Benchmarks negotiate positive close on choppy day

Indian equity benchmarks ended the choppy day of trade slightly in green on Monday, with frontline gauges swinging between green and red for most part of the day. Markets started the session in negative terrain as traders reacted negatively to the Reserve Bank of India's (RBI) surprise move during the weekend, ordering banks to transfer 100% of their cash under the central bank's cash reserve ratio (CRR) from deposits generated between September 16 and November 11. Though, RBI has said that it will review its decision asking banks to deposit their extra cash with it once the government issues an adequate quantum of market stabilisation scheme bonds to soak up liquidity.

Markets took U-turn and entered into green terrain in late morning session, as traders got some encouragement with Fitch Ratings’ latest statement that it expects India's GDP growth trend higher than China's in the medium term despite demonetization. It added that in India it expects GDP growth to accelerate in FY2018 on the back of reform implementation, monetary easing of the past year and infrastructure spending. Some support also came after RBI’s Governor Urjit Patel said that all necessary actions are being taken to ‘ease the genuine pain of citizens’ who are honest and who have been hurt. Liquidity in the banking system has increased and the intent is to normalise things as soon as possible. Currency is available and banks are working in a mission mode to take them to branches and ATMs, expressed the RBI Governor.

On the global front, European markets were trading lower on Monday with financials, led by asset manager Man Group and Italian banks, and oil-related stocks the worst performers. However, most of the Asian counters ended in green despite some cautiousness ahead of the OPEC meeting and after Saudi Arabia backed out of the non-OPEC meeting.

Back home, banking counters remained under pressure after RBI on Saturday asked banks to maintain a temporary incremental cash reserve ratio (CRR) of 100 per cent to absorb excess liquidity from the system. However, metal and mining stocks such as Jindal Steel, Vedanta, JSW Steel, and Hindustan Zinc rallied during the trade, as copper prices rose in global commodity markets. Telecom stocks edged higher after the government’s decision to allow old Rs 500 notes to be used for pre-paid mobile recharges. Shares of liquor companies too remained in focus with stock price of five companies GM Breweries, Pioneer Distilleries, Ravi Kumar Distilleries, Empee Distilleries and Globus Spirits were locked in upper circuit of 20% each on BSE.

The NSE’s 50-share broadly followed index -- Nifty -- rose by over ten points to end above the psychological 8,100 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex -- surged by over thirty points to finish above the psychological 26,350 mark. However, broader markets outperformed benchmarks and ended the session with a gain of around a percent. The market breadth remained in the favour off advances, as there were 1,666 shares on the gaining side against 923 shares on the losing side while 177 shares remain unchanged.

Finally, the BSE Sensex rose 33.83 points or 0.13% to 26350.17, while the CNX Nifty gained 12.60 points or 0.16% to 8,126.90.

The BSE Sensex touched a high and a low of 26413.99 and 26183.22, respectively and there were 16 stocks on gainers side against 14 stocks on the losers side on the index.

The broader indices ended in green; the BSE Mid cap index surged 0.97%, while Small cap index was up by 0.66%.

The top gaining sectoral indices on the BSE were Telecom up by 4.04%, Realty up by 1.91%, Power up by 1.74%, Utilities up by 1.41% and FMCG up by 1.23%, while Consumer Durables down by 1.20%, Bankex down by 1.16%, Finance down by 0.59% and IT down by 0.15% were the few losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 5.53%, Adani Ports &Special up by 2.60%, ITC up by 2.08%, ONGC up by 2.07% and Power Grid up by 1.84%. On the flip side, SBI down by 2.82%, ICICI Bank down by 1.73%, Mahindra & Mahindra down by 1.41%, TCS down by 1.02% and Larsen & Toubro down by 0.99% were the top losers.

Meanwhile, amid the larger debate and different views on impact of demonetization on economy, the global rating agency ‘Fitch Ratings' has said that despite demonetization it expects India's GDP growth trend higher than China's in the medium term. It has projected Indian economy to accelerate in FY2018 on the back of reform implementation, monetary easing of the past year and infrastructure spending, while it said that in China a continued increase in leverage in the broader economy is more and more becoming a burden for growth. 

The rating agency has said that the long-term impact of demonetization will depend on the time taken to ease the shortage in currency notes. It also noted that the move will have a negative impact on growth in the short run but for the fiscal year as a whole decline would be relatively moderate. On the positive side, it said that the demonetization may improve the fiscal position to the extent more earnings would be declared and a transfer is possible from the RBI to the government of the seigniorage (profit from the difference between the face value of the currency and cost of production) earned from unchanged notes.

In October 2016, Fitch forecasted India’s GDP growth of 7.4 per cent for the current fiscal, adding that the growth would accelerate to eight per cent only by 2018-2019, on account of a lagged impact of monetary easing. For China, it had forecasted real GDP growth of 6.4 per cent in 2017, down from a projected 6.7 per cent in 2016, due to the impact of recent macro-prudential tightening measures targeting the housing market.

The CNX Nifty touched a high and a low of 8146.50 and 8066.50, respectively and there were 34 stocks in green against 17 stocks in red on the index.

The top gainers on Nifty were Bharti Airtel up by 5.91%, Zee Entertainment up by 4.14%, Tata Power up by 3.78%, Bosch up by 3.01% and Idea Cellular up by 2.92%. On the flip side, Bank of Baroda down by 2.89%, SBI down by 2.84%, Indusind Bank down by 2.14%, ICICI Bank down by 1.85% and Yes Bank down by 1.55% were the top losers.

European markets were trading in red; Germany’s DAX declined 57.31 points or 0.54% to 10,641.96, France’s CAC dropped 18.73 points or 0.41% to 4,531.54 and UK’s FTSE 100 was down by 17.82 points or 0.26% to 6,822.93.

Most of the Asian markets made a positive closing on Monday, though there was some cautiousness too ahead of the OPEC meeting and after Saudi Arabia backed out of the non-OPEC meeting. Chinese market surged to an 11-month high, on upbeat industrial profits data for October that bolstered optimism that China's economic growth is possibly bottoming out. The Hong Kong market too posted gains of about half a percent after China and Hong Kong securities regulators approved the launch of Shenzhen-Hong Kong Stock Connect. On the other hand the Japanese market snapped a seven-session winning streak, with a strengthening yen and lower prices weighing on markets. Though, some late hour strength in dollar led to recovery in the index.