Benchmarks trade in fine fettle; Nifty reclaims 8,800 mark

Indian equity benchmarks have made a positive start and are trading in fine fettle in early deals on Wednesday, with frontline gauges recapturing their crucial 28,600 (Sensex) and 8,800 (Nifty) levels. Sentiments remained up-beat with global rating agency Moody’s statement that it could upgrade India's rating in 1-2 years if it is convinced that reforms are 'tangible', though it has called the reform process slow and gradual with muted private investment and NPAs posing a challenge. It said that it has a positive outlook on India. Global cues remained positive with most of the Asian counters paring initial losses and entered into green terrain after Japan’s central bank kept rates steady at its meeting held today, but issued a lot of fresh changes to its policy approach, indicating its comprehensive review of its negative interest rate policy and asset purchases was fruitful.

Back home, stocks related to infra sector remained on buyers’ radar, as the government has announced the names of 27 more cities that will be developed under the centre’s ‘Smart City Mission’. Telecom stocks also remained in focus, as telecom regulator Trai taking a stern view of the ongoing connectivity dispute between existing operators and Reliance Jio, warned of action in case of service quality violation and has asked all service providers to submit information on congestion levels in their networks.

The BSE Sensex is currently trading at 28603.23, up by 80.03 points or 0.28% after trading in a range of 28529.93 and 28640.56. There were 23 stocks advancing against 7 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.44%, while Small cap index was up by 0.76%.

The top gaining sectoral indices on the BSE were Telecom up by 1.06%, Realty up by 1.04%, Capital Goods up by 0.61%, Power up by 0.59% and Oil & Gas up by 0.51%, while there were no losers on the BSE sectoral front.

The top gainers on the Sensex were Tata Steel up by 1.15%, Axis Bank up by 1.08%, Adani Ports &Special up by 1.05%, Bajaj Auto up by 0.81% and GAIL India up by 0.70%. On the flip side, Cipla down by 0.65%, ICICI Bank down by 0.42%, Coal India down by 0.33%, Dr. Reddys Lab down by 0.29% and ONGC down by 0.29% were the top losers.

Meanwhile, global rating agency Moody's Investors Service has projected that India’s gross value added (GVA) growth will rise to 7.7% this fiscal with mixed trend in inflation, listing budget targets, private investment and bank liabilities as the main challenges for India. It also said that it could upgrade India's rating in one-two years if it is convinced that reforms are ‘tangible’, though it called the reform process slow and gradual with muted private investment and non performing assets (NPAs) posing a challenge. Further, it said that in the nearer term, challenging budget targets could lead to significant spending cuts late in the fiscal, especially since in the first four months of the fiscal year, 74% of the whole year’s budget target has already been reached.

Moody’s further said that with India’s credit rating materializing in the medium term based on reforms, it could potentially stabilize the macro-economic environment that is conducive to fiscal consolidation. According to the report some measures, if effectively implemented it can push India’s growth, notably an easing of restrictions on foreign direct investment to foster productivity, bankruptcy law for enhancing investor confidence and measures aimed at ease of doing business. However, these reforms will ease rather than remove some of the hurdles to robust and sustained investment along with the growth in India. In the nearer term, private investment will remain weak as corporate in investment-intensive sectors are burdened by elevated debt.

About the shift to a pan-India goods and service tax regime, Moody’s said this will only enhance revenue collection for the government over time, through better tax compliance and higher profits, as businesses save on tax administration costs. It said that banking sector risk will also remain a constraint on India’s sovereign ratings. While bad asset recognition is a first step, the measure does not strengthen the resilience of banks, and therefore does not reduce the contingent liability risks for the sovereign. It also estimated that fiscal costs of equity injections in public sector banks are manageable, although they are larger than currently budgeted and will add to the government’s challenge in meeting its fiscal targets.

The rating agency termed passage of GST and the bankruptcy law, the move towards the fiscal deficit range and inflation-targeting monetary policy as 'credit positive'. Moody's, has a 'Baa3' rating with a positive outlook on India. It had in April 2015 revised India's outlook to positive from stable and said it could upgrade rating in 12-18 months.

The CNX Nifty is currently trading at 8803.55, up by 27.65 points or 0.32% after trading in a range of 8778.40 and 8812.45. There were 42 stocks advancing against 8 stocks declining on the index, while 1 stock remained unchanged.

The top gainers on Nifty were Bharti Infratel up by 3.20%, Hindalco up by 1.82%, Tata Steel up by 1.26%, Adani Ports &Special up by 1.17% and Yes Bank up by 1.16%. On the flip side, Cipla down by 0.84%, Zee Entertainment down by 0.69%, ICICI Bank down by 0.64%, Ultratech Cement down by 0.44% and ONGC down by 0.41% were the top losers.

Asian markets were trading mostly in green; FTSE Bursa Malaysia KLCI rose 0.97 points or 0.06% to 1,656.75, KOSPI Index gained 1.53 points or 0.08% to 2,027.24, Taiwan Weighted increased 16.95 points or 0.19% to 9,178.53, Nikkei 225 added 41.31 points or 0.25% to 16,533.46 and Hang Seng was up by 73 points or 0.31% to 23,603.86. On the flip side, Jakarta Composite decreased 18.29 points or 0.35% to 5,284.20 and Shanghai Composite was down by 1.16 points or 0.04% to 3,021.84.