Late surge bolsters benchmarks to snap January F&O series near 3-month high

The January series expiry of Futures and Options turned out to be jubilant event for the Indian frontline indices, which finished the session with strong gains of over a percentage point on account of fresh buying ahead Union Budget next week. Hefty short covering in the dying hours ahead of the series expiry stoked the benchmarks to settle near the high point of the day. Sentiments remained upbeat with report that Donald Trump and Narendra Modi have discussed opportunities to strengthen the partnership between the United States and India in broad areas such as the economy and defense. Strong earnings from lenders such as HDFC Bank and Kotak Mahindra Bank raised optimism that the impact of note ban could be less than expected. Kotak Mahindra Bank posted a 34% Y-O-Y increase in its consolidated net profit at Rs 1266.59 crore for the quarter ended December 2016, while HDFC Bank reported 15.15% rise in its net profit at Rs 3865.33 crore for the quarter as compared to Rs 3356.84 crore for the same quarter in the previous year. Some support also came with the repot that Germany is set to finance long-term strategic projects in India particularly in the railway, infrastructure and smart cities sectors as part of efforts to support India's growth story. Meanwhile, the markets paid no heed to a  report that demonetisation has stymied India's GDP growth and the October-December quarter show is likely to be around 6%, while for January-March it could climb down to 5.7%. According to the financial services major, the consumption and services, which were the fastest growing segments pre-demonetisation, were the worst-hit. Meanwhile, credit ratings agency India Ratings in its report said most Indian companies with overseas debt have not hedged enough of their foreign currency risk, making them vulnerable to any sharp movements in the rupee. The study of 100 companies holding 19.5 trillion rupees ($286.30 billion) of debt abroad as of March 2016, showed 54 of them, with 14.5 trillion exposure, were vulnerable given only 35 percent of their balance sheets were hedged.

On the global front, all the major Asian equity indices settled in the green zone with Japan’s benchmark Nikkei 225 grabbing the top gainer’s position amid a broad-based rally across all sectors after official data showed Japan's exports rose for the first time in 15 months in December, helping Prime Minister Shinzo Abe's efforts to revive the economy. Furthermore, Chinese markets too ended higher despite the country's central bank increasing interest rates on medium-term loans ahead of Lunar New Year public holidays. Meanwhile, European equities started the session on a positive note as France's CAC advanced 0.65%, Britain's FTSE 100 climbed 0.47% and Germany's DAX surged 0.72%.

Back home, the local benchmarks started the session on firm note amid strong cues from Asian markets following gains in Wall Street as investors welcomed US President Donald Trump’s growth initiatives. Thereafter, the frontline indices slowly but steadily started gathering steam and surged by over half a percent by noon trades. The bourses further capitalized on the momentum and spurted in afternoon trades on the back of broad based bottom fishing in undervalued stocks. Finally, the NSE’s 50-share broadly followed index Nifty, got buttressed by close to one and half percent to settle above the crucial 8,600 support level while Bombay Stock Exchange’s Sensitive Index-Sensex accumulated over three hundred points and closed above the psychological 27,700 mark. Moreover, the broader markets too participated in the rally and closed with gains of around a percent. The market breadth remained optimistic, as there were 1512 shares on the gaining side against 1234 shares on the losing side while 206 shares remained unchanged.

Finally, the BSE Sensex gained 332.56 points or 1.21% to 27708.14, while the CNX Nifty was up by 126.95 points or 1.5% to 8,602.75. 

The BSE Sensex touched a high and a low of 27736.83 and 27439.68, respectively and there were 23 stocks on gainers side against 7 stocks on the losers side on the index.

The broader indices ended in green; the BSE Mid cap index jumped 0.90%, while Small cap index was up by 0.87%.

The top gaining sectoral indices on the BSE were Bankex up by 2.33%, Consumer Durables up by 2.26%, Oil & Gas up by 1.75%, PSU up by 1.64% and Capital Goods up by 1.53%, while IT down by 0.23%, TECK down by 0.08% and Power down by 0.05% were the only losing indices on BSE.

The top gainers on the Sensex were HDFC up by 4.31%, Adani Ports & SEZ up by 3.61%, Hero MotoCorp up by 3.42%, Axis Bank up by 2.76% and Coal India up by 2.13%. On the flip side, Wipro down by 1.59%, Bharti Airtel down by 1.52%, Reliance Industries down by 1.06%, Sun Pharma down by 0.94% and Infosys down by 0.89% were the top losers.

Meanwhile, in order to provide some relief to foreign investors, the Central Board of Direct Taxes has said that income arising from transfer of unlisted shares would not be taxed in the case of certain categories of Alternative Investment Funds (AIFs) registered with Securities and Exchange Board of India (SEBI). The tax department has also said that such exemption would be applicable for SEBI registered Category I and II AIFs only.

Category-I AIFs are funds that receive incentives from the government, SEBI or other regulators and this include Venture Capital Funds, SME Funds, Social Venture Funds and Infrastructure Funds. On the other hand, Category-II entities can put in their money anywhere in any combination but are prohibited from raising debt, excepting for meeting their day-to-day operational requirements. Primarily, SEBI registered Category I and II AIFs invest in unlisted shares of ventures, many of which are new set ups or start ups. Therefore, to protect the interest of investors, some form of control and management of the underlying business many be essential to be exercised by such AIFs.

Meanwhile, Indian Private Equity and Venture Capital Association (IVCA) Chairman Gopal Srinivasan has said that before the upcoming budget the investor community welcomes this clarification. He also said that great cooperation between the industry and government to pursue the goals of ease of doing business and manage in India.

The CNX Nifty traded in a range of 8,612.60 and 8,493.95. There were 40 stocks in green against 10 stocks in red on the index, while one stock remained unchanged.

The top gainers on Nifty were Kotak Mahindra Bank up by 6.80%, Bosch up by 4.62%, BPCL up by 4.51%, Bank of Baroda up by 4.33% and Adani Ports and Special Economic Zone up by 3.87%. On the flip side, Wipro down by 1.35%, Bharti Airtel down by 1.33%, HCL Tech down by 1.20%, Infosys down by 0.95% and Aurobindo Pharma down by 0.93% were the top losers.

The European markets were trading in green; UK’s FTSE 100 increased 17.21 points or 0.24% to 7,167.55, Germany’s DAX increased 130.55 points or 1.13% to 11,725.49 and France’s CAC increased 45.33 points or 0.94% to 4,875.36.

Asian equity markets ended mostly in green on Wednesday, with positive data out of Japan and South Korea, as well as overnight gains in the US on optimism for economic growth supporting underlying sentiment. Japanese shares rose sharply amid a broad-based rally across all sectors after official data showed Japan's exports rose for the first time in 15 months in December, helping Prime Minister Shinzo Abe's efforts to revive the economy. Further, Chinese shares ended higher despite the country's central bank increasing interest rates on medium-term loans ahead of Lunar New Year public holidays. Taiwan Stock Exchange was closed on account of ‘Non Trading Day’.