Benchmarks continue to hold their head above water

The local equity markets continue to trade in green in the noon session on account of buying  by both funds and retail investors in selected blue-chip stocks. Holding slender gains, both Sensex and Nifty were trading above the crucial 28,000 and 8,600 levels respectively. The broader markets outperformed benchmark indices as investors turned their focus on fundamentally sound mid-cap and small-cap stocks as valuations in large-cap stocks seem stretched. Sentiments got some support with rating agency Ind-Ra revising India’s economic growth forecast to 7.8% for the ongoing fiscal on better monsoon. It has said the positive impact of monsoon on agriculture will support the overall GDP growth with its backward and forward linkages. Besides, short-covering of positions by speculators in view of Thursday’s August monthly derivatives contract expiry also contributed to the up move.

On the global front, Asian markets were trading under pressure on Wednesday as strong U.S housing data overnight increased the chances of an interest rate increase in coming months, prompting some investors to take profits, while oil prices slipped after a surprise jump in U.S. inventories. However, the pessimism around China has been balanced by growing optimism around emerging markets as some investors such as bond giant PIMCO are slowly turning more bullish, citing a rebound in growth and improving economic fundamentals. Further, Japan's Nikkei share an average rise with a pause in the strong-yen trend lifting cyclical stocks, while hopes that the Bank of Japan would buy more exchange traded funds that continued to support sentiment.

Back home, stocks from Oil & Gas, PSU and Realty counters were supporting the markets’ uptrend, while those from Metal and FMCG counters were adding to the underlying cautious undertone. In scrip specific development, Engineers India has rallied after the company reported 50% year-on-year (YoY) jump in net profit at Rs 80 crore for the quarter ended June 30, 2016, despite fall in operational income.  Moreover, Majesco has surged after the company announced that Elafris has joined the Majesco Partner EcoSystem to enhance insurers’ customer communication and payment experience.

The market breadth remained optimistic as there were 1431 shares on the gaining side against 904 shares on the losing side, while 150 shares remained unchanged.
The BSE Sensex is currently trading at 28027.84, up by 37.63 points or 0.13% after trading in a range of 28003.51 and 28108.39. There were 14 stocks advancing against 15 stocks declining on the index, while 1 stock remained unchanged.

The broader indices were trading in green; the BSE Mid cap index was up by 0.64%, while Small cap index up by 0.63%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.23%, PSU up by 0.70%, Realty up by 0.53%, IT up by 0.52% and TECK up by 0.51%, while Metal down by 0.14% and FMCG down by 0.05% were the few losing indices on BSE.

The top gainers on the Sensex were Maruti Suzuki up by 2.83%, Cipla up by 2.41%, NTPC up by 1.92%, Infosys up by 1.52% and Sun Pharma Inds. up by 1.38%. On the flip side, Lupin down by 2.49%, Hindustan Unilever down by 1.27%, Coal India down by 0.91%, TCS down by 0.70% and ITC down by 0.64% were the top losers.

Meanwhile, India's most respected credit rating agency, India Ratings and Research (Ind-Ra) in its latest report titled 'Review of the Economy' has revised gross domestic product (GDP) estimate for 2016-17 to 7.8% from its earlier forecast of 7.7%. The upward revision has been prompted by the progress of monsoon and the sowing of kharif crop so far but the economy is just ‘chugging along’ despite the euphoria emerging after the formation Modi government at the Centre.

Rating agency said that the farm gross value added (GVA) should grow 3% in the current fiscal as against 2.8% forecasted earlier as area under kharif crop sowing is 5.7% higher than a normal area so far. The positive impact of monsoon on agriculture will support the overall GDP growth with its backward and forward linkages. Further it said India’s growth is in motion but not accelerating.

Ind-Ra said that government has not done anything to revive the growth. Even though services sector showed its flexibility and will continue to lead the economy, unsatisfactory progress on the industrial front is a cause of concern. Further it said that moderation in both inflation and lending rates of banks is aiding the consumption demand in urban areas. Salary revision of central government employees due to the award of the recommendations of the 7th Central Pay Commission will further aid the urban consumption demand.

The report stated that with weaker industrial growth in continuation, it retained previous forecast of sector GVA to grow 7.2%. The wait is getting longer for an investment recovery which is the main reason to hold acceleration in industrial growth. Besides, the current government has taken several initiatives to revive private investment as also the manufacturing sector growth in the country. However, all this has failed so far to revive the animal spirit in the economy. Corporate, particularly in infrastructure, power, iron and steel and textile sectors, are either repairing their balance sheets or saddled with stagnation or even decline in capacity utilization.

The CNX Nifty is currently trading at 8642.50, up by 9.90 points or 0.11% after trading in a range of 8633.80 and 8661.05. There were 23 stocks advancing against 26 stocks declining on the index, while 2 shares remained unchanged.

The top gainers on Nifty were Aurobindo Pharma up by 4.43%, Maruti Suzuki up by 2.78%, Cipla up by 2.31%, NTPC up by 1.95% and Infosys up by 1.55%. On the flip side, Idea Cellular down by 2.97%, Lupin down by 2.55%, Hindustan Unilever down by 1.29%, Ambuja Cement down by 1.22% and Coal India down by 0.94% were the top losers.

Asian markets were trading mostly in red; Hang Seng decreased 0.79%, Jakarta Composite shed 0.14%, KOSPI Index slipped 0.33% and Shanghai Composite was down by 0.03%. On the flip side, FTSE Bursa Malaysia KLCI increased 0.04%, Taiwan Weighted added 0.15% and Nikkei 225 was up by 0.53%.