up by 3.88%, Cipla up by 3.52% and GAIL India up by 3.38%. On the flip side, BHEL down by 2.82%, Infosys down by 2.07%, Maruti Suzuki down by 1.19%, NTPC down by 1.02% and Axis Bank down by 0.99% were the top losers. (Provisional)

Meanwhile, after S&P, another global rating agency Moody’s in its credit outlook has said that the 18% reduction in gas price for the six month period starting October 1 was credit-negative for producers such as Oil and Natural Gas Corporation (ONGC) and Oil India, since it would lower their revenue and cash flow. It added that the sharp cut in natural gas prices notified by the Indian government will not only impact state-run companies but will also discourage new exploration investments and fuel imports.

Moody's said that India relies on natural gas imports to meet its energy needs. Imports accounted for 36% of the total natural gas consumption in India for fiscal 2015 and 39% for the five months between April 1 and August 30, 2015. It added that imports will continue to increase as low international gas prices stimulate demand for natural gas and low domestic prices discourage further investments by upstream players to explore and develop new gas reserves.

The rating agency in its report has said that gas price reduction will have its greatest effect, in absolute terms, on ONGC, and at present sale volumes, it expect ONGC's revenue to decline by about $300 million (approximately Rs 2,000) for the six months between October 1 and March 31. OIL revenues, it said, would decline by about $33 million (approximately Rs 220 crore) for the same period.

India sets natural gas prices by taking a volume-weighted annual average of the rate prevailing in the US, Britain, Canada and Russia. Prices are calculated on the trailing 12 month data with a lag of one quarter. Accordingly, the price came down to $3.82 per mBtu (million British thermal unit) from $4.66 on a gross calorific value basis for the six month period starting October 1. Moody’s has said that with benchmark prices still low, the government-mandated domestic natural gas price is likely to remain muted over the next 12-18 months. It has further stated that its assumption for Henry Hub natural gas prices for 2016 is $3 per mBtu and $3.25 per mBtu for 2017. 

The CNX Nifty ended at 8148.55, up by 29.25 points or 0.36% after trading in a range of 8096.50 and 8180.95. There were 25 stocks gainers side against equal number of stocks on decliners’ side on the index. (Provisional)

The top gainers on Nifty were Tata Motors up by 5.74%, ITC up by 4.13%, Cipla up by 3.81%, Coal India up by 3.71% and GAIL India up by 3.65%. On the flip side, BHEL down by 3.16%, Infosys down by 2.10%, Ultratech Cement down by 1.70%, ACC down by 1.58% and NTPC down by 1.57% were the top losers. (Provisional)

European markets were showing signs of recovery after a weak start, France’s CAC increased by 19.33 points or 0.42% to 4,636.23, Germany’s DAX was up by 39.35 points or 0.4% to 9,854.14, while UK’s FTSE 100 was down by 5.32 points or 0.08% to 6,293.60.

The Asian equity markets ended mostly in green on Tuesday, extending gains into a second session following another US rally. China Stock exchange was closed on account of ‘National Day’ holiday. The International Monetary Fund stated that China has the capacity to manage its economic slowdown but needs to communicate policy more effectively and guard against potential spillovers. The Fund added that China needed to expand market forces to return to sustainable growth and to implement effective governance. The Fund calculates that every percentage point slowdown in China’s growth translates into a 0.3 percent decline for other Asian countries, although it noted that the impact of China’s slowdown had likely been exacerbated by declines in its financial markets in recent months. Indonesia’s banks need to consider the likely risk of a further depreciation in the rupiah before deciding whether to lower their lending rates, the country’s central bank governor stated, after the cabinet secretariat said President Joko Widodo would seek to encourage reductions in interest rates. Bank Indonesia Governor Agus Martowardojo told that lower annual inflation in September provided room for banks to reduce lending rates, but they have to also consider expectations of (rupiah) depreciation, which would make it quite risky to adjust the level of their rate. Japan’s Average Cash Earnings fell to a seasonally adjusted 0.5%, from 0.9% in the preceding quarter whose figure was revised up from 0.6%.