Benchmarks trade modestly in green in afternoon session

Indian benchmark indices trimmed some of their early gains but continued to trade in green in the afternoon session led by gains in frontline blue chip stocks such as Lupin, Asian Paints, Larsen & Toubro, Tata Steel and NTPC among others. Sentiments got some support with Finance Minister Arun Jaitley's statement that banks are integrating their information technology system with RBI and GST Network as they prepare to handle tax deposits under the new indirect tax regime. Some support also came with Agriculture Minister Radha Mohan Singh’s assurance that sowing of rabi crops like wheat, pulses and oilseeds has not been affected due to banning of old Rs 500 and Rs 1,000 notes. However, depreciation in rupee value against dollar weighed on the sentiments. The Rupee weakened by 22 paise to trade at fresh 9-month low of 68.47 against the US Dollar at this point of time on sustained foreign fund outflows amid increased demand for the US currency from importers. In scrip specific development, Reliance Communications rose around a percent after the Supreme Court dismissed the special leave petition filed by the Income Tax department against the telecom major on taxing the proceeds of its $1.5-billion foreign currency convertible bonds.

On the global front, Asian markets were trading mixed, buoyed by the record closing highs overnight on Wall Street and stronger commodity prices. Crude oil prices were flat in Asian trades after moving modestly lower overnight. Back home, the BSE Sensex is currently trading at 26000.42, up by 39.64 points or 0.15% after trading in a range of 25877.16 and 26130.49. There were 17 stocks advancing against 13 stocks declining on the index.

The broader indices too were trading in green; the BSE Mid cap index was up by 0.57%, while Small cap index was up by 0.76%.

The top gaining sectoral indices on the BSE were Metal up by 2.25%, Capital Goods up by 1.70%, Realty up by 1.58%, Consumer Durables up by 0.79% and IT up by 0.31%, while Oil & Gas down by 0.09% and Bankex down by 0.07% were the losing indices on BSE.

The top gainers on the Sensex were Lupin up by 3.29%, Asian Paints up by 3.11%, Larsen & Toubro up by 3.10%, Tata Steel up by 2.49% and NTPC up by 2.41%. On the flip side, HDFC down by 2.13%, Power Grid Corpn. down by 1.55%, Mahindra & Mahindra down by 1.55%, Maruti Suzuki down by 1.13% and Wipro down by 1.09% were the top losers.

Meanwhile, global ratings agency, Fitch Ratings in its latest report has said that the surprise move of demonetizations of old Rs. 500, 1,000 has the potential to raise government revenue and encourage bank lending, but at the same time the positive effects are unlikely to be strong and sufficiently enduring to support credit profiles. The rating agency said that the impact on GDP growth will increase, the longer the disruption continues, but we will already need to revise down our forecasts to reflect what will almost certainly be a weak 4Q16.

The report further said that the discontinuation of the large denomination notes has led to a short-term disruption in India’s economy. The withdrawal of bank notes has created a cash crunch, with the time spent queuing up outside banks affecting general productivity. Following the announcement, the consumers have not had the cash to complete purchases, and there have been reports of supply chains being disrupted. Also, farmers incapable to buy seeds and fertiliser for the sowing season.

As per the report, the move by the government could also affect sectors that rely on cash transactions and have a negative impact on bank asset quality. Most importantly, demonetizations is a one-off event. People that operate in the informal sector will still be able to use the new high-denomination bills and other options like gold to store their wealth.

However, Fitch pointed that the move could boost government revenue to the extent that demonetizations helps to move economic activity from the informal to the formal sector, as more earnings would be declared. It is possible that this positive effect would soon outweigh the drag on revenue collection from lower short-term GDP growth. Government finances may also benefit from a proportion of high-denomination notes not being traded. On November 8, 2016, the government had declared demonetisation of Rs 500 and Rs 1,000 note replacing them with new Rs 500 and Rs 2,000 notes to curb corruption and make efforts to recover ‘black’ or unaccounted money.

The CNX Nifty is currently trading at 8010.05, up by 7.75 points or 0.10% after trading in a range of 7973.10 and 8055.20. There were 28 stocks advancing against 23 stocks declining on the index.

The top gainers on Nifty were Hindalco up by 3.75%, Lupin up by 3.28%, Larsen & Toubro up by 3.04%, Asian Paints up by 3.02% and Tata Steel up by 2.29%. On the flip side, HDFC down by 2.41%, Mahindra & Mahindra down by 1.92%, BPCL down by 1.65%, Power Grid Corpn. down by 1.58% and Wipro down by 1.40% were the top losers.

Asian markets were trading mixed; Hang Seng increased 1.61 points or 0.01% to 22,679.68, KOSPI Index gained 4.48 points or 0.23% to 1,987.95 and Taiwan Weighted rose 44.84 points or 0.49% to 9,178.23.

On the flip side, Jakarta Composite decreased 14.99 points or 0.29% to 5,189.68, Shanghai Composite decreased 12.94 points or 0.4% to 3,235.41 and FTSE Bursa Malaysia KLCI was down by 4.55 points or 0.28% to 1,624.77.