Benchmarks continue to trade in green; Power sector lead the rally

Indian benchmark equity indices continued to trade in green in the noon session on sustained buying by funds and retail investors. Sentiments remained optimistic with the Finance Ministry’s statement that the drive to transform India will continue in Budget 2017-18 to be unveiled by Finance Minister Arun Jaitley on February 1. Budget 2017 will be the fourth by the Modi government and will come amid expectations of tax incentives for individuals and a likely stimulus to revive a note ban-hit economy. Traders also took some support with President Pranab Mukherjee’s statement that demonetisation may have led to “temporary” slowdown in economy but it will bring more transparency in the system. Besides, data showing that foreign institutional investors made sizeable buying on Wednesday also buoyed sentiments. As per provisional figures, foreign institutional investors bought shares worth Rs 1378.81 crore, while domestic institutional investors sold shares worth Rs 383.03 crore.

On the global front, Asian markets were showing a negative trend on Friday, following the mixed cues from Wall Street. Investors are treading cautiously after the US-Mexico crisis deepened. Amid a dispute over who will pay for a wall on the US-Mexico border, Mexican President Enrique Pena Nieto pulled out of a planned meeting next week with US President Donald Trump. However, Japanese market extended its gains for a third straight day on the back of a weaker yen. Investors digested Japanese inflation data, which showed that core consumer prices fell in December for the tenth straight month. 

Back home, barring Realty, all the other BSE sectoral indices were trading in the green. Among them, Power index gained the most by 1.46 percent, followed by PSU 1.46 percent, Banking 1.36 percent and Oil & Gas 1.26 percent. In scrip specific development, Cholamandalam Investment & Finance Company gained after the company reported 10.37% rise in its consolidated net profit at Rs 163.38 crore for the quarter ended December 31, 2016, as compared to Rs 148.03 crore for the same quarter in the previous year. On the flip side, Oberoi Realty declined after the company reported 60.01% fall in its consolidated net profit at Rs 84.92 crore for the quarter ended December 31, 2016, as compared to Rs 212.34 crore for the same quarter in the previous year.

The market breadth remained optimistic, as there were 1532 shares on the gaining side against 880 shares on the losing side, while 173 shares remained unchanged.

The BSE Sensex is currently trading at 27952.51, up by 244.37 points or 0.88% after trading in a range of 27759.48 and 27969.48. There were 22 stocks advancing against 8 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 1.06%, while Small cap index up by 0.92%.

The top gaining sectoral indices on the BSE were Power up by 1.56%, Consumer Durables up by 1.46%, PSU up by 1.40%, Oil & Gas up by 1.24% and Bankex up by 1.23%, while Realty down by 0.01% was the sole losing index on BSE.

The top gainers on the Sensex were ICICI Bank up by 3.23%, Axis Bank up by 2.63%, GAIL India up by 2.14%, Mahindra & Mahindra up by 2.01% and HDFC up by 2.01%. On the flip side, Lupin down by 1.24%, Wipro down by 1.21%, Tata Motors down by 0.85%, Cipla down by 0.80% and Hindustan Unilever down by 0.66% were the top losers.

Meanwhile, Global ratings agency, Moody's Investors Service (Moody’s) has said that its positive outlook on India's Baa3 credit rating reflects their expectations of continued policy reforms which will allow balanced growth to support a sustainable reduction in the government's debt burden, even as it feels that the high debt level limits room to cut fiscal deficit quickly. It also cautioned that India's debt-to-GDP ratio at 68.6 percent is high compared to peers and the economy will return to the previous trend by mid-2017 after temporary effects of demonetisation fade away.

The agency said that India's general government debt-to-GDP ratio, at 68.6 percent, is high relative to peers. Therefore, room to reduce the deficit quickly is limited as wages and salaries account for about 50 percent of total expenditure with a large, once-in-10-years increase in central government compensation just implemented. As a result, fiscal policy decisions will need to be carefully calibrated, moving forward'.

Moody’s V-P Sovereign Risk Group William Foster said that persistent sizeable deficits imply that any reduction in India's debt burden will largely rely on robust nominal Gross Domestic Product (GDP) growth, which, in turn, is linked to a sustainable recovery in private investment. He also said that government capital expenditure that crowds in such private investment through infrastructure investment could support such growth. Foster on impact of demonetization said that in the medium term, it will strengthen India's institutional framework by reducing tax avoidance and corruption. He added that Demonetisation should also result in efficiency gains through greater formalisation of economic and financial activity, which would help broaden the tax base, enhance tax revenues and expand usage of the financial system.

The government aims to lower fiscal deficit to 3.5 percent of GDP in the present financial year, from 3.9 percent earlier. The 2017-18 budget, which is due on February 1, will outline the fiscal deficit target.

The CNX Nifty is currently trading at 8670.40, up by 67.65 points or 0.79% after trading in a range of 8606.90 and 8672.05. There were 40 stocks advancing against 11 stocks declining on the index.

The top gainers on Nifty were BHEL up by 3.87%, ICICI Bank up by 3.08%, Bank of Baroda up by 2.96%, Axis Bank up by 2.82% and Eicher Motors up by 2.33%. On the flip side, Bosch down by 2.24%, Wipro down by 1.27%, Lupin down by 1.26%, Kotak Mahindra Bank down by 1.18% and Tata Motors down by 1.01% were the top losers.

Asian markets were trading mostly in red; Hang Seng decreased 0.06%, Jakarta Composite slipped 0.1% and FTSE Bursa Malaysia KLCI was down by 0.35%. On the flip side, Nikkei 225 was up by 0.2%.