Benchmarks trade with traction in early deals; Sensex reclaims 26,700 mark

Paring all of their initial losses, Indian equity benchmarks have entered into green and are trading with traction in early deals on Thursday, as traders took some encouragement with Prime Minister Narendra Modi’s statement that presently, cleaning the system from black money and corruption is very high on his agenda and added that India is currently witnessing an economic transformation. However, gains remained capped as some concern came with global rating agency Standard & Poor's statement that demonetisation has cast a shadow over the RBI's competence and independence, it further said that slow replacement of the abolished bills has sparked a shortage of cash that has hit large parts of the economy.

On the global front, Asian markets trading in red at this point of time, as the US Federal Reserve raised interest rates by quarter a point on late Wednesday and signalled a faster pace of increases in 2017 and 2018. The US markets made a soft closing in the last session as trade remained volatile, as investors grappled with the prospect of a faster pace of rate increases in 2017 than had been previously forecasted.

Back home, the market breadth indicating the overall health of the market remained strong, with 1219 shares gaining and 561 shares declining, while a total of 86 shares were unchanged. On the sectoral front, shares of public sector oil marketing companies (OMCs) edged higher, as the global crude prices witnessed a sharp decline overnight. Stocks related to ports and shipping sector too remained in focus, as the Cabinet has approved the Major Port Authorities Act, 2016, which seeks to infuse professionalism in and increase the autonomy of the 12 port boards and, more importantly, allow future public-private partnership operators to fix tariffs based on market conditions and only notify the port authority.

The BSE Sensex is currently trading at 26701.11, up by 98.27 points or 0.37% after trading in a range of 26407.58 and 26726.66. There were 22 stocks advancing against 8 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.62%, while Small cap index was up by 0.72%.

The top gaining sectoral indices on the BSE were IT up by 1.68%, TECK up by 1.26%, Realty up by 1.18%, PSU up by 0.62% and Power was up by 0.55%, while Telecom down by 0.35%, Healthcare down by 0.16% and FMCG was down by 0.04% were the few losing indices on BSE.

The top gainers on the Sensex were TCS up by 2.27%, Adani Ports &Special up by 1.96%, Infosys up by 1.88%, SBI up by 1.41% and Mahindra & Mahindra up by 1.32%. On the flip side, Sun Pharma down by 1.63%, ONGC down by 0.83%, Bharti Airtel down by 0.79%, Tata Motors down by 0.48% and Hindustan Unilever down by 0.37% were the top losers.

Meanwhile, global rating agency S&P in its latest report has said that as per it’s base case scenario, the disruption from demonetisation should be short-lived with demand revival in the next one to two quarters, limiting the impact on Indian banks and corporate and in the long run, demonetisation and the GST could result in a wider tax base and greater participation in the formal economy.

The rating agency expects both demonetisation and the goods and services tax (GST) to adversely impact some sectors of the economy in the short run but have long-term benefits with demand revival in the next one to two quarters, limiting the impact on Indian banks and corporates. It said that both GST and demonetization are likely to have a higher disruptive impact on the informal, rural, and cash-based segments of the economy.  S&P had recently revised its growth forecast for India to 6.9% in 2016-17 from 7.9% earlier.

The report suggested that the extent of the impact from demonetization depended on how quickly the government was able to increase its supply of new notes, the duration of the current cash crunch and the pace of the shift in the Indian economy to “less-cash” transactions.

It also cautioned that in a less-likely downside scenario, the shock of demonetization will not be absorbed within the next few months and the economic disruption will spill over into fiscal 2018, and potentially coincide with the introduction of the GST. Economic growth will stay lower for longer, raising stress levels on corporates, banks, and other financial institutions; although the sovereign rating is likely to remain resilient.

The CNX Nifty is currently trading at 8214.50, up by 32.05 points or 0.39% after trading in a range of 8121.95 and 8223.15. There were 35 stocks advancing against 16 stocks declining on the index.

The top gainers on Nifty were TCS up by 2.32%, Adani Ports & Special up by 1.85%, Infosys up by 1.80%, HCL Tech up by 1.58% and Mahindra & Mahindra up by 1.53%. On the flip side, Sun Pharma down by 1.52%, Bharti Airtel down by 0.87%, ONGC down by 0.83%, Tata Motors down by 0.49% and Ultratech Cement down by 0.44% were the top losers.

Asian markets were trading in red; Hang Seng declined 380.24 points or 1.69% to 22,076.38, Taiwan Weighted decreased 31.78 points or 0.34% to 9,336.74, Nikkei 225 slipped 24.13 points or 0.13% to 19,229.48, Shanghai Composite shed 9.22 points or 0.29% to 3,131.31, Jakarta Composite dipped 7.73 points or 0.15% to 5,255.08, FTSE Bursa Malaysia KLCI dropped 7.39 points or 0.45% to 1,635.90 and KOSPI Index was down by 0.95 points or 0.05% to 2,035.92.