Benchmarks trim gains; trade continues in green

After getting firm start, Indian benchmark indices gave up most of their gains in the late morning session and now trading in a narrow range though with a positive bias, as investors have turned cautious ahead of Reserve Bank of India's (RBI’s) Monetary policy. The latest monetary policy meeting will be the first meet where the interest rate decision will be taken by the panel. Urjit Patel, the RBI governor, will be one among the six-member Monetary Policy Committee (MPC) recently notified by the government. Investors got some confidence 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. Also, factory activity in Asia’s third-largest economy expanded for the ninth straight month in September, helped by new orders and surge in buying levels. However, the rate of expansion was slower than in August and there is an intensification of inflationary pressures. Some support also came with the report that the national security advisors of India and Pakistan have spoken over phone and agreed to reduce tensions on the Line of Control (LoC).

On the global front, Asian markets were trading mostly higher as concerns about Deutsche Bank’s financial health eased and Japan’s quarterly survey showed companies lowered their inflation outlook. Sentiments got some support after 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. Meanwhile, crude oil prices edged lower in Asian trades after rising overnight.

Back home, stocks from Oil & Gas, PSU and Metal counters were supporting the markets’ uptrend, while those from Capital Goods, Consumer Durables and Banking counters were adding to the underlying cautious undertone. In scrip specific development, Dhampur Sugar Mills has rallied after the company received an approval for acquisition of 428,400 equity shares of DETS, constituting 51% of equity share capital at Rs 33 per equity share. Moreover, Gayatri Projects has jumped after the company bagged Rs 926-crore highway road construction contract in the state of Bihar.

The market breadth remained optimistic as there were 1394 shares on the gaining side against 1073 shares on the losing side, while 111 shares remained unchanged.

The BSE Sensex is currently trading at 28280.22, up by 36.93 points or 0.13% after trading in a range of 28268.43 and 28402.65. There were 16 stocks advancing against 13 stocks declining on the index, while one stock remained unchanged.

The broader indices were trading in green; the BSE Mid cap index was up by 0.20%, while Small cap index up by 0.33%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 2.04%, PSU up by 0.62%, Metal up by 0.59%, FMCG up by 0.35%, IT up by 0.34% while, Capital Goods down by 0.50%, Consumer Durables down by 0.38%, Bankex down by 0.19%, Auto down by 0.05% were the losing indices on BSE.

The top gainers on the Sensex were GAIL India up by 5.00%, ONGC up by 3.38%, Cipla up by 2.17%, Tata Steel up by 1.41% and Reliance Industries up by 1.08%. On the flip side, Coal India down by 2.39%, Larsen & Toubro down by 1.28%, Axis Bank down by 0.81%, Mahindra & Mahindra down by 0.77% and Bharti Airtel down by 0.52% 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 8751.15, up by 13.05 points or 0.15% after trading in a range of 8748.45 and 8778.30. There were 31 stocks advancing against 20 stocks declining on the index.

The top gainers on Nifty were GAIL India up by 4.76%, ONGC up by 3.65%, Cipla up by 2.29%, Hindalco up by 1.72% and Tata Power up by 1.57%. On the flip side, Zee Entertainment down by 3.24%, Coal India down by 2.47%, Bank of Baroda down by 1.42%, Larsen & Toubro down by 1.29% and Idea Cellular down by 1.05% were the top losers.

Asian markets were trading in green; Hang Seng rose 0.12%, Jakarta Composite gained 0.02%, KOSPI Index increased 0.5%, FTSE Bursa Malaysia KLCI jumped 0.67%, Taiwan Weighted added 0.58% and Nikkei 225 was up by 0.5%.