Indian benchmarks continue to trade in positive terrain

The local equity markets continue to remain in positive terrain in noon session on account of sustained buying by retail and domestic institutional investors and covering up of pending short positions ahead of February series F&O expiry later today. Sentiments remained upbeat with International Monetary Fund (IMF) assessment report that the adoption of the GST could help raise India's medium-term GDP growth to over eight per cent and create a single national market for enhancing the efficiency of the movement of goods and services. Noting that India's tax revenue-to-GDP ratio (at around 17 and a half per cent) remains considerably below than its emerging market peers, the IMF said the implementation of a robust GST should be a key priority given its growth-enhancing effects. Adding optimism among market participants, RBI Governor Urjit Patel said faster remonetisation and return of discretionary consumer demand will push economic activity in the latter part the fiscal. Patel, during the two-day Monetary Policy Committee meeting on February 7-8, also said that shifting monetary policy stance from accommodative to neutral will provide sufficient flexibility to move the policy rate in either direction. However, gains remained capped with the SBI’s report that the growth estimate in the country’s economic output or gross domestic product (GDP) may be scaled down to less than 6% for the FY’17 as the impact of demonetisation hurt consumption and output. CSO is going to release Q3 F17 GDP estimate on February 28, 2017. The Q3 estimates will be very critical as they cover the two-month period of demonetisation and might give the glimpses of what happened in the economy during those two months. Furthermore, investors remained cautious with report that India’s corporate debt repayment rate is abysmally low- around, only 25.7 cents to a dollar loaned (or Rs 17 on Rs 67 lent) ever returns to the lender after years of protracted recovery proceedings. Indian banks are staring at a bad-debt accumulation of Rs 6.68 lakh crore. Furthermore, the existing legal and reparation infrastructure - such as debt recovery tribunals (DRTs) and SARFAESI Act - is inadequate for handling the volume of recovery cases.

On the global front, Asian markets were trading mostly lower on Thursday, following the mixed cues overnight from Wall Street after minutes of the Federal Reserve's latest monetary policy meeting said it might be appropriate to raise interest rates again ‘fairly soon’ if the data is in line or stronger than expectations. In commodities, oil prices gained following American Petroleum Institute data showing a surprise drop in US crude stocks last week. 

Back home, stocks from Telecom, IT and Consumer Durables counters were supporting the markets’ uptrend, while those from Energy, Power and Utilities counters were adding to the underlying cautious undertone. In scrip specific development, Bharti Airtel surged after the company entered into a definitive agreement with Telenor South Asia Investments (Telenor) to acquire Telenor (India) Communications (Telenor India). On the other hand, Aurobindo Pharma declined after the company’s US arm is recalling 47,040 bottles of Venlafaxine Hydrochloride extended release capsules, manufactured by the Hyderabad-based firm, from the American market.

The market breadth remained optimistic, as there were 1277 shares on the gaining side against 1128 shares on the losing side, while 185 shares remained unchanged.

The BSE Sensex is currently trading at 28987.08, up by 122.37 points or 0.42% after trading in a range of 28904.34 and 28989.65. There were 22 stocks advancing against 7 stocks declining on the index, while one stock remained unchanged.

The broader indices were trading in green; the BSE Mid cap index was up by 0.47%, while Small cap index up by 0.40%.

The top gaining sectoral indices on the BSE were Telecom up by 3.63%, TECK up by 1.82%, IT up by 1.52%, Consumer Durables up by 1.13% and Realty up by 0.73%, while Energy down by 0.26%, Power down by 0.10% and Utilities down by 0.04% were the few losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 4.79%, TCS up by 1.97%, Infosys up by 1.83%, Sun Pharma up by 1.39% and Wipro up by 0.87%. On the flip side, Reliance Industries down by 1.00%, ICICI Bank down by 0.73%, NTPC down by 0.72%, Axis Bank down by 0.67% and Power Grid down by 0.45% were the top losers.

Meanwhile, International Monetary Fund (IMF), in its annual report, has said that India’s gross domestic product (GDP) is likely to slow to 6.6 percent in the financial year 2016-17, then rebound to 7.2 per cent in FY 2017-18, due to transitory disruptions, mainly to private consumption, caused by the government’s demonetisation drive. The report also said that note ban would have only short term impact on the economy and in the next few years it would bounce back to its projected growth of more than eight per cent. It noted that India's economy grew at 7.6 per cent in 2015-16. 

The report pointed that the post-November 8, 2016 cash shortages and payment disruptions caused by the currency exchange initiative taken by government have undermined consumption and business activity, posing a new challenge to sustaining the growth momentum. It also noted that tailwinds from a favorable monsoon, low oil prices and continued progress in resolving supply-side bottlenecks and robust consumer confidence will support near-term growth as cash shortages ease. Report further said that the country’s investment recovery is likely to remain modest and uneven across sectors, as corporate de-leveraging takes place and industrial capacity utilisation picks up.

On the external front, IMF said that despite the reduced imbalances and strengthened reserve buffers, the impact from global financial market volatility could be disruptive, including from US monetary policy normalization or weaker-than-expected global growth. The IMF suggested continued vigilance to potential domestic and external shocks and urged the authorities to further advance economic and structural reforms to address supply bottlenecks, raise potential output, create jobs and ensure inclusive growth.

The CNX Nifty is currently trading at 8964.05, up by 37.15 points or 0.42% after trading in a range of 8935.40 and 8964.05. There were 37 stocks advancing against 14 stocks declining on the index.

The top gainers on Nifty were Idea Cellular up by 5.73%, Bharti Airtel up by 4.70%, Infosys up by 1.99%, TCS up by 1.91% and Hindalco up by 1.58%. On the flip side, Grasim Industries down by 1.01%, Reliance Industries down by 0.94%, Axis Bank down by 0.89%, Eicher Motors down by 0.87% and ICICI Bank down by 0.82% were the top losers.

Most of the Asian markets were trading in red; Hang Seng declined 0.32%, Nikkei 225 decreased 0.25%, Shanghai Composite shed 0.34%, KOSPI Index declined 0.03%, Taiwan Weighted slipped 0.1% and FTSE Bursa Malaysia KLCI was down by 0.04%. On the flip side, Jakarta Composite was up by 0.14%.