India benchmarks display spirited performance; Sensex rallies over 400 pts

Indian benchmark equity indices staged a stunning performance on Tuesday by vehemently rallying over one and half percent in the session and re-conquering their key psychological levels. Monday’s optimism got spilled over into day’s trade, helping the frontline indices in extending the winning momentum for second successive session, as encouraging global developments buttressed domestic sentiments. Investors continued to build hefty positions across the board as sentiments got a boost after consumer spending rose for a fourth straight month in US, pointing to a pick-up in the world’s largest economy. On the domestic front, sentiments got some support with Reserve Bank of India’s Annual Report indicating that the near-term growth outlook for India seems brighter than last fiscal and the economy is likely to expand at 7.6 percent in 2016-17. It said that a better than anticipated agricultural performance and the possibility of allowances under the 7th Pay Commission's award being paid out in the fourth quarter of 2016-17 provide upsides to this projection. Also, Niti Aayog Vice-Chairman Arvind Panagariya stated that India’s economy will accelerate to 8% growth in the current financial year thanks to a good monsoon, policy reforms and PM Narendra Modi’s focus on implementation at the grassroots level. Some support also came with the report that foreign portfolio investors (FPIs) bought shares worth a net Rs 286.52 crore on August 29, 2016.

On the global front, Asian markets ended mostly lower on Tuesday, as investors failed to digest hawkish comments from U.S. Federal Reserve officials last week. Fed Chair Janet Yellen said on Friday the case for a rate hike was strengthening, but provided little detail on when it would next move.  However, the Chinese market managed a positive close supported by rebound in banks, while Hong Kong market surged close to a percent. Meanwhile, European markets edged higher with stocks in Germany and France gaining the most, while stocks in the UK were flat after trading resumed after a holiday on Monday.

Back home, the local benchmarks got off to a positive start as investors were largely influenced by the supportive leads from Asian markets. The frontline indices soon gathered momentum and traded with over half a percent gains through the morning session of trade. Second half of the session saw the key gauges capitalize on the momentum further and spurt to session’s highest levels in dying moments. Finally, the NSE’s 50-share broadly followed index Nifty, got buttressed by over one and half percent to settle above the crucial 8,700 support level, while Bombay Stock Exchange’s Sensitive Index-Sensex accumulated over four hundred points and closed above the psychological 28,300 mark. Moreover, the broader markets too participated in the rally and closed with gains of around a percent. On the BSE sectoral space, buying was evident across the board and investors piled up hefty positions in the high beta Auto counter which rocketed by around two percent, while the IT, Banking and FMCG pockets too gained from strength to strength and climbed about one and half percent each.

In scrip specific development, Gujarat Mineral Development Corporation (GMDC) hit a 52-week high, after the company reported 60% year on year jump in net profit of Rs 115 crore for the quarter ended June 30, 2016. TD Power Systems soared after the company received an order for supply of 45 railway application generators from a major multi-national company (MNC) for installation in North America. However, Bharti Airtel declined on the bourses in an otherwise strong market after the reduction in rates of prepaid internet data plans to defend its data market share was conceived to be hurting its margins. Transport Corporation of India (TCI) was locked in lower circuit for the third straight trading session, down 5% at Rs 193 on the BSE. 

The market breadth remained in the favour of advances, as there were 1638 shares on the gaining side against 1073 shares on the losing side while 216 shares remain unchanged.

Finally, the BSE Sensex surged 440.35 points or 1.58% to 28343.01, while the CNX Nifty gained 136.90 points or 1.59% to 8,744.35. 

The BSE Sensex touched a high and a low 28478.02 and 28010.66, respectively. There were 29 stocks advancing against just 1 stock declining on the index. The broader indices ended in green; the BSE Mid cap index rose 0.80%, while Small cap index was up by 1.02%.

The top gaining sectoral indices on the BSE were Auto up by 1.81%, IT up by 1.77%, Bankex up by 1.49%, FMCG up by 1.41% and TECK up by 1.29%, while there were no losers on the sectoral space.

