Indian markets settle with moderate gain; Sensex ends above 31,300 for first time

Indian stock markets, which appeared to be wandering on a directionless trajectory through the morning trades, witnessed some renewed buying interests in Consumer Durables and Realty counters during the noon session, which helped the equity indices to snap second straight session on a positive note. The gains were, however, capped as investors remained cautious ahead of the Reserve Bank of India (RBI)'s policy meeting, which begins tomorrow. Market is hoping that RBI may review its current stance of neutral to accommodative considering the slowdown in economic activity and consolidation in current & future outlook in inflation. Furthermore, HSBC's latest report indicated India's economic growth is expected to remain flat at 7.1% in current fiscal as investment is still weak and government spending might not be as high given the fiscal consolidation. According to the global financial services major, the GDP growth momentum is slowing since mid-2016 and this trend is expected to continue going forward.

Sentiments got a boost with the report that Services sector activity in India grew at the fastest pace in four months in May riding piggyback on higher work orders as companies inducted more people to cope with greater workloads. The Nikkei India Services Purchasing Managers' Index (PMI), which tracks services sector output on a monthly basis, rose from 50.2 in April to 52.2 in May. Some support also came with World Bank report indicating that successful demonetization will help in raising revenues on sustained basis as more and more people will come under the tax net. During 2016-17, India generated additional tax revenues as unreported cash identified both through the amnesty scheme and demonetisation were brought under the tax net. Meanwhile, shares of jewellery companies rose sharply today, following the government's announcement of GST rates on gold. The GST Council on Saturday announced that the rate on gold and gold jewellery would be at 3%, while the import duty of 10%, which will be over and above the 3%, remains unchanged. Currently, tax on gold and jewellery is at 2% and the current GST rate is slightly higher at 3%, but lower than the 5% rate that was expected.

On the global front, Asian markets ended the session mixed on Monday, as investors turned jittery after deadly attacks in London at the weekend and the potential impact on parliamentary elections scheduled for June 8, 2017. Prices of oil rose following reports that four Arab nations cut diplomatic ties to Qatar. Further, China's stocks declined, as sharp losses in financial firms offset news the securities regulator had cut the number of initial public offerings coming onto the market. China Securities Regulatory Commission (CSRC) approved on Friday only four IPOs to raise up to 1.5 billion yuan ($220.5 million), down from 7 IPOs in the past week. Japanese shares ended flat, keeping close to a 22-month high scaled at the end of last week as the yen's rise against the dollar stalled. Meanwhile, Europe markets were trading mostly weak, as investors eyed an upcoming monetary policy meeting from the European Central Bank (ECB).

Back home, the local equity benchmark started the session on cautious note, tracking mixed trade in other regional markets and disappointing US jobs data. The indices gained movement in late morning trade and surged around quarter percent, but weak opening of European markets and cautiousness ahead of the RBI’s monetary policy meet tomorrow, keep the indices in tight range for rest of the session. Finally, the NSE's 50-share broadly followed index Nifty got buttressed by around quarter percent to settle above the crucial 9,650 support level, while Bombay Stock Exchange's Sensitive Index-Sensex accumulated over thirty points and closed above the psychological 31,300 mark. The market breadth remained optimistic, as there were 1438 shares on the gaining side against 1237 shares on the losing side, while 189 shares remained unchanged.

Finally, the BSE Sensex gained 36.20 points or 0.12% to 31309.49, while the CNX Nifty was up by 21.60 points or 0.22% to 9,675.10. 

The BSE Sensex touched a high and a low of 31355.42 and 31198.22, respectively and there were 15 stocks on gainers side as against 15 stocks on the losers side on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.15%, while Small cap index was up by 0.65%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 5.81%, Realty up by 1.02%, Consumer Disc up by 1.00%, Capital Goods up by 0.80% and Telecom up by 0.60%, while Metal down by 0.56%, Utilities down by 0.26%, Power down by 0.06%, Healthcare down by 0.05% and PSU down by 0.01% were the top losing indices on BSE.

The top gainers on the Sensex were Bajaj Auto up by 1.92%, TCS up by 1.53%, Larsen & Toubro up by 1.15%, Axis Bank up by 1.02% and Adani Ports &Special up by 1.02%. On the flip side, Coal India down by 1.67%, GAIL India down by 1.02%, Infosys down by 0.95%, Lupin down by 0.79% and Dr. Reddy’s Lab down by 0.72% were the top losers.

Meanwhile, Government’s announcement of the demonetization of high-value notes seven months ago has received some support from the World Bank. The unilateral agency in its latest ‘India Development Report’ has said that in the long term, demonetization has potential to accelerate the formalization of the economy and will help in raising revenues on sustained basis as more & more people will come under the tax net.

In its exclusive section ‘India’s Great Currency Exchange’ of the report, the World Bank has stated that even if the initial impact of demonetization on banks was negative, the longer-term impact may be more positive if the new steady-state level of deposits is higher and usage of electronic payments increases. Besides, it has said that demonetization promotes a reallocation of resources from the informal to the formal economy.

The World Bank report is of the view that demonetisation has the potential to accelerate the formalisation of the economy, saying that formalization is ultimately a positive transformation that can lead to greater efficiency, adding that India's low aggregate productivity is in part due to the prevalence of a large number of informal unproductive firms. World Bank though said that India still needs to bring in complementary measures for ease of doing business to ensure that the new equilibrium of higher formalisation prevails.

While highlighting the country’s other complementary measures related to the ease of doing business, the report has said that the smooth implementation of GST will be another major complementary reform to promote formalization, as firms have a strong incentive to register with GST to obtain input tax credits.

The CNX Nifty traded in a range of 9,687.20 and 9,640.70. There were 33 stocks in green as against 18 stocks in red on the index.

The top gainers on Nifty were Indiabulls Housing Finance up by 3.46%, Yes Bank up by 2.67%, TCS up by 1.99%, IOC up by 1.84% and Bharti Infratel up by 1.57%. On the flip side, Coal India down by 1.58%, Ultratech Cement down by 1.43%, GAIL India down by 1.11%, Infosys down by 1.08% and Lupin down by 0.96% were the top losers.

The European markets were trading in red; UK’s FTSE 100 decreased 19.67 points or 0.26% to 7,527.96 and France’s CAC decreased 28.26 points or 0.53% to 5,315.15.

Asian equity markets made a mixed closing on Monday after a US jobs report failed to meet expectations and Islamic terrorism once again stuck the United Kingdom, killing at least seven people and injuring 48 more. Meanwhile, Oil prices rose on the back of news that Saudi Arabia, Bahrain, the United Arab Emirates and Egypt had severed diplomatic ties with Qatar. Saudi Arabia said it had cut ties with Qatar due to reasons related to terrorism. Chinese shares ended lower, with financials and healthcare stocks leading losses, after the China Securities Regulatory Commission allowed four companies to rise up to 1.5 billion yuan (about $220 million) via initial public offerings, despite the positive read from the May Caixin services PMI which rose to 52.8 from 51.5 in April. Japanese shares ended flat, keeping close to a 22-month high scaled at the end of last week as the yen's rise against the dollar stalled.