Benchmarks continue to hold their head above water

Indian equity markets continued to hold their head above water on sustained and selective buying by funds and retail investors. Markets got some support with report that India Inc’s merger and acquisition activity reaching a record level of $46 billion in January-September this year, up 36% in value terms over the whole of 2015. Some support also came after credit rating agency, CRISIL in its latest report said that revenues of companies in key sectors such as automobiles, IT services, power, steel products, telecom services, pharmaceuticals and FMCG are expected to grow 7% in the July-September 2016 quarter, compared with a marginal 2% in the year ago period. However, investors remained caution ahead of key Index of Industrial Production (IIP) data, to be released later in the day. In scrip specific development, IRB Infrastructure Developers was trading in red after Maharashtra State Road Development Corporation (MSRDC) terminated concession agreement for Mumbai Pune Phase II project.

On the global front, European markets were trading lower after no clear winner emerged from the second U.S. presidential debate between Donald Trump and Hillary Clinton at Washington University in St. Louis.

The BSE Sensex is currently trading at 28118.72, up by 57.58 points or 0.21% after trading in a range of 28083.39 and 28216.64. There were 18 stocks advancing against 12 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was down by 0.04%, while Small cap index was up by 0.33%.

The gaining sectoral indices on the BSE were Consumer Durables up by 1.90%, Metal up by 1.70%, IT up by 0.97%, TECK up by 0.80%, FMCG up by 0.37%, while Realty down by 1.06%, Oil & Gas down by 0.61%, PSU down by 0.31%, Power down by 0.08%, Bankex down by 0.03% were the losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 2.69%, Asian Paints up by 1.97%, Cipla up by 1.69%, Infosys up by 1.36% and GAIL India up by 0.92%. On the flip side, NTPC down by 1.55%, Bharti Airtel down by 1.14%, HDFC down by 1.12%, Adani Ports &Special down by 1.03% and ONGC down by 0.73% were the top losers.

Meanwhile, credit rating agency Crisil in its latest report on “Corporate Profitability: Review and Outlook” has said that due to the improvement in urban and rural consumption and falling global commodity prices, the profits of companies in the key sector such as automobiles, IT services, power, steel products, telecom services, pharmaceuticals and FMCG are likely to grow 7 per cent in the July-September quarter, as compared to the a marginal 2 per cent in the year ago period.

This will be the second best revenue growth in the last six quarters mainly on the back of low-base effect (revenue growth in the corresponding quarter last fiscal was stagnant), improvement in urban and rural consumption, and low commodity prices, though the report excludes banking, financial services and insurance (BFSI) and oil companies.

As per the report, during the April-June quarter (Q1FY17), India Inc. reported 5 per cent year-on-year revenue growth, compared with stable revenue in the Q1 of FY16. Crisil estimates a 50 bps increase in operating margin (operating profit/ net sales) in the July-September quarter at 19.8 per cent, from 19.3 per cent in the year ago quarter. During the second quarter, automobile, steel products, telecom services and FMCG (fast moving consumer goods) firms are expected to record better operating margin compared with last year. On the other hand, firms in the IT services, power and pharmaceuticals are likely to witness a contraction in operating margin.

Rating agency sees automobile companies reporting 13 per cent growth on the back of new launches and healthy rural demand following a good monsoon. Retail is expected to grow 12 per cent on the back of improvement in disposable incomes and India’s economic outlook, while pharmaceuticals, driven by new launches in the US, is likely to see 13 per cent growth. IT services sector is expected to grow 10 per cent, slower than in the past, aided by volume and rupee depreciation. Consumer discretionary sectors such as airlines, cars and two-wheelers and retail are expected to grow faster than industry because of improved volumes.

The CNX Nifty is currently trading at 8721.20, up by 23.60 points or 0.27% after trading in a range of 8708.60 and 8745.80. There were 31 stocks advancing against 19 stocks declining on the index, while 1 stock remained unchanged.

The top gainers on Nifty were ACC up by 2.86%, Tata Steel up by 2.63%, Asian Paints up by 2.20%, Bharti Infratel up by 1.94% and Ambuja Cement up by 1.90%. On the flip side, NTPC down by 1.58%, BPCL down by 1.09%, Bharti Airtel down by 1.08%, Adani Ports &Special down by 0.97% and HDFC down by 0.87% were the top losers.

Asian market were trading in green; FTSE Bursa Malaysia KLCI increased 1.2 points or 0.07% to 1,666.58, KOSPI Index increased 3.02 points or 0.15% to 2,056.82 and Shanghai Composite increased 43.44 points or 1.45% to 3,048.14. On flip side, Jakarta Composite decreased 18.05 points or 0.34% to 5,359.10.

European markets were trading in red; Germany’s DAX decreased 19.67 points or 0.19% to 10,471.19, France’s CAC decreased 16.75 points or 0.38% to 4,433.16 and UK’s FTSE 100 decreased 14.88 points or 0.21% to 7,029.51.