Markets extend the rally on hopes of good monsoon

Indian markets extended their jubilation and rallied in Tuesday's trading session, ahead of the release of February industrial production and March consumer price index (CPI) data later in the day. It was mainly the monsoon talk that kept the markets in high spirit through the day. Ahead of India Meteorological Department (IMD), issue its forecast for this year's monsoon rains, private weather forecaster Skymet predicted above average rains this year. A normal monsoon - after two straight years of drought - is likely to boost the farm sector. The government too has said that after two years of deficient rainfall, monsoon this year is expected to be normal and directed states to chalk out plans to boost crop acreage and production in Kharif season starting June. Traders also took some encouragement with India's Chief Economic Adviser (CEA) Arvind Subramanian’s statement that India's economy has the potential to grow between 8 to 10 per cent if the country continues its pace of reforms. He further stated that achieving this growth rate is dependent on a number of factors including the continuation and pace of reforms and global environment that promotes exports.

On the global front, after the subdued performance of the US markets, the Asian markets made mostly a positive closing, led by the Japanese market after the yen snapped its longest rally since 2012; however the Chinese shares drifted lower on profit taking after sharp gains in the previous session. The European stocks though made mostly a positive start and held near a one-week high, ahead of the International Monetary Fund’s release of updated World Economic Outlook, which is likely to show a dip in the global growth forecast following a reduction in the previous projections in January.

Back home, local markets after a choppy start firmed up in the very early morning of trade on reports that foreign investors are buying heavily into emerging market and the investor community has infused Rs 3,469 crore in domestic equities so far this month. In early trade markets were also encouraged by a World bank report that India's GDP will grow at 7.7% in 2017 and 7.5% in 2016, not only this driven by India's GDP growth, the World Bank forecasted gradual acceleration in South Asia's economic growth from 7.1 percent in 2016 to 7.3 percent in 2017.The local traders kept accumulating value stocks and markets gained momentum, however sudden bout of profit taking appeared in metal and select IT stocks in the late noon session that took the major bourses almost in the red territory, but the selling was reciprocated by good buying that once again powered the markets to highs of the day. Traders rejoiced with government’s statement that monsoon this year is expected to be normal. The news led the rally in Consumer durable, auto and banking stocks, which witnessed good buying interest till last, as stronger than usual monsoon rainfall eased concerns about inflation. Apart from sectoral gains, shares of fertiliser, irrigation systems and agri machinery manufacturers too were in limelight today. Also, the Crisil Research reportedly said that corporate earnings in Q4 will be much better than earnings seen since past 5-6 quarters.

Finally, the BSE Sensex ended at 25145.59, up by 123.43 points or 0.49%, while the Nifty ended at 7708.95, up by 37.55 points or 0.49%.

The BSE Sensex traded in a range of 24996.44 and 25180.02. There were 23 stocks in green against 7 stocks in red on the index. The overall market breadth remained positive with 1,521 shares advancing against 1,101 declining on the BSE.

The broader indices outperformed the benchmarks and ended with good gains; the BSE Mid cap index was up by 1.00%, while Small cap index gained 0.90%.

The top gaining sectoral indices on the BSE were Auto up by 1.61%, Oil & Gas up by 1.21%, Consumer Durables up by 0.74%, Capital Goods up by 0.69%, Bankex up by 0.50% while, Metal down by 1.38% were the losing indices on BSE.

The top gainers on the Sensex were GAIL India up by 3.87%, Maruti Suzuki up by 2.82%, Hero MotoCorp up by 2.47%, Tata Motors up by 2.40% and Adani Ports &Special up by 1.92%. On the flip side, Coal India down by 2.28%, Tata Steel down by 2.11%, ITC down by 1.18%, HDFC Bank down by 0.55% and SBI down by 0.24% were the top losers.

Meanwhile, Finance Minister Arun Jaitley, taking forward the dialogue with states on fiscal management asked them to spend within the fiscal limits and adhere to fiscal discipline. he also advised them to spend on infrastructure and development activities and to use Aadhaar for transferring benefits to people. Jaitley said we have to ensure that some states depending on parameters have been given some additional fiscal space, but all of us will have to learn to live and spend within means and stick to fiscal discipline. He further said that we have seen that ever since we have shown this tendency of spending more yet sticking to fiscal discipline, this has brought immediate results in terms of interest rates and India's credibility.

Jaitley said national focus is on larger expenditure on social sector, infrastructure creation and rural areas, which have conventionally been found lacking in the past. FM speaking at second conference of state finance secretaries said that “the tendency to spend it on non- developmental activities may in the short term appear to be attractive but in longer run it doesn't reap results.”

The share of states in central taxes has seen a quantum jump after implementation of the 14th Finance Commission report that prescribed a record 10 per cent increase in their share in the Union taxes to 42 percent. Total transfers to states including grants in aid from the Centre to state are estimated to be Rs 9.47 lakh crore in FY17 as compared to Rs 8.36 lakh crore during FY16. Acceding to the recommendations by the 14th Finance Commission for the 2015-20 period, the Centre has approved a fiscal deficit target of 3% for states that have had a favourable debt-GSDP ratio and interest payments-revenue receipts ratio in the previous two years.

The CNX Nifty traded in a range of 7663.35 and 7717.40. There were 36 stocks on gainers side against 15 stocks on losers side on the index.

The top gainers on Nifty were GAIL India up by 4.09%, Zee Entertainment up by 2.80%, Maruti Suzuki up by 2.73%, Hero MotoCorp up by 2.52% and Tata Motors - DVR up by 2.47%. On the flip side, Coal India down by 2.16%, Tata Steel down by 2.01%, Idea Cellular down by 1.87%, ITC down by 1.48% and Tech Mahindra down by 1.10% were the top losers.

The European markets made mostly a positive start, France’s CAC was up by 8.44 points or 0.2% to 4,321.07, Germany’s DAX gained 49.72 points or 0.51% to 9,732.71 and UK’s FTSE 100 was tad lower by 1.43 points or 0.02% to 6,198.69.

Asian equity markets ended mostly higher on Tuesday. Japanese shares rallied as the yen pulled back from the previous day's 17-month high against the dollar, lifting shares of exporters as well as recently battered banks. However, Chinese shares succumbed to profit taking after sharp gains in the previous session on the back of encouraging consumer as well as producer price inflation data. China's Shanghai Composite index also dropped on liquidity worries after the country's securities regulator approved seven initial public offerings that will raise a total 2.8 billion yuan ($433 million), too led to drop in Chinese shares.