Benchmarks end volatile session with modest gains

Indian equity benchmarks ended the volatile day of trade with marginal gains on Friday. Markets after a weak opening, recovered in style to trade jubilantly for most part of the day, but a sharp wave of selling, which emerged in last leg of trade, dragged the key gauges near the neutral lines. Sentiments remained up-beat with Finance Minister Arun Jaitley vowing a corruption-free governance, reasonable tax rates and non-discretionary allotment of natural resources to make it easier for companies to do business in India. 

However, markets suffered profit taking in last leg of trade led by selling in banking counter, as the Reserve Bank of India (RBI) has thrown open the doors for mergers and acquisitions in the banking industry by signaling that it is open to persons owning more than 10 percent stake in a bank. The central bank has said that it could permit promoters, or investors to own more than 10 per cent if the applicant meets certain conditions including if ‘it is in public interest’ and in the desirability of diversified ownership. Investors also remained concerned with the RBI governor Raghuram Rajan’s statement that the drop in public and private investments was the main concerns about the country’s economic growth. RBI has cut its growth forecast for the current fiscal year to 7.4% from 7.6% previously, well below the government's target of 8 to 8.5%.

On the global front, European markets, after a positive start, entered into red terrain and were trading with marginal losses, as investors opted to book profit at higher levels. However, Asian markets ended mostly in green as investors overlooked prospects of higher US borrowing costs and slower global economic growth.

Back home, Seventh Pay Commission recommended 23.5 per cent overall hike in central government employees and pensioners remuneration, which is likely to boost consumption and is seen as stimulus for the economy. Though, the pay hike will cost the government over Rs 1 lakh crore in the first year but the Finance Ministry has said that it can handle financial implications of the recommendations of the Seventh Pay Commission and will work out modalities for implementation of the suggestions. Appreciation in Indian rupee provided some support to the markets. The rupee strengthened by 10 paise to 66.08 against the dollar at the time of equity markets closing at the Interbank Foreign Exchange on increased selling of the US currency by exporters and banks.

Stocks related to oil and gas counter edged higher, led by domestic gas companies Petronet LNG and GAIL (India), which soared over 6 and 10 percent respectively, as Ras Gas Company (RasGas) agreed to modify sales and purchase agreement (SPA) with Petronet, which has a 25-year deal with Qatar’s RasGas to buy 7.5 million tonnes of LNG annually. Auto stocks too remained in limelight on hopes that the pay hike proposed in the seventh pay commission may boost demand.

The NSE’s 50-share broadly followed index Nifty rose by over ten points and ended above the psychological 7,850 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by over twenty points to finish above the psychological 25,850 mark. Broader markets, however, outperformed benchmarks and ended the session with a gain of over half a percent. The market breadth remained in favor of advances, as there were 1,451 shares on the gaining side against 1,201 shares on the losing side while 232 shares remain unchanged.

Finally, the BSE Sensex gained 26.57 points or 0.10% to 25868.49, while the CNX Nifty added by 13.80 points or 0.18 % to 7856.55.

The BSE Sensex touched a high and a low 26058.76 and 25769.81, respectively. The BSE Mid cap index was up by 0.86%, while Small cap index was up by 0.61%.   

The top gaining sectoral indices on the BSE were Oil & Gas up by 2.05%, Capital Goods up by 0.82%, IT up by 0.69%, TECK up by 0.62% and Auto up by 0.60%, while FMCG down by 0.82%, Realty down by 0.26% and Bankex down by 0.15% were the losing indices on BSE.

The top gainers on the Sensex were GAIL India up by 10.07%, Wipro up by 1.93%, Mahindra & Mahindra up by 1.92%, Dr. Reddys Lab up by 1.89% and Maruti Suzuki up by 1.84%. On the flip side, Sun Pharma down by 2.21%, ITC down by 2.17%, Hindalco down by 1.53%, Hero MotoCorp down by 1.07% and Tata Motors down by 1.06% were the top losers. 

Meanwhile, after the 7th Pay Commission headed by Justice A K Mathur recommended a 23.55 percent hike in salary, allowances and pension involving an additional burden of Rs 1.02 lakh crore for the government, the Finance Ministry has said that the recommendation of the seventh pay commission will not impact the finances. The ministry has said that it can handle the financial implications and will work out modalities for implementation of the suggestions. The new pay scale will come into effect from January 1, 2016, but is likely to be implemented from next financial year and employees will be paid arrears.

Finance Secretary Ratan Watal has said that by the time it is implemented, it goes into next financial year and India’s growth prospects are good and the economy is pretty robust.  He said that there will be challenges but the Ministry can face it. Watal also said the Finance Ministry would look at how to channelise the increase in money in the hands of people to long-term saving instruments.

In order to hasten the implementation of the recommendation, the government has decided to set up an implementation secretariat that would be headed by the expenditure secretary. Finance Minister Arun Jaitley said that an Implementation Secretariat, under Expenditure Secretary, will look into the recommendation of the Seventh Pay Commission. He further said that there will be a separate Empowered Committee which is normally headed by the Cabinet Secretary where different departments of the government which are concerned with the recommendations their heads are members and therefore if any representations come from any segment, they take a view.

The government had unveiled a fiscal consolidation roadmap in Budget under which fiscal deficit was to be brought down to 3.9 per cent of GDP in 2015-16, 3.5 per cent in 2016-17 and 3 per cent by 2017-18.Fiscal deficit in 2014-15 was 4 per cent of GDP.

The CNX Nifty touched a high and low 7906.95 and 7817.80 respectively.

The top gainers on Nifty were GAIL India up by 9.59%, Wipro up by 2.33%, Bank of Baroda up by 2.29%, Ambuja Cement up by 2.20% and Dr. Reddys Lab up by 2.10%. On the flip side, ITC down by 2.16%, Sun Pharma down by 2.21%, Hindalco down by 1.34%, HCL down by 1.22% and Bosch down by 0.99% were the top losers.

European Markets were trading mostly in red; France’s CAC was down by 0.63%, Germany’s DAX was down by 0.19% and UK’s FTSE was down by 0.18%.

The Asian markets closed mostly higher on Friday, as investors continue to mull a likely interest rate hike by the US Federal Reserve in December. The survey showed an increasing number of Japanese retail investors are predicting flat growth or recession for the economy over the next 12 months. The survey provided the latest evidence that Prime Minister Shinzo Abe’s unprecedented stimulus to revive the economy is failing to win investors confidence. The Bank of Japan will release a new set of price indicators this month that reconfigures the way price trends are measured as the central bank seeks to show the country’s below-target inflation rate is due to volatile items such as energy. Importantly, a new consumer price index (CPI) will exclude energy costs, which have been falling, but include the costs of items such as processed and imported foods, which have been rising. Chinese consumer confidence dipped just 1 point to 106 in the third quarter as residents in first-tier cities were generally optimistic over employment and personal finance. Consumer expectations for employment were stable at 66 percent, while their sentiment for personal finance shed 1 percentage point to 64 percent, according to the quarterly survey of 3,500 respondents in China.

South Korea’s average disposable household income grew a slim 0.2 percent in real terms in the third quarter over a year earlier, the slowest in nearly two years. It follows a 2.5 percent gain in the second quarter on-year and was the slowest since the fourth quarter of 2013, adding to some doubts that Asia’s fourth largest economy can sustain a fast recovery despite weak exports. The incremental income growth was due in large part to a real 0.6% drop in labour income, which accounts for 67% of the total income, in July-September from a year earlier.