Benchmarks snap two-day losing streak, Sensex ends above 27800 mark

After trading on a feeble note for most part of the session, domestic benchmarks managed to negotiate a close in the green terrain, breaking the two session downtrend, as continued heavy buying by foreign investors helped lift blue chips such as IDEA, BPCL, ITC even though overall sentiment remained cautious. Although Asian markets ended on mixed note and European stocks made an optimistic start, global sentiments remained somewhat subdued as oil prices came under pressure after the International Energy Agency offered a downbeat outlook for oil prices. However, investors got some comfort with monsoon session of parliament proceeding rather smoothly, fallowing GST Amendment. Lok Sabha on Tuesday passed the Taxation Laws (Amendment) Bill, 2016, that, among other things, will pave the way for the textile sector getting tax sops. Further, sentiments got some support with the report that the government is working out a plan to optimally utilize land banks of state run companies as part of its bigger ambition to monetize the assets of public sector enterprises. The government will look at all central public sector companies (CPSEs), including profit making firms, to assess if their existing resources can be utilized for spurring the economic growth.

Meanwhile, mild buying was observed in selected textile counters, as the Lok Sabha passed the Taxation Laws (Amendment) Bill, 2016, relaxing the rules for the textile sector to avail itself of the income tax benefit on additional employment created.  However, sharp selling witnessed in PSU banking stocks, led by Bank of Baroda (BOB), which declined by over eight percent  after the bank reported 60 percent year-on-year (YoY) drop in net profit at Rs 424 crore for the quarter ended June 30, 2016 due to higher provisions and lower net interest income. Almost all the PSU bank have disappointed the street by reporting higher net performing assets (NPA). During the June quarter, BOB’s gross NPA as a percentage of total loans rose to 11.15 percent, while some lenders like Indian Overseas Bank registered a gross NPA of over 20 percent of its advances. Today’s session was mostly stock specific as investors were buying or selling wisely ahead of June IIP and retail inflation data for July to be released tomorrow. In scrip specific development, Ipca Laboratories rallied after the company reported over two fold jump in its net profit at Rs 47.57 crore for the quarter ended June 30, 2016 as compared to Rs 20.92 crore for the same quarter in the previous year. Tata Communications moved higher to its 52-week high of Rs 519, after the Lok Sabha passed the Taxation Laws (Amendment) Bill. Moreover, Atlanta locked in upper circuit of 20 percent on the BSE after the company reported net profit of Rs 28 crore for the quarter ended June 30, 2016, on the back of strong operational performance.

On the global front, Asian markets ended mixed on Thursday, following a slump in the oil price driven by fresh indications of oversupply, and with regional volumes affected by the closure of Japan's stock exchange for a holiday. Investors were waiting for clearer signals on the timing of a possible US interest rate hike, with expectations that the Fed will move cautiously. China is to release data on industrial production, retail sales and fixed asset investment on Friday, with traders waiting to see if recent stabilization will continue into the second half of the year.  Meanwhile, European equities hovered near a seven-week high, with investors assessing valuations amid mixed earnings and a slide in commodity producers.

Back home, the benchmark got off to a positive opening, in tandem with the cautiously optimistic sentiments prevailing in Asian markets. The frontline indices soon gathered momentum and touched intraday highs in noon trade, but could not succeed in holding their gains for long as selling pressure at higher levels brought the indices to intraday lows in late morning session. Thereafter, the bourses recovered from the lows of the day but could not succeed in recovering all of their early gains by the end of trading session. Finally the NSE’s 50-share broadly followed index Nifty, got buttressed by over two tens of a percent but settled below the crucial 8,600 support level, while Bombay Stock Exchange’s Sensitive Index-Sensex accumulated over eighty points and closed above the psychological 27,800 mark.  Moreover, the broader markets too snapped the day in the positive territory but ended up underperforming the larger peers by quite a margin.

The market breadth remained pessimistic, as there were 1167 shares on the gaining side against 1518 shares on the losing side, while 158 shares remained unchanged.

Finally, the BSE Sensex gained 84.72 points or 0.31% to 27859.60, while the CNX Nifty rose by 16.85 points or 0.20% to 8,592.15.

