Post session - Quick review

The June series Futures and Options contract expiry session turned out to be an encouraging day for the Indian equity markets, as bulls showed strong buying interests in majority of the blue chip stocks. The usual volatility of the expiry day was completely missing from the markets and the indices held up to their gains firmly through the day to end near intraday high levels, with Sensex and Nifty ending near their crucial 27,000 and 8,300 levels respectively. Sentiments remained upbeat after the Cabinet approved the recommendations of the 7th Pay Commission on Wednesday and traders took some encouragement with Parliamentary Affairs Minister Venkaiah Naidu’s statement that the government will seek to ensure that the bill on a pan-India goods and services tax (GST) will be passed in the upcoming session of parliament, scheduled from July 18 to August 12.

Some support also came with India Meteorological Department’s (IMD) report that the Southwest monsoon is likely to hit the national capital in next 2-3 days as it picks up pace. Market participants also got some solace with Finance Minister Arun Jaitley’s statement that the Non Performing Assets (NPA) situation is under control as the economic conditions are showing signs of improvement. He pointed to some factors mentioned in the FSR including the numbers of declining weak companies and the number of stressed companies deleveraging quite fast.

Global cues too provided some support to domestic markets with European counters making a firm start as near term worries over Brexit eased. Asian markets ended mostly in green, tracking an overnight rally on Wall Street, while the safe-haven Japanese yen was held in check as global markets regained a semblance of calm after the Brexit shock.

Back home, there was broad based buying witnessed in the markets and apart from the blue chips, the broader markets too participated strongly in the rally. Sentiments got some boost with Chief Economic Advisor (CEA) Arvind Subramanian reiterating that the Current Account Deficit (CAD) the net difference between outflows and inflows of foreign currencies will possibly dip below 1 per cent in the financial year 2016-17, on the back of lower global oil prices, but he also said that the Brexit is expected to impact India as the global economy will slow down. Appreciation in Indian rupee too aided sentiments, the rupee firmed up by 15 paise to 67.52 against the dollar at the time of equity markets closing, following sustained selling of the US currency by exporters and banks. Buying in metal and mining counter too aided sentiments after the Union Cabinet on June 29, approved the National Mineral Exploration Policy. Auto stocks extended previous session rally triggered by the Union Cabinet approving 7th Pay Commission’s recommendations. Stocks related to fertilizer space remained in focus as fertilizer companies are looking to benefit from higher demand on the back of better monsoon this year.

The NSE’s 50-share broadly followed index -- Nifty -- rose by over eighty points to end above the psychological 8,250 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex -- surged by around two hundred and sixty points to finish near the psychological 27000 mark. Broader markets too traded with traction and ended the session with a gain of around a percent.

The market breadth remained in favour of advances, as there were 1,606 shares on the gaining side against 1,004 shares on the losing side while 220 shares remain unchanged. (Provisional)

The BSE Sensex ended at 26999.72, up by 259.33 points or 0.97% after trading in a range of 26872.59 and 27069.23. There were 27 stocks advancing against 3 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index was up by 1.26%, while Small cap index gained 0.94%. (Provisional)

The top gaining sectoral indices on the BSE were Realty up by 2.39%, Power up by 2.19%, Telecom up by 2.08%, Utilities up by 1.79% and Metal up by 1.74%, while there were no losers on the BSE sectoral front. (Provisional)

The top gainers on the Sensex were Dr. Reddys Lab up by 3.78%, Axis Bank up by 3.23%, Tata Steel up by 2.98%, NTPC up by 2.80% and Tata Motors up by 2.44%. On the flip side, Sun Pharma down by 0.83%, Infosys down by 0.39% and Cipla down by 0.06% were the top losers. (Provisional)

Meanwhile, India Ratings and Research, following the Cabinet’s decision to clear all recommendations made by the Seventh Pay Commission report, resulting in about 23.55 percent overall increase in salaries, allowances and pension for more than 1 crore government staff and pensioners, has said that implementation of the much- awaited pay hike for one crore central government employees and pensioners will boost domestic consumption by Rs 45,110 crore as also push up household savings. Overall it is positive for growth with modest risk on inflation.

According to India rating the gross impact of the increased pay out on the government exchequer is likely to be Rs 94,775 crore or 0.63 per cent of GDP. It added that the central government will receive income tax on this pay out and collect excise duty on consumption, after sharing the increase in income tax and excise duty with states. Thus the net impact on the central government finances is estimated to be Rs 80,641 crore or 0.54 per cent of GDP.

However, the rating agency also said that consumer price index inflation may inch up somewhat due to higher prices of services, but the impact on wholesale price index is likely to be muted due to the counter balance provided by the deflation in commodity prices and the availability of excess capacity in several manufacturing sectors.

As per India rating agency consumption in the economy will get a boost of Rs 45,110 crore or 0.30 per cent of GDP and increase savings will increase by Rs 30,710 crore  or 0.20 per cent of GDP as consumption demand in urban areas is likely rise owing to the rising income levels.  While the employees will get salary arrears from January 1, 2016, allowances will be paid only from July 1, 2016. The impact of the pay hike is expected to be less severe on state finances than expected earlier due to a lower arrear pay out.

The CNX Nifty ended at 8287.75, up by 83.75 points or 1.02% after trading in a range of 8242.10 and 8308.15. There were 45 stocks advancing against 6 stocks declining on the index. (Provisional)

The top gainers on Nifty were BHEL up by 4.72%, Grasim Industries up by 4.29%, Dr. Reddys Lab up by 3.27%, Yes Bank up by 3.21% and Axis Bank up by 3.02%. On the flip side, Sun Pharma down by 0.93%, Infosys down by 0.51%, Ambuja Cement down by 0.43%, Cipla down by 0.29% and Bosch down by 0.17% were the top losers. (Provisional)

European markets were trading in green; Germany’s DAX increased 24.42 points or 0.25% to 9,636.69, France’s CAC gained 25.73 points or 0.61% to 4,221.05 and UK’s FTSE 100 was up by 32.82 points or 0.52% to 6,392.88.

Asian stocks closed mostly higher on Thursday, as sterling crawled higher and the yen held steady against its rivals on easing concerns over Britain's exit from the European Union. Investors shrugged off Japan’s weak industrial production data, as more signs of sluggishness added pressure on the Bank of Japan to expand its massive stimulus at a rate review on July 28 -29. Meanwhile, official data showed that Japan's industrial output fell 2.3 percent in May from April when it rose 0.5 percent, marking the first drop in three months. Japanese shares erased earlier gains to end almost flat, but suffered its biggest monthly decline in four years as the shock of Britain's vote to leave the European Union sowed deep uncertainty. The Chinese stocks too ended marginally lower after three days of gains, as investors looked ahead to factory and service sector activity readings due on Friday for further direction.