Benchmarks continue to trade firm in late morning session

Indian equity benchmarks continued their firm trade in the late morning session on account of buying in frontline blue chip counters ahead of monetary policy review. The sentiments were on optimistic note after World Bank stated that India’s GDP growth will remain strong at 7.6 per cent in 2016 and 7.7 per cent in 2017. In its latest report on South Asia Economic Focus, the bank enlightened that 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. Some additional support came 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. Also, the Union Minister for Commerce and Industry Nirmala Sitharaman has said that the ‘One Nation One Tax’ regime through the GST system would come into effect on April 1, 2017, leading to a unified domestic market. The street is eyeing Urjit Patel, who replaced the flamboyant Raghuram Rajan as Reserve Bank of India Governor, is in the spotlight today as he chairs his first policy review, which for the first time will see a committee set interest rates. Views are divided on whether there will be any change this time round, but regardless of the outcome, market players are closely scrutinizing how the newly-formed monetary policy committee or MPC votes, trying to spot the doves and hawks among the six members. However, some cautiousness too prevailed limiting the upside, with another rating agency Fitch Ratings projecting Indian economy to grow at a slower pace of 7.4 percent in the current fiscal and touch 8 percent growth only in 2018-19, as it expects the benefits of reforms and impact of monetary easing to kick in with a lag.

Traders were seen piling up positions in Oil & Gas, PSU and IT stocks, while selling was witnessed in Capital Goods, Bankex and Consumer Durables sector stocks. In scrip specific development, HPL Electric and Power was trading in red after making a weak market debut. High valuations and low profitability of the company were the reasons behind its weak debut. The company raised Rs 360 crore from its initial public offer (IPO), which ended on September 26. The issue was subscribed just over 8 times.

On the global front, Asian stocks were higher, with Japan’s Nikkei share average rising after the yen weakened against the dollar on data suggesting the US manufacturing sector grew more than expected in September. A flurry of data from China in coming weeks is expected to point to modest improvement in the economy in the third quarter as a government infrastructure spree and a housing boom boosts demand from steel and glass to furniture and appliances. Back home, the NSE Nifty and BSE Sensex were trading above the psychological 8,750 and 28,300 levels respectively. The market breadth on BSE was positive in the ratio of 1345:944, while 94 scrips remained unchanged.

The BSE Sensex is currently trading at 28307.55, up by 64.26 points or 0.23% after trading in a range of 28288.86 and 28402.65. There were 18 stocks advancing against 12 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.19%, while Small cap index was up by 0.32%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 2.13%, PSU up by 0.66%, IT up by 0.48%, Metal up by 0.38% and FMCG up by 0.35%, while Capital Goods down by 0.32%, Bankex down by 0.24% and Consumer Durables down by 0.12% were the losing indices on BSE.

The top gainers on the Sensex were GAIL India up by 3.96%, ONGC up by 3.65%, Sun Pharma up by 1.42%, Tata Steel up by 1.40% and Cipla up by 1.37%.

On the flip side, Coal India down by 2.18%, Larsen & Toubro down by 0.94%, Axis Bank down by 0.72%, Bharti Airtel down by 0.49% and Mahindra & Mahindra down by 0.36% were the top losers.

Meanwhile, raising some concern for the policy makers, the global rating agency ‘Fitch Ratings’ in its latest bi-monthly Global Economic Outlook (GEO) report, has projected Indian economy to grow at a slower rate of 7.4 percent in FY17 and to accelerate gradually to 8.0 percent only in FY19, as it expect the benefits of reforms and impact of monetary easing will kick in with a lag.

The Indian economy grew 7.6 per cent last year, GDP growth fell to 7.1 per cent in Q2 from 7.9 per cent Q1. This was lower than the 7.6 per cent estimated in the July GEO report. It further said that private consumption growth was 6.7 per cent in Q2 and is expected to reach 8.8 per cent in FY18 due to increasing real disposable income growth. It also forecasted a sharp pick-up in FY18 investment growth to 6.3 per cent. Strong export growth also continued in Q216, a rebound from the contraction in 2015. Import dynamics remained weak and thus net exports will have a 1.6 percentage point growth contribution in FY17 before moderating over the medium-term.

The rating agency further said that public-sector wage hikes, lagged impact of monetary policy easing, and a better monsoon season than the previous two years, should support growth in the near-term, while decent progress on structural reforms including the recent landmark passage of the Goods and Services Tax in parliament should facilitate a turnaround in investment over the medium term.

Rating agency also said that RBI, led by its new Governor Urjit Patel, is expected to cut its policy rate by 25 basis points to 6.25 per cent before the end of 2016, followed by one more rate cut in 2017. Consumer inflation was 5.1 per cent in August 2016, a 1 percentage point drop compared to the previous month. Therefore, it expects the inflation to start gradually increasing to 5.5 per cent by end-2016, 5.8 per cent by end-2017 and 6.0 per cent by end-2018, the upper end of the 4 per cent plus or minus 2 per cent medium-term inflation target range.  

The CNX Nifty is currently trading at 8756.90, up by 18.80 points or 0.22% after trading in a range of 8748.45 and 8778.30. There were 29 stocks advancing against 22 stocks declining on the index.

The top gainers on Nifty were ONGC up by 3.71%, GAIL India up by 3.07%, Tech Mahindra up by 1.79%, Sun Pharma up by 1.64% and Reliance Industries up by 1.39%.

On the flip side, Zee Entertainment down by 2.47%, Coal India down by 2.15%, IndusInd Bank down by 1.13%, Bank of Baroda down by 1.12% and Larsen & Toubro down by 1.08% were the top losers.

The Asian markets were trading in green; Jakarta Composite increased 1.12 points or 0.02% to 5,465.04, FTSE Bursa Malaysia KLCI increased 11.15 points or 0.67% to 1,663.70, KOSPI Index increased 11.25 points or 0.55% to 2,054.88, Hang Seng increased 23.04 points or 0.1% to 23,607.47, Taiwan Weighted increased 33.92 points or 0.37% to 9,268.12 and Nikkei 225 increased 124.51 points or 0.75% to 16,723.18.

Shanghai Stock Exchange was closed on account of ‘National Day’ holiday.