Benchmarks extend northward journey; Sensex regains 27,000 mark

Extending their northward journey for sixth day in a row, Indian equity benchmarks ended the volatile session in the green with a gain of around one third of a percent on hopes of rollout of the Goods and Services Tax (GST) from the next financial year. Markets gave up their entire gains in noon deals and entered into red terrain as sentiments weakened on report that International Monetary Fund (IMF) has cut its global growth forecasts for a second time this year, citing weak commodity prices and a slowdown in China and warned that policies aimed at increasing demand were needed. IMF has also lowered India's growth forecast to 7.3 per cent this year, from its earlier estimate of 7.5 per cent, and said that a faster-than-expected deceleration in inflation provides leeway for modest cuts in interest rates. Some cautiousness also crept in after Moody's Investors Service has said that with India facing fourth largest number of terror attacks across the world in 2013, such incidents have a significant and long-lasting negative impact on the economy.

Hectic buying activity which took place during last leg of trade mainly drove the markets higher, with frontline gauges ending at intraday high levels, recapturing their crucial 27,000 (Sensex) and 8,150 (Nifty) bastions. Some support also came with report that foreign investors have been big buyers of Indian stocks so far this month. This is a big turnaround after they sold over Rs 20,000 crore worth of Indian equities (net) in the previous two months. Appreciation in Indian rupee too aided sentiments. The partially convertible rupee was trading at 65.34 per dollar at the time of equity market closing against the Tuesday’s close of 65.40 on the Interbank Foreign Exchange.

Firm opening in European counters too supported the sentiments with CAC, DAX and FTSE were trading with a gain of around half percent in early deals. Sentiments remained up-beat after Glencore shares rose for a fourth day in London and ahead of UK’s Industrial and manufacturing production figures. The Asian equity markets ended in green led by the Hong Kong market which gained over 3 percent for the day, building on their biggest five-day advance in almost four years.

Back home, buying in upstream oil companies mainly provided major boost to the markets after international crude oil prices surged to near a three-month high after a new US forecast showed tighter oil supplies next year. Auto stocks too remained on buyers’ radar on hopes the upcoming festive season would boost sales. The sugar sector continued its jubilation for third straight session on global forecasts of shortage during the next crushing season. The International Sugar Organisation has forecasted a deficit of 2.5 million tonnes, while the US Department of Agriculture estimated the shortage to be 3.8 million tonnes. On the flip side, power sector lenders extended their decline for a second consecutive session on profit-taking after surging higher on hopes the government would soon announce power distributors’ restructuring.  

The NSE’s 50-share broadly followed index Nifty rose by over twenty points and ended above the psychological 8,150 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by over hundred points to finish above the psychological 27,000 mark. Broader markets too traded with traction throughout the trade and ended the session in green. The market breadth remained in favor of advances, as there were 1,691 shares on the gaining side against 1,061 shares on the losing side while 108 shares remain unchanged.

Finally, the BSE Sensex surged by 102.97 points or 0.38% to 27035.85, while the CNX Nifty gained 24.50 points or 0.30 % to 8177.40.

The BSE Sensex touched a high and a low 27082.28 and 26877.51, respectively. The BSE Mid cap index was up by 0.09%, while Small cap index was up by 0.40%.

The top gaining sectoral indices on the BSE were Metal up by 2.76%, Realty up by 1.90%, Auto up by 1.37%, Power up by 1.30% and Oil & Gas up by 1.28%, while IT down by 1.63% and TECK down by 1.38% were the losing indices on BSE.

The top gainers on the Sensex were Hindalco up by 9.64%, Vedanta up by 5.83%, Tata Steel up by 4.25%, ONGC up by 3.99% and Bajaj Auto up by 3.14%. On the flip side, Axis Bank down by 1.92%, Infosys down by 1.88%, Wipro down by 1.78%, Bharti Airtel down by 1.66% and TCS down by 1.51% were the top losers.

Meanwhile, commerce department has come up with the proposal that tariffs and minimum alternate tax (MAT) levied on Special economic zones (SEZ) should be brought down. SEZs may soon get a boost with the government considering two proposals to revive these once much sought after enclaves that are struggling without fiscal benefits. SEZs contribute about a quarter of the country's exports but several licences were surrendered after the two taxes were levied .The proposals are expected to be discussed on October 7, when officials of the commerce ministry and trade councils will discuss the ways to boost exports.

Units in SEZs, which were set up with the objective of attracting foreign investment and boosting exports, are also allowed to sell products manufactured in such zones in the domestic market. India can import almost 200 kinds of electronic hardware without paying the custom duty under the Information Technology Agreement. Though, manufacturers of these goods in SEZ selling them in the local market have to pay almost 28 per cent in duties.

Currently, goods from SEZs which are sold in the domestic market are levied an import duty which puts them at disadvantage compared with the goods which are imported through free trade agreements. SEZ units face competition from goods being sold in DTA (domestic tariff area) through the free trade agreement route due to the difference in the duty. Besides customs duty, SEZs have also been hit by MAT and dividend distribution tax, which were imposed in 2011.The commerce department wants MAT of 7.5 per cent to be levied on manufacturing SEZs from the existing of 18.5 per cent. Reduction in MAT in manufacturing SEZs will benefit those in the auto components, garment manufacturing, ceramics and computer parts sectors located in Chennai, Noida and Kerala.

Exports from SEZs declined to Rs 4.63 lakh crore in 2014-15 from Rs 4.94 lakh crore in 2013-14.

The CNX Nifty touched a high and low 8188.90 and 8132.90 respectively.

The top gainers on Nifty were Hindalco up by 9.13%, Vedanta up by 5.83%, Cairn India up by 5.54%, ONGC up by 5.11% and Tata Steel up by 3.78%. On the flip side, HCL down by 3.93%, Wipro down by 2.01%, TCS down by 1.67%, Bharti Airtel down by 1.59% and Axis Bank down by 1.58% were the top losers. 

European Markets were trading in the green; France’s CAC was up by 0.61%, Germany’s DAX was up by 1.02% and UK's FTSE was down by 0.41%.

The Asian equity markets ended in green on Wednesday, as investors shrug off cut in growth outlook by IMF. China Stock exchange was closed on account of ‘National Day’ holiday. The Bank of Japan held off on expanding stimulus, even as slumping exports and falling oil prices threaten its rosy projection that the economy is on track to hit the bank’s ambitious 2 percent inflation target next year. But lingering fears of recession will keep the central bank under pressure to ease at a more crucial meeting on October 30, when it is expected to cut its long-term economic and price forecasts. BOJ Governor Haruhiko Kuroda remained bullish that the bank’s massive money-printing will eventually lift the world’s third-biggest economy decisively out of nearly two decades of deflation. The BOJ maintained its optimistic view that while exports and output has been hurt by slowing emerging market growth, Japan’s economy continues to recover moderately. Singapore’s central bank would announce its semi-annual monetary policy decision on October 14. The Monetary Authority of Singapore (MAS) will probably ease monetary policy due to the rising risk of a recession and downside risks to the inflation outlook.

China’s foreign exchange reserves shrank by $43.3 billion in September as the central bank stepped up intervention to stabilize the yuan and calm sentiment after a surprise devaluation of its currency had jolted global markets. China’s reserves, the world’s largest, dropped to $3.514 trillion last month, after a record slide of $93.9 billion in August. The devaluation of the yuan on August 11, and the consequent fall in reserves have raised questions about how sustainable China’s efforts to support the yuan are, as capital trickles out of the country due to fears of a deepening economic slowdown and prospects of rising US interest rates.