Benchmarks extend winning streak for the third straight session

Indian equity indices carried forward their northbound journey for yet another session on Tuesday, as optimistic cues from across the globe helped the indices to surpass crucial support levels of 8,750 and 28,300. It turned out to be a rather volatile day of trade as the indices rebounded after drifting to lower levels in the noon  session, though sustained position build up was witnessed after the Reserve Bank of India (RBI) cut the short-term lending rate, or repo rate, by 25 basis points to 6.25% from 6.50% earlier. Today's rate decision, the first in the tenure of new RBI chief Urijit Patel, also began a new era for the central bank. The policy decision was for the first time made by a six-member panel called the monetary policy committee or MPC, which noted that the recent sharp drop in inflation reflects a downward shift in the momentum of food inflation - which holds the key to future inflation outcomes - rather than merely the statistical effects of a favourable base effect. The committee also expects that the strong improvement in sowing, along with supply management measures, will improve the food inflation outlook. Investors’ morale also remained upbeat with the World Bank's statement that India's GDP growth will remain strong at 7.6 percent in 2016 and 7.7 percent in 2017. According to World Bank, the growth will be supported by expectations of a rebound in agriculture, civil service pay reforms supporting consumption, increasingly positive contributions from exports and a recovery of private investment in the medium term.

On the global front, Asian markets ended higher on Tuesday, with Japanese stocks boosted by a weaker yen against the dollar as the market’s appetite for risk returned. Sentiments got some support with data showing expansion in US manufacturing boosted optimism over the health of the world's largest economy. The US September purchasing managers’ index, a key measure of factory activity jumped to 51.5, shifting back into expansionary territory, following a surprise dip to 49.4 in August. Furthermore, European stocks advanced across industry groups and regional markets, heading for a sixth straight day without losses. Meanwhile, commodities prices were mostly lower, as a stronger dollar made the dollar-denominated products more expensive to buy for those holding other currencies.

Back home, the local benchmark got off to a positive start in the morning trade as investors sentiments remained optimistic with hopes of a probable rate cut. However, the indices failed to capitalize on the initial momentum and continued trade around the neutral line for most part of the day. But the dying hours saw the frontline indices edging higher as the central bank cut the short-term lending rate by 25 bps. Finally the NSE’s 50-share broadly followed index Nifty, got buttressed by over quarter percent to settle over the crucial 8,750 support level, while Bombay Stock Exchange’s sensitive Index-Sensex accumulated over ninety points and closed above the psychological 28,300 mark. Moreover, broader markets managed a touch better than the larger peers as the BSE’s midcap and smallcap indices settled with gains of 0.50% and 0.66% respectively.The market breadth remained in the favour of advances, as there were 1691 shares on the gaining side against 1156 shares on the losing side while 131 shares remain unchanged.

Finally, the BSE Sensex gained 91.26 points or 0.32% to 28334.55, while the CNX Nifty ended up by 31.05 points or 0.36% to 8,769.15. 

The BSE Sensex touched a high and a low 28404.70 and 28242.25, respectively. There were 18 stocks advancing against 12 stocks declining on the index. The broader indices ended in green; the BSE Mid cap index rose 0.50%, while Small cap index was up by 0.66%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 2.33%, PSU up by 1.44%, Realty up by 0.96%, Metal up by 0.78% and IT up by 0.68%, while Capital Goods down by 0.45% was the sole losing index on BSE.

The top gainers on the Sensex were ONGC up by 5.21%, GAIL India up by 4.55%, Tata Steel up by 1.89%, Tata Motors up by 1.60% and SBI up by 1.59%. On the flip side, Coal India down by 2.06%, Mahindra & Mahindra down by 1.92%, Larsen & Toubro down by 1.43%, Hindustan Unilever down by 1.02% and Axis Bank down by 0.75% were the top losers.

Meanwhile, the leading rating agency - CRISIL in its latest report has stated that credit quality of Indian companies has improved in the first half of current fiscal. For the first time in the last 10 semi-annual periods, the debt weighted credit ratio rose above 1.The credit ratio (number of upgrades to downgrades) came in at 1.2 times in first half of fiscal 2017 compared with 0.8 times in second half of fiscal 2016.

As per the report, there were 646 upgrades to 553 downgrades in the first half. Upgrades were concentrated in the domestic consumption-linked sectors such as auto ancillaries and packaging, and in the exports-linked pharmaceutical sector. On other hand, downgrades were mainly in the investment-linked sectors such as construction, industrial machinery, real estate and metals. Financial (capital structure, debt protection and liquidity) and business (demand, profitability and working capital cycle) reasons contributed equally to rating actions.

CRISIL expects the overall credit ratio to stay above 1 in the near term led by an expected rural leg-up to private consumption following a near-normal monsoon. However, debt downgrades in value terms is expected to be more in the second half because of continuing pressure on the investment-linked sectors. Further, it said that the focus now shifts to the sustainability of the improvement in credit quality. The investment cycle is yet to pick up, there hasn’t been a material deleveraging in corporate balance sheets, and weak assets continue to mount in banking. To boot, global growth is also weak.

The CNX Nifty traded in a range of 8,783.65 and 8,736.10. There were 34 stocks advancing against 17 decliners on the index.

The top gainers on Nifty were ONGC up by 4.69%, GAIL India up by 4.38%, Tata Steel up by 2.27%, SBI up by 2.23% and Tata Motors up by 2.07%. On the flip side, Zee Entertainment down by 2.43%, Coal India down by 2.15%, Mahindra & Mahindra down by 2.07%, Ambuja Cement down by 1.26% and Larsen & Toubro down by 1.24% were the top losers.

The European markets were trading in green; UK’s FTSE 100 increased 107.29 points or 1.54% to 7,090.81, Germany’s DAX increased 64.51 points or 0.61% to 10,575.53 and France’s CAC increased 39.41 points or 0.88% to 4,492.97.

The Asian markets ended in green on Tuesday after oil futures surged to a multi-week high overnight and as the yen weakened against the dollar on data suggesting the US manufacturing sector grew better than expected in September. Japanese shares ended higher on weaker yen and a measure of Japan consumer confidence topped forecasts. Reports showed Consumer confidence in Japan rose to 43.0 in September of 2016 from 42.0 in August and beating market expectations of 41.8. Further, Hong Kong stocks posted modest gains, led by consumer staples and a rally in developer China Evergrande, but gains were capped by concerns that more cities in China may take steps to cool surging property prices. The Chinese markets remained shut all week and will re-open on Monday.