Markets trade higher led by capital goods stocks

Extending their northward journey for third straight session, Indian equity benchmarks have once again made a gap-up opening and are now trading higher by around half a percent in early deals, on account of sustained buying by funds and retail investors. Buying in capital goods stocks too aided the sentiments, as the Cabinet approved the first-ever policy for the capital goods sector in the country that aims to triple the value of production of these goods to Rs.7.5 lakh crore by 2025 and create more than 21 million jobs. Further, support also came in on report that foreign portfolio investors (FPIs) bought shares worth a net Rs 495.08 crore yesterday, as per provisional data released by the stock exchanges. Besides, traders were also getting support from the upbeat news that the government is confident that it would be able to garner an adequate number of votes in the Rajya Sabha to ensure the passage of the Constitution amendment Bill on goods and services tax (GST) during the forthcoming monsoon session of Parliament. Based on this, it has already begun working on a timeline that envisages roll-out of the GST regime from April 2017. However, Markets are likely to remain volatile as traders roll over positions in the futures & options (F&O) segment from the May 2016 series to June 2016 series. The May 2016 derivatives contracts expire today.

In the scrip specific development, L&T surged over 9 per cent after the company’s net profit for the quarter ended March, rose 23.22% at Rs 2539.14 crore from the Rs 2060.65 crore during the corresponding quarter a year before.

On the global front, US markets ended higher on Wednesday, helped by higher oil prices and investors becoming more comfortable with the prospect of an interest rate hike as early as next month. Asian markets were trading mostly lower despite the positive cues overnight from Wall Street. Investors were treading cautiously as they kept an eye on a two-day Group of Seven leaders' summit in Japan that starts later on Thursday and a speech by U.S. Federal Reserve Chair Janet Yellen on Friday.

Back home, all the sectoral indices on the BSE, barring Consumer Durables, were trading in fine fettle led by Capital Goods, Metal, Oil & Gas, Power and Auto. The market breadth on BSE was positive in the ratio of 919: 558, while 74 scrips remained unchanged.

The BSE Sensex is currently trading at 26027.22, up by 146.05 points or 0.56% after trading in a range of 25941.51 and 26068.61. There were 18 stocks advancing against 12 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.42%, while Small cap index gained 0.42%.

The top gaining sectoral indices on the BSE were Capital Goods up by 5.97%, Metal up by 0.70%, Oil & Gas up by 0.52%, Power up by 0.45% and Auto up by 0.35%, while Consumer Durables down by 0.11% was the lone losing index on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 9.73%, BHEL up by 2.32%, GAIL India up by 1.97%, Tata Steel up by 1.36% and ONGC up by 1.28%. On the flip side, NTPC down by 1.30%, Sun Pharma Inds. down by 0.91%, TCS down by 0.74%, SBI down by 0.49% and Cipla down by 0.37% were the top losers.

Meanwhile, in order to boost the manufacturing sector, the government has approved the first ever policy for the country’s capital goods sector, which aims to triple the value of production of these goods to Rs 7.5 lakh crore by 2025 and create more than 21 million jobs. Capital Goods are crucial for the manufacturing industry as it forms the backbone of the industry. Exports are directly linked with the capital goods and the policy will give a boost to the falling exports.

The government stated that this is first-ever policy for capital goods sector with a clear objective of increasing production of capital goods from Rs 2.3 lakh crore in 2014-15 to Rs 7.5 lakh crore and raising direct and indirect employment from the current 8.4 million to 30 million in 2025. It also said that the aim of the policy is create game-changing strategies for the capital goods sector. Some of the key issues addressed include availability of finance, raw material, innovation and technology, productivity, quality and environment-friendly manufacturing practices, promoting exports and creating domestic demand.

The policy also envisages increasing the share of domestic production in India’s capital goods demand from 60 percent to 80 percent by 2025 and improving domestic capacity utilisation to 80-90 per cent in the process. The policy says that once in place it will increase exports from current 27% to 40% of production. The policy envisions increasing the share of capital goods in total manufacturing activity from 12% at present to 20% by 2025.

The policy also seeks to facilitate improvement in technology depth across sub-sectors, increase skill availability, ensure mandatory standards and promote growth and capacity building of MSMEs. Further, to create an ecosystem for globally competitive capital goods sector, the policy recommends devising a long-term, stable and rationalised tax and duty structure.

The CNX Nifty is currently trading at 7969.85, up by 34.95 points or 0.44% after trading in a range of 7948.50 and 7986.35. There were 30 stocks advancing against 20 stocks declining on the index.

The top gainers on Nifty were Larsen & Toubro up by 10.22%, Idea Cellular up by 2.88%, BHEL up by 2.61%, Ambuja Cement up by 1.98% and GAIL India up by 1.61%. On the flip side, Bharti Infratel down by 1.54%, NTPC down by 1.45%, Tech Mahindra down by 1.23%, TCS down by 0.80% and Maruti Suzuki down by 0.78% were the top losers.

Asian markets were trading mostly in red, Hang Seng decreased 52.62 points or 0.26% to 20,315.43, Shanghai Composite decreased 27.37 points or 0.97% to 2,787.72, Jakarta Composite decreased 8.29 points or 0.17% to 4,764.69, Taiwan Weighted decreased 6.45 points or 0.08% to 8,389.75 and KOSPI Index decreased 2.1 points or 0.11% to 1,958.41.

On the flip side, FTSE Bursa Malaysia KLCI increased 1.66 points or 0.1% to 1,632.62 and Nikkei 225 increased 48.28 points or 0.29% to 16,805.63.