Indian markets ricochet from Monday’s lows; surge over half percent

A session after displaying a distressing performance, Indian equity indices managed to pull through a shining performance by surging over half a percentage points on Tuesday, thanks to fresh buying by domestic investors in the Auto, IT and Oil & Gas counters. Sentiments got some support with Central Board of Direct Taxes (CBDT) clarification that an increase in turnover of a business owing to its accepting digital means of payment will not trigger reopening of cases of past years. Market participants are optimistically waiting the Consumer Price Index (CPI) data which is expected to cool down for the month of November, as the data accommodates the impact of the government’s decision to demonetize high value currency notes that month. The all-India general CPI inflation had dropped to 4.2% in October from 4.39% in the previous month. Meanwhile, many stock specific actions were seen during the session, which helped the indices to enlarge their gains.  Shares of Tata Motors surged as much as 4%, making them the top gainer on the BSE index, after an undisclosed buyer bought about 50 million shares in two block deals at an up to 10% premium to Monday's close. Adani Ports, Wipro, Axis Bank and Infosys were also among the gainers in the Sensex. Investors are closely looking at the Fed's statement on future action given fears that aggressive rate hikes could spark outflows from emerging markets to the United States. Such an outcome could hit Indian shares further given that markets are already under pressure over worries that demonetisation would hurt the economy bigger than expected. Asian Development Bank (ADB) has recently trimmed its 2016 growth estimate for India to 7% from the previous 7.4%. Also, one private report indicated that Private equity/ venture capital investments declined both in terms of value and volume in November 2016. In value terms, PE/VC investments in India stood at $908 million, down 50%, from $1.82 billion in November last year.

On the global front, Asian markets ended mostly higher on Tuesday, on account of selective buying activity ahead of the US Federal Reserve's monetary policy announcement on Wednesday. Chinese shares edged higher as better than expected November retail sales and factory output data encouraged bargain-hunting after the previous session's slump, while Japanese shares ended in green, with support coming from likely buying by the Bank of Japan and as investors snapped up cheaper domestic demand-driven stocks. Meanwhile, European stocks rose, hovering around an 11-month high as Italian bank shares strengthened after the country’s largest lender, UniCredit SpA, rolled out a restructuring plan.

Back home, after getting cautious start, the local benchmarks traded in tight range above neutral line for most part of the session, as traders remained on sidelines ahead of microeconomic data. However, the frontline indices gained much of their momentum in the final hour of trade, tracking firm trading European markets.  Finally, the NSE’s 50-share broadly followed index Nifty, ended higher by over half a percent to settle above the crucial 8,200 support level, while Bombay Stock Exchange’s sensitive Index-Sensex accumulated one eighty two points and closed near the psychological 26,700 mark. On the BSE sectoral space, Auto counter remained the top gainer in the space with around a percent gains followed by IT index which ended with gain of over half a percent. Good buying was also observed in Oil & Gas, Teck and FMCG counters. On the flipside, Realty counter languished at the bottom of the table with cut of over a percent, while the Metal and Power sectors settled with moderate cuts.

The market breadth remained pessimistic as there were 1281 shares on the gaining side against 1304 shares on the losing side, while 191 shares remained unchanged.

Finally, the BSE Sensex gained 182.58 points or 0.69% to 26697.82, while the CNX Nifty added 51 points or 0.62% to 8,221.80. 

The BSE Sensex touched a high and a low of 26724.97 and 26494.23, respectively and there were 21 stocks on gainers side against 9 stocks on the losers side on the index. The broader indices made a positive closing; the BSE Mid cap index ended higher by 0.43%, while Small cap index was up by 0.07%.

The top gaining sectoral indices on the BSE were Auto up by 0.98%, IT up by 0.85%, Oil & Gas up by 0.81%, TECK up by 0.71% and FMCG up by 0.60%, while Realty down by 1.10%, Metal down by 1.00%, Power down by 0.07% and Consumer Durables down by 0.04% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 3.48%, Adani Ports &Special up by 2.35%, Wipro up by 1.86%, Axis Bank up by 1.74% and Infosys up by 1.28%. On the flip side, GAIL India down by 1.34%, Tata Steel down by 0.79%, Lupin down by 0.71%, Hindustan Unilever down by 0.41% and NTPC down by 0.33% were the top losers.

Earlier there were lots of optimism over upcoming UP election, which could reduced the gap between opposition party and the governing party in upper house, but now turned jittery about the negative impact of demonetisation’s move on election as the several MPs admitted that there is concern on ground that labourers, weavers, vegetable vendors, small shopkeepers and small-scale industries are facing trouble due to the ongoing cash crunch, and that there are real threats of job losses in selective sectors, too. Being in a minority in Upper House, the BJP-led NDA has failed to ensure the passage of several of its key Bills in last one year. With the hardship faced by common people continued, the popular support for Narendra Modi government's demonetising high denomination notes is declining, as per the private survey released on Monday. The survey, which participated by 8526 people, only 39% now felt the implementation of the scheme has been good as against the 51% of the respondents who supported it about 3 weeks ago. Further, opposition party using this as opportunity to criticize the government by saying the move is a biggest scam of the year. Former Finance minister P Chidambaram hit out at the Union government terming the demonetisation move as the ‘biggest scam of the year’ and demanded that it be investigated. It has broken the back of poor people, a case of khoda pahad nikli chuhiya, Chidambaram said, adding that not even a national calamity would have caused so much suffering.

The CNX Nifty traded in a range of 8,228.85 and 8,155.80. There were 34 stocks in green against 17 stocks in red on the index.

The top gainers on Nifty were Tech Mahindra up by 3.75%, Tata Motors up by 3.50%, BPCL up by 2.87%, Wipro up by 2.30% and Adani Ports up by 2.01%. On the flip side, Ultratech Cement down by 2.81%, Hindalco down by 2.58%, Zee Entertainment down by 2.38%, BHEL down by 1.69% and Grasim Industries down by 1.42% were the top losers.

The European markets were trading in green; UK’s FTSE 100 increased 18.26 points or 0.27% to 6,908.68, Germany’s DAX increased 79.96 points or 0.71% to 11,270.17 and France’s CAC increased 32.46 points or 0.68% to 4,793.23.

Asian equity markets ended mostly in green on Tuesday, though some investors stayed on the sidelines ahead of the US Federal Reserve's monetary policy announcement on Wednesday. The Fed's two-day meeting is widely expected to bring the first US interest rate hike this year, which could lure more capital away from emerging markets. Japanese shares ended higher, with support coming from likely buying by the Bank of Japan and as investors snapped up cheaper domestic demand-driven stocks. Further, Chinese shares ended marginally higher as better than expected November retail sales and factory output data encouraged bargain-hunting after the previous session's slump.