The BSE Sensex touched a high and a low 27902.39 and 27697.33, respectively. The broader indices made a positive closing; the BSE Mid cap index ended up by 0.03%, while Small cap index was up by 0.02%.

The top gaining sectoral indices on the BSE were FMCG up by 1.44%, Oil & Gas up by 0.74%, Power up by 0.38%, IT up by 0.27% and TECK up by 0.14%, while Realty down by 0.90%, Metal down by 0.68%, Auto down by 0.45%, PSU down by 0.27% and Capital Goods down by 0.22% were the top losing indices on BSE.

The top gainers on the Sensex were Lupin up by 2.27%, ITC up by 1.82%, ICICI Bank up by 1.27%, TCS up by 1.14% and Asian Paints up by 1.12%. On the flip side, SBI down by 1.97%, Adani Ports &Special down by 1.91%, Mahindra & Mahindra down by 1.88%, GAIL India down by 1.07% and Sun Pharma down by 1.03% were the top losers

Meanwhile, in another major relaxation in FDI norms since November 2015, the cabinet has given its approval for amendments to the Foreign Exchange Management (Transfer or Issue of Security by the Person Resident Outside India) regulations on NBFCs to this effect. The cabinet has approved the list of non-banking financial companies (NBFCs), which can attract foreign direct investment. The government also gave a green signal to foreign investment through the automatic route in other financial services regulated by any of the financial sector regulators such as the Reserve Bank of India (RBI), Securities and Exchange Board of India (Sebi) and Pension Fund Regulatory and Development Authority (PFRDA).

Under the current regulations, 100 per cent FDI would be allowed on automatic route for only 18 specified NBFC activities including merchant banking, under writing, portfolio management services, financial consultancy and stock broking after fulfilling prescribed minimum capitalisation norms mentioned therein. This is the third major relaxation in FDI norms since November 2015. In June this year, the government had announced liberalisation in eight sectors, including defense and civil aviation sectors.

The amendment in the Foreign Exchange Management (Transfer or Issue of Security by the Person Resident outside India) regulations on NBFCs will enable inflow of foreign investment in other Financial Services on automatic route provided such services are regulated by any financial sector regulators or government agencies. Foreign investment can be made through approval route in other financial services, which are not regulated.

Further, minimum capitalisation norms as mandated under FDI policy have been eliminated as most of the regulators have already fixed minimum capitalisation norms. This will induce FDI and spurt economic activities. It will cover whole India and is not limited to any State/Districts. India’s FDI inflows in 2015-16 increased to record $55.46 billion as against $45.15 billion in 2014-15 and $36.04 billion during 2013-14.

The CNX Nifty traded in a range of 8,601.15 and 8,540.05. There were 27 stocks advancing against 24 decliners on the index.

The top gainers on Nifty were Eicher Motors up by 2.81%, Idea Cellular up by 2.80%, BPCL up by 2.18%, Lupin up by 2.14% and ITC up by 2.03%. On the flip side, Bank of Baroda down by 9.23%, Grasim Industries down by 6.58%, Zee Entertainment down by 2.63%, Bharti Infratel down by 2.52% and Hindalco down by 2.16% were the top losers.

The European markets were trading mostly in green; Germany’s DAX increased 56.25 points or 0.53% to 10,707.14, France’s CAC increased 29.13 points or 0.65% to 4,481.14, while UK’s FTSE 100 decreased 21.3 points or 0.31% to 6,845.12.

Asian equity markets showed mixed performance on Thursday after US shares were pulled down overnight by a sell-off in energy companies, due to lower oil prices and some disappointment over the New Zealand central bank’s interest rate cut. Investors awaited Friday’s US retail sales report to find out whether the Federal Reserve will raise interest rates this year. China is also set to release data on industrial production, retail sales and fixed asset investment on Friday, with investors waiting to see if recent stabilization will continue into the second half of the year. Regional volumes were affected by the closure of Japan’s stock exchange for a holiday. Chinese shares closed lower despite gains in the financial sector after a conglomerate increased its stake in New China Life Insurance. Meanwhile, Hong Kong shares climbed to an eight-month closing high, as a further decline in global bond yields increased the appeal of blue-chips listed in the city.