Indian markets bounce with a bang as traders eye ECB stimulus

Indian equity indices staged a stunning performance on Thursday by strongly rallying over one and half percent, on the back of widespread buying by participants tracking firm global cue in anticipation of the European Central Bank extending stimulus. Local sentiments also got buttressed by Finance Minister Arun Jaitley’s statement that demonetisation will boost growth in long run. The Finance Minister said the country will now have a cleaner economy, cleaner ethics and better GDP, he added that the economy, in the long term, is looking for a major change and policy makers now have a vision. Also, appreciation in rupee value against the dollar added to the optimistic sentiments. Indian rupee gained 19 paise to 67.44 against the dollar on Thursday on sustained selling of the US currency by exporters and banks amid foreign fund inflows. The foreign institutional investors which resorted to selling after Trump's win also reversed their trend in past few sessions. In last two trading sessions the foreign institutional investors bought shares worth Rs 356 crore. Investors got some confidence after Reserve Bank of India’s (RBI) deputy governor enlightened that the banking sector’s health is improving as bad loan accumulation has slowed and provision coverage has improved than in the previous quarters. The formation of incremental NPA (Non Performing Assets) has decelerated, the provision coverage ratio at the system level has slightly improved and compared to the last year, in this half year, the recoveries have been better and write-offs have reduced to some extent. Some support also came with S&P Global Ratings’ statement that India with a large domestic economy will be less affected by the changes in growth and monetary policy in the new set-up under Donald Trump administration.

On the global front, Asian markets finished the session on cheerful note on Thursday after U.S. shares logged their biggest one-day rally since the election on Wednesday amid bets that President-elect Donald Trump's policies would accelerate economic growth. Sentiments got some support after Chinese trade data came in unexpectedly strong.  China's exports rose 0.1 percent in the month from a year ago in dollar terms, confounding expectations for a decline of 5 percent. At the same time, imports advanced 6.7 percent in contrast to the expected fall of 1.9 percent. Meanwhile, European markets started the trade on a strong note amid bets that the European Central Bank (ECB) will extend its bond buying program beyond March 2017 at a policy meeting later in the session. ECB President Mario Draghi will hold the customary post-meeting press conference following the rate announcement.

Back home, the benchmark got off to a gap-up opening following supportive leads from Asian markets as sentiments in the region got buttressed after Wall Street strode to new records. The frontline indices carried forward the optimistic momentum and kept oscillating in a narrow range throughout the morning session. Second half of the session saw the key gauges capitalize on the momentum further and spurt to session’s highest levels in dying hour. However, a mild profit booking in dying moments of trade ensured that the key indices shut shop off the intraday highs. Finally the NSE’s 50-share broadly followed index Nifty, amassed triple digit gains to settle just below the crucial 8,250 support level, while Bombay Stock Exchange’s Sensitive Index - Sensex amassed whopping over four hundred points and closed below the psychological 26,700 mark. Moreover, the broader markets too matched the fervor with which their larger peers rallied and closed with gains of over a percent. On the BSE sectoral space, the Metal counter garnered maximum traction and surged by around three percent on the back of solid gains in bellwethers like Vedanta, Tata Steel and Hindalco Industries which rallied 5.15%, 4.62% and 2.32% respectively. The Auto pocket too witnessed huge buying interests as it gained well over two and half a percent, while IT and high beta -Banking too remained among prominent gainers. While there were no sectoral laggards, individual name i.e. NTPC settled in the red terrain with just 0.06% loss.

The market breadth remained optimistic as there were 1827 shares on the gaining side against 814 shares on the losing side, while 167 shares remained unchanged.

Finally, the BSE Sensex gained 457.41 points or 1.74% to 26694.28, while the CNX Nifty rose 144.80 points or 1.79 % to 8,246.85. 

The BSE Sensex touched a high and a low of 26733.87 and 26357.35, respectively and there were 29 stocks on gainers side against 1 stock on the losers side on the index. The broader indices made a positive closing; the BSE Mid cap index ended higher by 1.49%, while Small cap index was up by 1.28%.

The top gaining sectoral indices on the BSE were Metal up by 2.93%, Auto up by 2.63%, IT up by 1.74%, TECK up by 1.56% and Bankex up by 1.54%, while there no losers on the BSE sectoral front.

The top gainers on the Sensex were Tata Steel up by 4.62%, Tata Motors up by 3.60%, Adani Ports &Special up by 3.30%, Bajaj Auto up by 2.77% and Hero MotoCorp up by 2.53%. On the flip side, NTPC down by 0.06% was the sole loser on the index.

Meanwhile, in order to introduce a separate regulatory framework and Act for off-highway equipment, the government is going to bring legislation for construction equipment manufacturing (CEM). The proposed legislation similar to the Central Motor Vehicle Rules which soon be placed before Parliament for its enactment, will be for regulations for construction equipment which are not wheeled and for use of spurious parts. 

Department of Heavy Industry Secretary Girish Shankar has said that they have to introduce a friendlier tax structure to introduce a separate regulatory framework and Act for off- highway equipment and they have already drafted a legislation for CEM. He also said that the government is setting up the experience centre for advanced manufacturing as 4.0 industrial revolutions is already there.

He elaborated that the legislation is required because the industry has to gear itself towards quality and adoption of the right technology and discourage use of spurious spare parts. He added that his ministry has also proposed allowing the use of external commercial borrowing (ECB) to finance domestic equipment, excluding construction equipment in future FTAs, including locally produced construction equipment in export market access incentives and developing a dedicated R&D and advanced test facility.

Shankar  added that the demand for construction services is expected to rise manifolds due to several factors like massive expansion of the infrastructure sector, industrialization, urbanization rise in disposable incomes and various government. He also said that in the next three years they are going to invest around 1 trillion $ in infrastructure sector.

The CNX Nifty traded in a range of 8,256.25 and 8,151.75. There were 47 stocks in green against 4 stocks in red on the index.

The top gainers on Nifty were Tata Steel up by 4.89%, Tata Motors - DVR up by 4.41%, Tata Motors up by 3.57%, Adani Ports &Special up by 3.46% and Bajaj-Auto up by 3%. On the flip side, Bharti Infratel down by 2.38%, Eicher Motors down by 0.40%, Aurobindo Pharma down by 0.21% and NTPC down by 0.09% were the top losers.

The European markets were trading mostly in red; UK’s FTSE 100 decreased 8.5 points or 0.12% to 6,893.73 and France’s CAC decreased 0.89 points or 0.02% to 4,693.83, while Germany’s DAX increased 18.33 points or 0.17% to 11,005.02.

Asian equity markets ended mostly in green on Thursday after the US and European markets closed with large gains overnight on hopes of a state-backed rescue for struggling Italian lenders and amid optimism that fiscal-stimulus measures outlined by President-elect Donald Trump could lift US economic growth. Investors looked ahead to the ECB meeting later in the day. Faced with weak growth and inflation across the 19-country euro zone, the central bank is widely expected to extend its asset purchase program by six months. Japanese shares hit their highest level in more than 11 months after Chinese trade data came in unexpectedly strong. China's exports unexpectedly rose 0.1 percent in the month from a year ago in dollar terms, confounding expectations for a decline of 5 percent. At the same time, imports advanced 6.7 percent in contrast to the expected fall of 1.9 percent. Though, Chinese shares ended lower as trade and forex data painted a mixed picture of the world's second-largest economy.