Benchmarks trade in fine fettle ahead of RBI monetary policy outcome

Indian equity benchmarks have made a positive start and are trading in fine fettle in early deals on Tuesday, with frontline gauges recapturing their crucial 28,300 (Sensex) and 8,750 (Nifty) bastions, on expectations of a rate cut by the central bank in its bi-monthly monetary policy meet where six-member Monetary Policy Committee (MPC) will announce its decision on interest rates later in the day. Sentiments also remained up-beat with global ratings agency Crisil predicting a strong boost to India's domestic consumption in 2016-17 led by implementation of 7th pay panel’s recommendations, with reforms like the Goods and Services Tax (GST) to benefit the uptick. Traders also took some encouragement with the Union Minister for Commerce and Industry Nirmala Sitharaman’s statement that the 'One Nation One Tax' regime through the Goods and Services Tax (GST) system would come into effect on April 1, 2017, leading to a unified domestic market.

All the Asian markets were trading in green at this point of time though the mood was a bit cautious following a retreat in US equities. Back home, appreciation in Indian rupee too aided sentiments. The rupee edged higher by 7 paise to 66.52 against the dollar on increased selling of the American currency by exporters and banks ahead of RBI policy meet scheduled later in the day. On the sectoral front, public sector oil marketing companies (OMCs) remained on buyers’ radar, as the international oil prices dipped again weighed down by a rise in Iranian exports.

The BSE Sensex is currently trading at 28332.96, up by 89.67 points or 0.32% after trading in a range of 28306.94 and 28402.65. There were 22 stocks advancing against 7 stocks declining on the index, while one stock remained unchanged..

The broader indices were trading in green; the BSE Mid cap index gained 0.35%, while Small cap index was up by 0.46%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 2.12%, Energy up by 1.17%, Utilities up by 0.89%, PSU up by 0.78% and FMCG up by 0.61%, while Metal down by 0.17%, Capital Goods down by 0.05%, Bankex down by 0.04% and Finance down by 0.01% were the few losing indices on BSE.

The top gainers on the Sensex were GAIL India up by 4.04%, ONGC up by 3.57%, Wipro up by 1.24%, Reliance Industries up by 1.03% and Cipla up by 1.03%. On the flip side, Coal India down by 1.97%, Larsen & Toubro down by 0.73%, Bharti Airtel down by 0.55%, Axis Bank down by 0.33% and Mahindra & Mahindra down by 0.29% 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 is currently trading at 8765.55, up by 27.45 points or 0.31% after trading in a range of 8751.60 and 8778.30. There were 35 stocks advancing against 16 stocks declining on the index.

The top gainers on Nifty were GAIL India up by 3.72%, ONGC up by 3.57%, Tech Mahindra up by 1.76%, Tata Power up by 1.57% and BPCL up by 1.55%. On the flip side, Coal India down by 2.04%, Zee Entertainment down by 1.94%, Indusind Bank down by 1.05%, Larsen & Toubro down by 0.87% and Bharti Airtel down by 0.56% were the top losers.

Asian markets were trading in green; Hang Seng rose 5.57 points or 0.02% to 23,590.00, Jakarta Composite gained 6.03 points or 0.11% to 5,469.95, KOSPI Index increased 9.23 points or 0.45% to 2,052.86, FTSE Bursa Malaysia KLCI jumped 10.46 points or 0.63% to 1,663.01, Taiwan Weighted added 33.78 points or 0.37% to 9,267.98 and Nikkei 225 was up by 130.52 points or 0.79% to 16,729.19.