Benchmarks make gap-up opening; Nifty reclaims 8,800 level

Indian equity benchmarks have made a gap-up opening and are trading with traction in early deals, with frontline gauges recapturing their crucial 28,400 (Sensex) and 8,800 (Nifty) levels. Sentiments remained up-beat with Reserve Bank of India’s governor’s statement that there is further scope for banks to reduce lending rates as the Reserve Bank has already brought down its policy rates by 175 basis points since January 2015. Traders also took some encouragement with reports that foreign direct investment into the country surged by 60 percent to $ 4.68 billion in November 2016, compared to $2.93 billion in November 2015. Market participants overlooked report that RBI has cut the economic growth forecast to 6.9 percent for the current fiscal from 7.1 percent estimated.

On the global front, Asian markets were trading mostly in green at this point of time despite political risks in Europe and the US. The US markets made a mixed closing in last session after showing a lackluster trade through the day, as traders seemed reluctant to make significant amid another relatively quiet day on the U.S. economic front, though the tech-heavy Nasdaq reached a new record closing high.

Back home, there was broad based buying witnessed in the markets and apart from the blue chips, the broader markets too participated strongly in the rally. The market breadth remained in favour of advances, as there were 1,430 shares on the gaining side against 632 shares on the losing side while 88 shares remain unchanged.

The BSE Sensex is currently trading at 28412.92, up by 123.00 points or 0.43% after trading in a range of 28348.50 and 28469.48. There were 21 stocks advancing against 9 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.40%, while Small cap index was up by 0.71%.

The top gaining sectoral indices on the BSE were IT up by 0.84%, TECK up by 0.75%, Realty up by 0.71%, Power up by 0.70% and Bankex up by 0.44%, while Metal down by 0.45% was the sole losing index on the BSE.

The top gainers on the Sensex were Power Grid up by 1.44%, HDFC up by 1.23%, Lupin up by 1.04%, TCS up by 1.01% and Hero MotoCorp was up by 0.95%. On the flip side, Tata Steel down by 1.53%, Coal India down by 0.37%, Hindustan Unilever down by 0.37%, Maruti Suzuki down by 0.34% and Cipla was down by 0.31% were the top losers.

Meanwhile, the Monetary Policy Committee (MPC) of the RBI, headed by Urjit Patel, unanimously decided to hold the key repo rate at 6.25 percent in its sixth bi-monthly policy review of the financial year 2016-17. Accordingly, the reverse repo rate at which it absorbs excess liquidity was retained at 5.75 percent, the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent. Importantly, the committee said that it decided to change the stance from accommodative to neutral, while keeping the policy rate on hold to assess how the transitory effects of demonetisation on inflation and the output gap play out.

The Reserve Bank of India (RBI) has said that all the six members of the MPC voted in favour of the decision. It also said that the decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving consumer price index (CPI) inflation at 5 percent by Q4 of 2016-17 and the medium-term target of 4 percent within a band of +/- 2 percent, while supporting growth. The MPC said it is committed to bringing headline inflation closer to 4.0 percent on a durable basis and in a calibrated manner and this requires further significant decline in inflation expectations, especially since the services component of inflation that is sensitive to wage movements has been sticky.

Talking about growth, RBI said that growth is expected to recover sharply in FY18. It said this can be triggered by revival in discretionary demand held back by demonetisation; pick-up in economic activity in cash-intensive sectors such as retail trade, hotels and restaurants, and transportation, as well as in the unorganised sector; and pick-up in both consumption and investment demand. RBI revised down its growth projection to 6.9 percent for FY 2016-17 from 7.1 percent estimated earlier, but added that it will pick up sharply to 7.4 percent in FY 2017-18. It also said that the current account deficit (CAD) is likely to remain muted and below 1 percent of GDP in 2016-17.

The central bank further noted that the environment for timely transmission of policy rates to banks lending rates will be considerably improved if (i) the banking sector’s non-performing assets (NPAs) are resolved more quickly and efficiently; (ii) recapitalisation of the banking sector is hastened; and, (iii) the formula for adjustments in the interest rates on small savings schemes to changes in yields on government securities of corresponding maturity is fully implemented.

The CNX Nifty is currently trading at 8802.00, up by 32.95 points or 0.38% after trading in a range of 8793.15 and 8821.40. There were 33 stocks advancing against 18 stocks declining on the index.

The top gainers on Nifty were Power Grid up by 1.44%, Aurobindo Pharma up by 1.41%, Tech Mahindra up by 1.36%, Kotak Mahindra Bank up by 1.25% and HDFC was up by 1.09%. On the flip side, Tata Steel down by 1.52%, Bank of Baroda down by 1.52%, Hindalco down by 1.27%, Eicher Motors down by 0.65% and Grasim Industries was down by 0.62% were the top losers.

Asian markets were trading mostly in green; KOSPI Index gained 5.81 points or 0.28% to 2,070.89, Shanghai Composite rose 11.86 points or 0.37% to 3,178.84, Jakarta Composite increased 21.99 points or 0.41% to 5,383.07, Taiwan Weighted advanced 40.54 points or 0.42% to 9,583.79 and Hang Seng was up by 90.78 points or 0.39% to 23,575.91.

On the flip side, Nikkei 225 decreased 75.13 points or 0.4% to 18,932.47 and FTSE Bursa Malaysia KLCI was down by 0.34 points or 0.02% to 1,688.50.