Indian benchmarks end higher on final day of 2016

Indian benchmark indices showcased courageous performance and went on to outclass indices around the world by vivaciously rallying around a percent in the session and settling above the psychological 8,150 (Nifty) and 26,600 (Sensex) levels. Sentiments remained up-beat with Finance Minister Arun Jaitley’s statement that the impact of demonetisation is clearly visible with tax collection figures seeing double-digit growth. He had said that there has been a 26.2 per cent increase in central indirect tax collection till November 30, while till December 19, direct tax collection increase has been to the extent of 14.4 per cent against a growth rate of only 8.3 per cent previous year. Adding optimism among investors, Agriculture Minister Radha Mohan Singh said that the growth in agriculture and allied sectors will be higher during this fiscal as the country is likely to harvest bumper crop buoyed by good rains. The Minister also assurance that the Centre will procure pulses and other crops if rates fall below the minimum support price (MSP) level. Furthermore, Union government has charted out a roadmap for the early completion of 99 irrigation projects under the Accelerated Irrigation Benefits Programme (AIBP) and Pradhan Mantri Krishi Sinchayee Yojana (PMKSY). Some support also came with the Reserve Bank of India (RBI) easing norms for working capital lending to micro and small enterprises (MSEs) on difficulties faced by them, as a result of the sudden withdrawal of legal tender status of high-value currency notes. Meanwhile, market participants give littlie importance to RBI’s Financial Stability Report, which indicated a sharp rise in the non-performing assets (NPAs) of banks as “the banking stability indicator shows that the risks to the banking sector remained elevated due to continuous deterioration in asset quality, low profitability and liquidity”. The stress test indicated that under the baseline scenario, the GNPA ratio may increase from 9.1% in September 2016 to 9.8% by March 2017 and further to 10.1% by March 2018.

On the global front, Asian markets ended mostly higher on Friday, despite the modest losses overnight on Wall Street. Trading volumes remain thin in the absence of any market-moving news. China’s stock exchange edge higher, taking cues from a survey by the People’s Bank of China which showed that business confidence among entrepreneurs in China rose for the third straight quarter in October-December. However, Japan's Nikkei share average slipped as investors took profits from the recent gains. Meanwhile, European stocks fell in thin trading, poised to end the year with their first annual decline since 2011 when the sovereign-debt crisis peaked.

Back home, the local benchmark got off to a positive start in the morning trade as investors were largely influenced by the supportive leads from Asian markets. The frontline indices soon gathered momentum and traded with over half a percent gains through the morning session of trade. 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 shops off the intraday highs. Finally, the NSE’s 50-share broadly followed index Nifty, got buttressed by over a percent to settle above the crucial 8,150 support level, while Bombay Stock Exchange’s Sensitive Index-Sensex accumulated over two hundred and fifty points and closed above the psychological 26,600 mark. Moreover, the broader markets too participated in the rally and closed with gains of around a percent. On the sectoral front, all sectoral indices ended the day in green with FMCG, Power, Realty and IT stocks stealing the show on the last session of 2016. Sugar stocks like Shree Renuka Sugars, Bajaj Hindusthan Sugar and Balrampur Chini Mills have gained traction on report that the Central government doesn’t have immediate plans to lower import duties on sugar as it did with wheat.

The market breadth remained optimistic as there were 1758 shares on the gaining side against 860 shares on the losing side, while 195 shares remained unchanged.

Finally, the BSE Sensex gained 260.31 points or 0.99% to 26626.46, while the CNX Nifty rose 82.20 points or 1.01% to 8,185.80. 

The BSE Sensex touched a high and a low of 26678.60 and 26406.53, respectively and there were 26 stocks on gainers side against 4 stocks on the losers side on the index.

The broader indices made a positive closing; the BSE Mid cap index ended higher 1.07%, while Small cap index was up by 0.77%.

The top gaining sectoral indices on the BSE were FMCG up by 1.67%, Power up by 1.30%, Realty up by 1.10%, IT up by 1.09% and TECK up by 1.08%, while there were no losers on BSE sectoral front.

The top gainers on the Sensex were GAIL India up by 3.07%, Sun Pharma up by 2.59%, ITC up by 2.31%, Power Grid up by 2.14% and Infosys up by 1.67%. On the flip side, Bajaj Auto down by 0.81%, Tata Steel down by 0.34%, Dr. Reddys Lab down by 0.24% and ONGC down by 0.05% were the top losers.

Meanwhile, releasing its Financial Stability Report (FSR) December 2016, the Reserve Bank of India (RBI) has said that Income disclosure schemes (IDS) will help the government in achieving its fiscal deficit target of 3.5 percent for 2016-17, as additional collections will compensate for the lower revenues through disinvestment and telecom spectrum auctions.

The report said that while lower-than-expected revenues through disinvestments and telecom spectrum auctions may stretch the fiscal deficit, but the additional revenue from measures such as IDS may compensate for this. Though, report also said that the short-term impact of the measures undertaken to contain the shadow economy and tax evasion, both in terms of changes in Gross Domestic Product (GDP) and revenues, is difficult to capture, these measures are expected to have a positive impact both on GDP and fiscal deficit in the long run.

As per the report, in the second quarter of the FY17, the current account deficit has narrowed to 0.6 percent as compared to 1.1 percent of GDP in the previous financial year. It also said that external debt, both in absolute and relative terms (as ratio to GDP), has declined and the foreign exchange reserves now cover a larger portion of total external debt and about 11 months of imports. It added that the country's external sector vulnerability indicators improved in the first quarter of the FY17. The report further said that one of the potential sources of stress in the country's balance of payments is decline in remittances. Globally, remittance flows are expected to increase only marginally in 2016 and the projections suggest a decline in remittances only in the case of India among the top five remittance receiving countries. 

The CNX Nifty traded in a range of 8,197.00 and 8,114.75. There were 43 stocks in green against 8 stocks in red on the index.

The top gainers on Nifty were Aurobindo Pharma up by 3.21%, Bosch up by 2.66%, GAIL India up by 2.58%, Sun Pharma up by 2.29% and ITC up by 2.03%. On the flip side, BPCL down by 0.89%, Bajaj Auto down by 0.66%, ONGC down by 0.42%, Tata Steel down by 0.34% and Dr. Reddys Lab down by 0.33% were the top losers.

The European markets were trading in red; UK’s FTSE 100 decreased 25.4 points or 0.36% to 7,094.86, Germany’s DAX decreased 15.29 points or 0.13% to 11,435.76 and France’s CAC decreased 11.41 points or 0.24% to 4,827.06.

Asian equity markets ended mostly in green on Friday, with Chinese stocks rose slightly on the last trading day of 2016, but the blue-chip index ended the year lower despite signs of resilience in the world's second-largest economy. Meanwhile, Japanese shares dropped to a three-week low in choppy trade as investors took profits from the recent gains on the last trading day of the year, but the market managed to eke out marginal gains for the year.