Indian equity markets continue to trade with traction

Indian equity markets are trading on an optimistic note in the noon trade, as sentiments remained buoyant tracking the encouraging leads from the global markets. Market participants piled up hefty positions across the board on anticipation of a rate cut at Reserve bank of India’s (RBI) policy review on Wednesday. The economic slowdown due to demonetization is likely to slice a percentage point from the gross domestic product (GDP) growth and so a rate cut at this point to encourage private-sector loan off-take and spending will be needed. However, the US Federal Reserve is likely to increase its policy rate in mid-December. If that happens, the interest rate differential between India and the US will narrow, making it unattractive for foreign investors to put in money in Indian market. Meanwhile, appreciation in rupee value against the dollar added to the optimistic sentiments. Indian rupee strengthened by 16 paise to 68.05 against the dollar on Tuesday on increased selling of the US currency by exporters and banks. Some support also came with Prime Minister Narendra Modi’s statement that India's economy is expected to witness a five-fold growth by 2040 owing to increase in investments. Modi said while global economy is going through uncertainty, India has shown tremendous resilience. Indian economy is more stable than others with investment in India at the highest levels. However, gains remained capped with the report that Indian services activity dived into contraction in November after PM Modi’s surprise move to withdraw high denomination bank notes led to a sharp decline in demand.

On the global front, Asian markets were trading mostly higher on Tuesday as investors judged the selloff after Italy's referendum was overdone, with robust U.S. economic data also helping sentiment. The global rating agency S&P said that Italian referendum outcome may not have immediate implications for Italy’s economic or budgetary policies beyond likely near-term changes in Italian politics. Meanwhile, Wall Street rose on Monday, with the Dow Jones industrials setting fresh record highs following a services sector report that showed further strength in the domestic economy.

Back home, stocks from Realty, Oil & Gas and IT counters were supporting the markets’ uptrend, while those from FMCG counter were adding to the underlying cautious undertone. In scrip specific development, RattanIndia Power declined after the company reported a net loss of Rs 50.73 crore for the quarter ended September 30, 2016 as compared to a net loss of Rs 82.82 crore for the same quarter in the previous year. On the other hand, Tata Power gained after the company’s strategic engineering division, Tata Power SED has won an order worth over Rs 200 crore from Ministry of Defence.

The market breadth remained optimistic as there were 1583 shares on the gaining side against 664 shares on the losing side, while 121 shares remained unchanged.

The BSE Sensex is currently trading at 26458.57, up by 109.47 points or 0.42% after trading in a range of 26393.99 and 26490.42. There were 21 stocks advancing against 9 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.70%, while Small cap index up by 0.81%.

The top gaining sectoral indices on the BSE were Realty up by 1.58%, Oil & Gas up by 1.13%, IT up by 0.85%, Power up by 0.81% and TECK up by 0.76%, while FMCG down by 0.65% was the sole losing index on BSE.

The top gainers on the Sensex were HDFC up by 3.09%, GAIL India up by 1.70%, NTPC up by 1.33%, Wipro up by 1.22% and Infosys up by 1.16%. On the flip side, Hindustan Unilever down by 1.18%, ITC down by 0.90%, Power Grid down by 0.70%, Sun Pharma down by 0.55% and Hero MotoCorp down by 0.45% were the top losers.

Meanwhile, the Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel started its two day meeting (December 6 and 7, 2016) for the Fifth Bi-monthly Monetary Policy review for 2016-17. There are expectations of at least 0.25 percent policy rate cut in order to tackle the impact of demonetisation move by the central government.

This will be Patel’s second monetary policy review since he took over as RBI Governor. In its first meeting of the MPC that happened in October, it was decided to cut the policy rates under the liquidity adjustment facility (LAF) by 25 basis points to 6.25 per cent from 6.5 per cent. The RBI had since January 2015 reduced repo rate by 1.75 per cent with an aim to boost economic growth.

This policy review has become significant as it will be the first monetary policy review after demonetisation of old Rs 500 and Rs 1,000 currency notes, following which banks witnessed surge in deposits after which in a surprise move Reserve Bank of India's (RBI) ordered 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.

The CNX Nifty is currently trading at 8165.10, up by 36.35 points or 0.45% after trading in a range of 8148.50 and 8174.05. There were 36 stocks advancing against 15 stocks declining on the index.

The top gainers on Nifty were HDFC up by 3.45%, Tata Power up by 2.46%, Idea Cellular up by 1.79%, Zee Entertainment up by 1.77% and GAIL India up by 1.64%. On the flip side, Hindustan Unilever down by 1.04%, ITC down by 0.95%, Power Grid down by 0.89%, Eicher Motors down by 0.85% and Indusind Bank down by 0.72% were the top losers.

Barring Shanghai Composite index which was down by 0.09%, all the other Asian markets were trading in green; FTSE Bursa Malaysia KLCI rose 0.22%, Jakarta Composite increased 0.09%, KOSPI Index surged 1.42%, Nikkei 225 jumped 0.34%, Taiwan Weighted soared 0.98% and Hang Seng was up by 0.74%.