The top gainers on the Sensex were Asian Paints up by 3.20%, Bajaj Auto up by 3.09%, Maruti Suzuki up by 2.83%, GAIL India up by 2.69% and HDFC Bank up by 2.35%. On the flip side, Bharti Airtel down by 2.82% was the only loser on the Sensex.

Meanwhile, Reserve Bank of India (RBI) in its annual report for 2015-16 has stated that India’s growth prospects in financial year 2016-17 are somewhat brighter than what they were in 2015-16, on the back of favourable monsoon and economic growth and the country is likely to grow at 7.6 per cent in the current fiscal, up from 7.2 percent last year. It also said that a better than anticipated agricultural performance and the possibility of allowances under the 7th Pay Commission's award being paid out in the fourth quarter of 2016-17 provide upsides to this projection.

Report further highlighted that the passage of the Goods and Services Tax (GST) Bill marks a new era in co-operative fiscal federalism and a growing political consensus for economic reforms. The implementation of the GST bill would boost trade, investment and growth by reducing supply chain rigidities, encouraging scale economies, cutting down transportation and transaction costs, as also promoting efficiency gains. The GST would also improve the overall competitiveness of the economy by eliminating the cascading impact of taxes on production and distribution costs.

RBI has said that it is also important to take note of impact of the implementation of the Seventh Pay Commission's award on the future trajectory of headline inflation. The largest effects are expected to emanate from increased house rent allowance in the Consumer Price Index, which may push up retail inflation, which shot up to nearly 2-year high of 6.07 in July. RBI also stated that the commitment of the central government to the path of fiscal consolidation in 2016-17 has enhanced the credibility of fiscal policy, which will, in turn, help in anchoring inflation expectations and in improving the business environment, including by fostering credibility among international investors.

Report also noted that the country's external position is viable and well-buffered to sustain a pick-up in non-oil non-gold imports as growth gathers momentum. Nevertheless, the external environment continues to pose challenges stemming from large currency movements, a rising incidence of protectionist measures, swift and massive movements of capital and the amplification of uncertainty by the Brexit vote.

However, the RBI cautioned that Industrial activity has been in contraction mode in the early months of 2016-17, pulled down by manufacturing and looking ahead, no strong drivers are discernible at this juncture that could engineer a turnaround. Some support to industrial activity may, however, stem from the recent measures taken by the Government such as 100 percent FDI in defence, civil aviation, pharmaceuticals and broadcasting. The report also added that even as the outlook for capital inflows is optimistic with the recent liberalisation of FDI policy, the repayment of FCNR(B) deposits under the special swap scheme due in September to November 2016 will need to be managed carefully.

The CNX Nifty traded in a range of 8,750.60 and 8,642.25. There were 47 stocks advancing against 4 decliners on the index.

The top gainers on Nifty were Ambuja Cement up by 3.97%, Bosch up by 3.94%, Grasim Industries up by 3.55%, ACC up by 3.50% and Eicher Motors up by 3.24%. On the flip side, Bharti Airtel down by 3.08%, Idea Cellular down by 0.64%, Zee Entertainment down by 0.21% and BHEL down by 0.18% were the top losers.

The European markets were trading in green; UK’s FTSE 100 increased 8.28 points or 0.12% to 6,846.33, France’s CAC increased 38.9 points or 0.88% to 4,463.15 and Germany’s DAX increased 108.02 points or 1.02% to 10,652.46.

The Asian markets ended mostly in red on Tuesday, with some indices paring the early gains after they rose in morning on a firm lead from Wall Street and higher commodity prices. Japanese market coming off a strong surge of last session, ended modestly in red, as the yen's retreat halted owing to better-than-expected economic data and increased doubts over U.S. rate hike this year. Meanwhile, the Japanese household spending fell less than expected in July, while retail sales fell by the smallest margin in five months. The Chinese market however managed a positive close supported by rebound in banks, while Hong Kong market surged close to a percent.