Benchmarks trade slightly in green ahead of MPC policy decision

Indian equity benchmarks have made a modestly positive start on Monday, as traders remained on sidelines ahead of monetary policy committee (MPC) of RBI announcement of policy rate later in the day. Traders apart from a rate cut would be watching the commentary on inflation and growth, and will look for clarity on market stabilisation scheme (MSS) and CRR measures announced recently. Market participants took some support with global rating agency Fitch Ratings’ statement that there is scope for monetary easing in India as retail inflation is holding below the 5 percent target. 

Global cues too remained supportive with most of the Asian counters trading in green at this point of time following the gains in US markets and the Japanese market advanced with the decline in yen. The US markets added modest gains in last session with Dow touching new record highs on gains among financials and telecoms. There was some cautiousness with Commerce Department reporting that the trade deficit widened to $42.6 billion in October from $36.2 billion in September, though it remained on expected lines.

Back home, the market breadth indicating the overall health of the market was strong, with 1,223 shares gaining and 557 shares declining, while a total of 79 shares were unchanged. On the sectoral front, PSU oil marketing companies edged higher in early deals, as the international crude prices started showing some fatigue following a 15 per cent four-day rally since the November 30 after the Opec members decided to cut output from January. Stocks related to gold and jewellary sector too remained in focus, as the Union Minister Ravi Shankar Prasad has said that government is not considering any plan to impose tax on jewellery of women.

The BSE Sensex is currently trading at 26441.45, up by 48.69 points or 0.18% after trading in a range of 26418.05 and 26469.93. There were 23 stocks advancing against 7 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.31%, while Small cap index was up by 0.41%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.09%, PSU up by 1.06%, Utilities up by 0.86%, Realty up by 0.77% and Power up by 0.75%, while Healthcare down by 0.93%, FMCG down by 0.06%, IT down by 0.05% and TECK down by 0.04% were the few losing indices on BSE.

The top gainers on the Sensex were Adani Ports &Special up by 1.38%, NTPC up by 1.35%, HDFC up by 1.34%, Power Grid up by 1.31% and Hero MotoCorp up by 1.12%. On the flip side, Sun Pharma down by 3.82%, TCS down by 0.98%, Lupin down by 0.61%, Axis Bank down by 0.37% and Dr. Reddys Lab down by 0.33% were the top losers.

Meanwhile, international rating agency, Fitch Ratings in its latest report titled ‘2017 Outlook: Emerging Asia Sovereigns’ has said that there is scope for monetary easing in India as retail inflation is holding below the 5 percent target. Fitch said that inflation of 4.2 percent in October 2016 was below the intermediate target of 5 percent by March 2017 and within the medium-term target range of 4 percent (+/-) 2 percent.

Fitch also said that India's growth outlook remains strong on the back of infrastructure spending and the implementation of ambitious reform agenda. As per the report, some central banks in the emerging Asian economies may still find room for further monetary policy easing, given generally low consumer inflation. It said that the growth outlook is particularly strong in Bangladesh, India and the Philippines, while it added that India accounts for 14 percent of the region's gross domestic product (GDP).

The rating agency believes that domestic growth drivers include an infrastructure boost and implementation of an ambitious reform agenda in some Asian economies like India and Indonesia. However, it said that public debt levels are high in some countries including India. The report added that India and Vietnam have favourable macroeconomic prospects, but weaknesses in their public finances have deterred rating agency from taking positive rating action. Thus, it has a 'BBB-' rating for India with a ‘stable’ outlook.

The Monetary Policy Committee (MPC), headed by Reserve Bank of India (RBI) Governor Urjit Patel, will announce the policy review on December 7, 2016, amid expectations of a 0.25 percent rate cut as retail inflation is below the short-term target of 5 percent by March. The committee, in October, had cut benchmark interest rates by 0.25 percent to 6.25 percent.

The CNX Nifty is currently trading at 8160.65, up by 17.50 points or 0.21% after trading in a range of 8155.05 and 8170.70. There were 37 stocks advancing against 14 stocks declining on the index.

The top gainers on Nifty were BPCL up by 1.90%, Idea Cellular up by 1.88%, NTPC up by 1.59%, Eicher Motors up by 1.57% and HDFC up by 1.45%. On the flip side, Sun Pharma down by 3.88%, Zee Entertainment down by 1.70%, Aurobindo Pharma down by 1.20%, Lupin down by 0.70% and Tata Power down by 0.66% were the top losers.

Asian markets were trading mostly in green; FTSE Bursa Malaysia KLCI rose 2.07 points or 0.13% to 1,631.80, Shanghai Composite gained 3.34 points or 0.1% to 3,202.98, Taiwan Weighted increased 11.5 points or 0.12% to 9,262.27, Hang Seng added 79.11 points or 0.35% to 22,754.26 and Nikkei 225 was up by 102 points or 0.56% to 18,462.54.

On the flip side, Jakarta Composite decreased 35.5 points or 0.67% to 5,237.47 and KOSPI Index was down by 1.97 points or 0.1% to 1,987.89.