Benchmarks snap two-day losing streak, Nifty ends above 8650 mark

Indian stock markets witnessed a fairly stable day of trade on Thursday as sanguinity got reinforced after minutes of the US Federal Reserve meeting signaled no interest rate hikes in the near term and raised hopes that the pace of foreign inflows into the domestic market would continue.  Sentiments remained optimistic for most part of the session as Jharkhand becoming the third state to ratify the Goods and Services Tax Amendment Bill in a special session of the Legislative Assembly. The state of Assam and Bihar had already passed the GST Bill. The government has set a deadline of April 2017 for its rollout. Also, a new UN report which calls for more transparent policies if the country aspires to become a global driver of innovation, has ranked India 66th in a list of most innovative economies, a jump of 15 places from last year.  Some support came with Moody’s report on emerging market highlighting that India is seeing gradual progress on reforms and the country’s outlook will largely be determined by domestic factors. The report maintained Gross Domestic Product (GDP) growth forecast for India at 7.5% adding that India now seems less vulnerable than it used to be. However, market participants remained cautious with the private report indicating that headline inflation is expected to continue its rally through the rest of this fiscal, while WPI is likely to average 3.9 per cent, CPI will average close to 5 per cent in 2016-17.  Meanwhile, mild buying witnessed in selected Steel makers with a Moody’s report that steel demand in India will outpace the regional average, while the profitability of domestic steel companies will outperform regional peers on account of an increase in domestic demand.

On the global front, Asian markets ended mostly higher on Thursday as risk-taking appetite returned after minutes of the US Federal Reserve's latest meeting showed that the chances of a September rate hike are looking pretty slim. However, Japanese markets declined as the yen firmed up and weak trade data signaled continued weak demand. Investors are weighing the policy response from the Bank of Japan as the currency headed for its strongest level against the greenback since November 2013. Meanwhile, European shares rose for the first time in a week and emerging markets advanced as a gauge of commodities climbed for the sixth straight day.

Back home, the benchmark got off to a positive start in the morning trade as investors were largely influenced by the supportive leads from Asian markets. Thereafter, the frontline indices soon capitalized on the momentum and touched intraday highs in late morning session but the indices failed to hold onto the highs on account of profit booking in few sectors. The key gauges for rest of the session traded in tight range as investors remained sideways in the absence of any significant trigger at domestic front. Finally the NSE’s 50-share broadly followed index Nifty, surged by over half a percent to settle above the crucial 8,650 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex smashed a century and ended above the psychological 28,100 mark. The broader markets also showed some resilience and managed to perform in line with their larger peers. In the BSE sectoral space, the Power counter was the leading gainer with around two percent of gains as heavyweights like Power Grid, NTPC and BHEL rallied by around two percent. While the Banking, Realty and PSU pockets too surged by around a percent each on hefty short covering. On the flipside, Metal, Consumer Durables and Capital Goods counter languished at the bottom of the table with cuts of around half percent.
The market breadth remained optimistic, as there were 1670 shares on the gaining side against 1017 shares on the losing side, while 179 shares remained unchanged.

Finally, the BSE Sensex gained 118.07 points or 0.42% to 28123.44, while the CNX Nifty rose by 49.20 points or 0.57% to 8,673.25.
The BSE Sensex touched a high and a low 28214.17 and 28077, respectively. The broader indices made a positive closing; the BSE Mid cap index ended up by 0.43%, while Small cap index was up by 1.01%.

The top gaining sectoral indices on the BSE were Power up by 1.83%, Bankex up by 1.64%, Realty up by 1.09%, PSU up by 1.00% and Oil & Gas up by 0.76%, while Metal down by 0.55%, Consumer Durables down by 0.48%, Capital Goods down by 0.42%, IT down by 0.29% and FMCG down by 0.12% were the top losing indices on BSE.

The top gainers on the Sensex were Power Grid up by 4.24%, NTPC up by 3.50%, Adani Ports &Special up by 2.91%, ICICI Bank up by 2.24% and Bharti Airtel up by 2.07%. On the flip side, Coal India down by 2.59%, Larsen & Toubro down by 1.29%, GAIL India down by 1.08%, Tata Steel down by 1.06% and Infosys down by 0.88% were the top losers.

Meanwhile, credit rating agency, India Ratings and Research (Ind-Ra) in its latest report has said that India’s industrial output will not return to a sustained and high growth path as long as excess capacity in the manufacturing sector remains and private investment does not revive.

Industrial output grew 2.1 percent in June and 1.1 percent in May. Even if the positive growth in the index of industrial production (IIP) in two consecutive months is encouraging, rating agency believes that it is still too early to expect an improvement and stability in industrial growth. Besides, retail and wholesale inflation for July came in at 6.07 percent and 3.55 percent respectively and manufacturing output increased to 0.9 percent year-on-year in June 2016 from 0.6 percent in the previous month. 

The report stated that a marginal increase in manufacturing does not generate confidence that the downtrend in manufacturing has been reversed, the capacity utilization in manufacturing has been hovering in the range of 70-75 percent now for nearly five years. Further it said that an analysis of food inflation data over the past 6-7 years suggests that nothing has managed to tame food inflation.

Ind-Ra’s assessment said that food inflation despite a favorable monsoon could surprise on the upside, especially with regard to kitchen items like potato, tomato, onion, milk, egg, pulses - as has been the case in the past. It said that the goalpost shifts each time food inflation surprises on the upside. It has become routine to put the blame on the failure of monsoon, unseasonal rainfall, the futures market in agricultural commodities and sometimes on hoarding and black-marketing. But the normal monsoon so far has raised expectations that food inflation will moderate in coming months and cool the overall inflation.

The CNX Nifty traded in a range of 8,690.70 and 8,645.05. There were 35 stocks advancing against 16 decliners on the index.

The top gainers on Nifty were Ultratech Cement up by 4.85%, Power Grid up by 4.58%, NTPC up by 4.30%, Indusind Bank up by 3.75% and Grasim Industries up by 2.87%. On the flip side, Coal India down by 2.53%, Tata Power down by 1.35%, Tata Steel down by 1.29%, Tech Mahindra down by 1.19% and Infosys down by 1% were the top losers.

The European markets were trading in green; UK’s FTSE 100 rose 13.46 points or 0.2% to 6,872.61, Germany’s DAX increased 45.77 points or 0.43% to 10,583.44 and France’s CAC was up by 7.63 points or 0.17% to 4,425.31.

Asian equity markets showed a mixed performance on Thursday, as a firmer yen and weakness in global oil markets despite an unexpected drawdown in US crude and gasoline stocks took some of the shine off the minutes from the Federal Reserve's July monetary policy meeting. The FOMC minutes showed that officials were still split over the timing of the next interest-rate rise despite a strong rebound in employment in June. With weak growth in the US and abroad and consumer price inflation continuing to run below the Committee's longer-run objective of 2 percent, Fed officials stopped short of any signals on the timing of their next move. Chinese shares slid after an official survey showed China home price growth moderated in July. Japanese shares closed lower as the yen firmed up and weak trade data signaled continued weak demand. Reports showed that Japan's exports fell more than forecast in July but imports also dropped at their fastest pace since 2009, resulting in a bigger-than-expected trade surplus.