Markets continue to trade higher; Metal, Capital Goods counters lead the rally

The local equity markets continued to trade higher in late morning session on the back of sustained buying in several blue chip stocks. Both the benchmark indices - BSE Sensex and NSE Nifty are trading well above their crucial levels of 24,400 and 7,400. Sentiments got a boost with a private report that the India's GDP growth is likely to pick up to 7.8 per cent in fiscal 2016-17 from 7.6 per cent this year.  According to report, the pickup in growth numbers would be driven by several factors including higher discretionary demand on Pay Commission wage hike, low inflation, high corporate profitability, ongoing implementation of public capex and an accommodative monetary policy stance. Besides, continued buying FIIs encouraged by the regulatory fillip to the financial sector and the government’s commitment to keep to the 3.5 per cent fiscal deficit target also boosted the domestic sentiment. However, gains remained capped on the report that the growth in India's services industry slowed sharply in February as rising prices lead to a slight deceleration in demand. The Nikkei/Markit Services Purchasing Managers' Index (PMI) sank to 51.4 in February from January's 54.3, but chalked up its eighth straight month above the 50-level that distinguishes growth from contraction.

On the global front, Asian markets were moderately higher on Thursday after Wall Street logged modest gains on solid labor market data, despite weakness in U.S. manufacturing. Overnight, energy and bank stocks led Wall Street higher on Wednesday, adding to a rally in the previous session. Meanwhile, Chinese shares gained ahead of the 12th National People's Congress (NPC) meeting, which convenes Saturday, while Japanese stocks rose for a third day as banks gained and a recovery in oil prices boosted commodity-related shares.

Back home, all BSE sectoral indices were trading in the green. Among them, Metal index gained the most by 2.41 per cent, followed by Capital Goods 2.17 per cent, Auto 1.63 per cent and IT 1.17 per cent. In scrip specific development, shares of Tata Motors have rallied after the company’s arm Jaguar Land Rover (JLR) reported a strong 25% jump in US sales at 7,929 units in February 2016 against 6,327 units a year earlier. Furthermore, HDFC gained after the company decided to raise Rs 2,000 crore via non-convertible debentures (NCDs) to fund business needs. The market breadth on the BSE was positive; there were 1265 shares on the gaining side against 777 shares on the losing side while 112 shares remain unchanged.

The BSE Sensex is currently trading at 24487.05, up by 244.07 points or 1.01% after trading in a range of 24383.28 and 24514.28. There were 23 stocks advancing against 6 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.14%, while Small cap index up by 0.71%.

The top gaining sectoral indices on the BSE were Metal up by 2.41%, Capital Goods up by 2.17%, Auto up by 1.63%, IT up by 1.17% and TECK up by 1.06%, while there were no losers on the index.

The top gainers on the Sensex were Tata Motors up by 4.95%, Tata Steel up by 4.29%, BHEL up by 4.27%, Larsen & Toubro up by 3.30% and Dr. Reddys Lab up by 2.71%. On the flip side, GAIL India down by 0.77%, NTPC down by 0.55%, Maruti Suzuki down by 0.45%, ICICI Bank down by 0.43% and Lupin down by 0.27% were the top losers.

Meanwhile, Praising the budget 2016 proposals, the multilateral lending agency the International Monetary Fund (IMF) has projected a robust growth rate of 7.3 percent for the country this fiscal, picking up to 7.5 percent next year, supported by stronger domestic demand, and has said that the measures are aimed at increasing public infrastructure spending, rationalising subsidies, creating more flexible labour and product markets as well as enhancing financial inclusion.

Though, the agency's protections are lower than the government's estimate of 7.6 percent growth in 2015-16 and unchanged from its earlier projection at the same rate in January, but it said that India has a very good outlook at the present time. It added that India certainly benefited from low oil and energy prices, one of the worlds largest oil importers and that's raised the real income of all Indians. In its report IMF said that the economy is on a recovery path, helped by a large terms of trade gain (about 2.5 percent of GDP), positive policy actions and reduced external vulnerabilities.

However, it also raised concern and said that main internal risk to a country like India comes from a weak corporate and bank balance sheet. There has been a big increase in non-performing loans in the present time, due to the previous shortfall in investment. It also noted that global financial market volatility, a potential further deterioration in exports, and strains in bank and corporate balance sheets could weigh on India’s growth prospects. It added that high fiscal deficits and upside risks to inflation constrain the scope for countercyclical policies.

It also cautioned that though balance of economic risks has improved, they remain tilted to the downside. These included the impact of intensified volatility on global financial markets, including from surprise unexpected US monetary policy moves or China`s economic slowdown.

The CNX Nifty is currently trading at 7437.50, up by 68.65 points or 0.93% after trading in a range of 7406.05 and 7445.70. There were 36 stocks advancing against 14 stocks declining on the index.

The top gainers on Nifty were Tata Motors up by 4.81%, BHEL up by 4.48%, Tata Steel up by 4.13%, Hindalco up by 3.80% and Larsen & Toubro up by 3.44%. On the flip side, Zee Entertainment down by 2.76%, Yes Bank down by 1.51%, Bank of Baroda down by 1.24%, GAIL India down by 1.14% and PNB down by 0.83% were the top losers.

Asian markets were trading mostly in green, KOSPI Index was up by 0.22%, FTSE Bursa Malaysia KLCI up by 0.29%, Shanghai Composite up by 0.28%, Jakarta Composite up by 0.42%, Taiwan Weighted up by 0.57% and Nikkei 225 was up by 1.1%.  On the flip side, Hang Seng was down by 0.33%.