Benchmarks make gap-up opening as Fed keeps interest rates unchanged

Indian equity benchmarks have made a gap-up opening and are trading jubilantly in early deals, with frontline gauges recapturing their crucial 28,800 (Sensex) and 8,850 (Nifty) levels after the US Federal Reserve decided to keep key policy rates unchanged. Traders also took some encouragement with report that country’s current account deficit (CAD) narrowed to $ 0.3 billion, or 0.1 percent of GDP, in the first quarter of 2016-17, significantly lower than $ 6.1 billion or 1.2 percent of GDP in Q1 of 2015-16.on account of lower trade gap. Some support also came with report that foreign institutional investors were net buyers in equities worth Rs 184 crore on Wednesday, as per provisional stock exchange data.

Global cues too remained jubilant with most of the Asian counters were trading in green at this point of time reacting to the Fed’s decision. Loose monetary policies in the U.S., Europe and Asia have helped power gains in stocks across the globe. The US markets rallied in the last session, with the tech-heavy Nasdaq surging to a new record closing high, after the Fed left interest rates unchanged as expected but signaled that a rate hike is likely before the end of the year.

Back home, logistics stocks remained on buyers’ radar on reports that Commerce Ministry is working on a proposal to enhance the logistics competitiveness of exporters and is discussing it with the railways as well as port authorities. In scrip specific developments, ICICI Bank was up by around two and a half percent after the company’s insurance arm witnessed huge interest on the last day of the open offer. Tata motors gained around two percent after its British brand Jaguar launched the all-new XF luxury saloon with prices starting at Rs 49.5 lakh (ex-showroom, Delhi).

The BSE Sensex is currently trading at 28829.44, up by 322.02 points or 1.13% after trading in a range of 28766.94 and 28871.92. There were 27 stocks advancing against 3 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index surged 0.97%, while Small cap index was up by 1.01%.

The top gaining sectoral indices on the BSE were Bankex up by 1.69%, Utilities up by 1.56%, Auto up by 1.54%, Consumer Durables up by 1.43% and Power up by 1.42%, while IT down by 0.16% was the lone losing indices on BSE.

The top gainers on the Sensex were Hero MotoCorp up by 3.12%, Power Grid up by 2.48%, ICICI Bank up by 2.35%, Maruti Suzuki up by 2.10% and SBI up by 2.09%. On the flip side, TCS down by 0.57%, Infosys down by 0.36% and Wipro down by 0.28% were the top losers.

Meanwhile, the Union Cabinet has approved the merger of railway and general budget but said that distinct identity and the functional autonomy of the railways will be maintained. The cabinet has also decided to advance the date of presentation of the annual accounts and decided to do away with the Plan/ Non-Plan expenditure classification in Budget 2017-18, replacing it with 'capital and receipt'. Advancement of budget will help complete related legislative business before March 31 and will enable better planning and execution of schemes from the beginning of a fiscal year, while doing away with the Plan and Non-Plan expenditure classification will provide corporate-style budgetary framework having a focus on revenues and capital expenditure.

The committee headed by NITI Aayog member Bibek Debroy, set up to finalise the modalities for the merger of rail budget with the general Budget had observed that presenting a separate railway budget is only a ritual as its size has become very small compared to the general budget. It had suggested that rail budget should be a part of government's overall fiscal discipline and the developmental approach of the Budget. Railway Minister Suresh Prabhu said that it was decided for merger of the rail budget with general budget but distinct identity of the railways will be maintained. Following the merger of Budget, the Railways would not have to pay dividend to the central government though it would still get gross budgetary support from the exchequer. In the financial year 2016-17, the railways had to pay dividend of Rs 9,731 crore, of which subsidy was Rs 4,301 crore, as a result the national transporter had to pay Rs 5,430 crore to the exchequer.

As far as the salary and pension bill of railway employees is concerned, it will remain the responsibility of the national transporter as there will be no change in the existing practice. At present, the railways has to bear an additional burden of about Rs 40,000 crore on account of implementation of the 7th Pay Commission awards, besides, an annual outgo of Rs 33,000 crore on subsidies for passenger service.

The merger is also expected to reduce the procedural requirements and instead bring into focus, the aspects of delivery and good governance. Consequent to the merger, the appropriations for railways will form part of the main Appropriation Bill. This will mark an end to the 92-year old practice of presenting a separate railway budget as was recommended by the Acworth Committee in 1921. Based upon the recommendations, the finances of railways were separated in 1924.

The CNX Nifty is currently trading at 8876.35, up by 99.20 points or 1.13% after trading in a range of 8865.25 and 8893.35. There were 47 stocks advancing against 4 stocks declining on the index.

The top gainers on Nifty were Hindalco up by 3.24%, Hero MotoCorp up by 3.05%, Power Grid up by 2.68%, Bank of Baroda up by 2.49% and ICICI Bank up by 2.30%. On the flip side, Idea Cellular down by 0.59%, TCS down by 0.57%, Wipro down by 0.48% and Infosys down by 0.26% were the only losers.

Asian markets were trading mostly in green; FTSE Bursa Malaysia KLCI gained 5.24 points or 0.32% to 1,663.97, KOSPI Index surged 21.64 points or 1.06% to 2,057.63, Shanghai Composite increased 22.74 points or 0.75% to 3,048.61, Jakarta Composite jumped 47.97 points or 0.9% to 5,390.56, Hang Seng strengthened 270.19 points or 1.14% to 23,940.09 and Nikkei 225 was up by 315.47 points or 1.91% to 16,807.62. On the flip side, Taiwan Weighted was down by 8.1 points or 0.09% to 9,220.40.