Benchmarks hover near highest point of the day

Indian equity benchmarks added strength to continue their firm trade, hovering near the highest point of the day in the late morning session taking cues from regional markets and as rate hike jitters faded. The sentiments were on optimistic note with the Reserve Bank of India in its latest report stating 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 has 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. Meanwhile, Niti Aayog Vice-Chairman Arvind Panagariya added 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. Additional buying was witnessed after Indian rupee gained against the US dollar at the Interbank Foreign Exchange (forex) market following selling of the American currency by banks and exporters amid firm domestic and global cues. Traders were seen piling position in Bankex, Auto and Realty sector stocks. In scrip specific development, Gujarat Mineral Development Corporation (GMDC) was trading firm after touching 52-week high on reporting 60% year on year jump in net profit of Rs 115 crore for the quarter ended June 30, 2016 (Q1FY17), on the back of healthy operational performance. eClerx Services was trading in green after the company’s board approved buyback of equity shares for an aggregate amount not exceeding Rs 234 crore at a price not exceeding Rs 2,200 per share.

On the global front, Asian stocks were trading mostly in green, catching an updraft from rising US stocks, commodities price rebounds, but with yen volatility throwing in an X factor to proceedings. Japanese household spending fell less than expected in July and the jobless rate hit a two-decade low, offering some hope for policymakers battling to pull the world's third-largest economy out of stagnation. Back home, the NSE Nifty and BSE Sensex were trading above the psychological 8,650 and 28,100 levels respectively. The market breadth on BSE was positive in the ratio of 1511:589, while 134 scrips remained unchanged.

The BSE Sensex is currently trading at 28117.60, up by 214.94 points or 0.77% after trading in a range of 28010.66 and 28138.24. There were 28 stocks advancing against 2 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.77%, while Small cap index was up by 0.95%.

The top gaining sectoral indices on the BSE were Bankex up by 1.31%, Auto up by 1.30%, Realty up by 0.96%, Metal up by 0.93% and Capital Goods up by 0.88%.

The top gainers on the Sensex were Maruti Suzuki up by 2.64%, Bajaj Auto up by 2.57%, ICICI Bank up by 1.80%, GAIL India up by 1.61% and Axis Bank up by 1.41%.

On the flip side, Bharti Airtel down by 1.87% and Coal India down by 0.22% were the top losers.

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 is currently trading at 8675.70, up by 68.25 points or 0.79% after trading in a range of 8642.25 and 8681.20. There were 45 stocks advancing against 6 stocks declining on the index.

The top gainers on Nifty were Maruti Suzuki up by 2.67%, Bajaj Auto up by 2.56%, Hindalco up by 2.37%, HCL Tech up by 2.01% and Tech Mahindra up by 1.89%.

On the flip side, Bharti Airtel down by 2.06%, Zee Entertainment down by 0.50%, Tata Motors - DVR down by 0.34%, Coal India down by 0.15% and Dr. Reddy’s Lab down by 0.09% were the top losers.

The Asian markets were trading mostly in green; Shanghai Composite increased 1.29 points or 0.04% to 3,071.32, FTSE Bursa Malaysia KLCI increased 1.43 points or 0.09% to 1,683.03, KOSPI Index increased 8.14 points or 0.4% to 2,040.49 and Hang Seng increased 181.21 points or 0.79% to 23,002.55.

On the other hand, Jakarta Composite decreased 25.64 points or 0.48% to 5,345.13, Nikkei 225 decreased 6.88 points or 0.04% to 16,730.61 and Taiwan Weighted decreased 2.59 points or 0.03% to 9,107.58.