Post Session: Quick Review

Indian equity benchmarks traded in green for most part of the day and ended the session with gain of around three tenth of a percent. Nifty Bank touched record high after RBI kept repo rate unchanged, while IT was under pressure amid report of Infosys spokesperson saying that the company’s clients were asking for 20-30 per cent cut in prices for projects. The equity benchmarks made a positive start and traded in fine fettle in early deals taking support from NITI Aayog CEO Amitabh Kant’s statement that the Goods and Services Tax (GST), to be rolled out next month as the biggest tax reform since independence, will help India achieve 9% growth rate. He said GST will simplify India’s taxation system and help deal with tax evasion. Some support also came after IMD upgraded its monsoon forecast from 96% forecast to 98%. It has also forecast normal rainfall during July (96%) and August (99%), key months for the crucial kharif season. The updated forecast of 98% of normal rainfall will cheer farmers and policy makers and help to control food inflation, which is a key input in the Reserve Bank of India’s stance towards interest rates. Separately, as per a private report, with large residential and non- residential projects in the pipeline, the Indian infrastructure market is forecast to overtake Japan’s in next five years. The report enlightened that although demonetization had a negative impact on construction activity in 2016 as most construction workers’ wages were paid in cash, it believes that robust growth will return in 2017 as work resumes on the large pipeline of infrastructure, residential and non-residential projects in the country.

Meanwhile, the Reserve Bank of India (RBI) has held on to the policy rate at 6.25 percent in its monetary policy review on June 7, 2017, the second bi-monthly review for the financial year 2017-18, keeping in line with the street forecast. Statutory liquidity ratio (SLR) was cut by 50 basis points to 20 per cent starting June 24, in order to provide more liquidity to banks. The MPC noted that incoming data suggest that the transitory effects of demonetization have lingered on in price formations relating to salient food items, entangled with excess supply conditions with respect to fruits vegetables, pulses, and cereals. The central bank said that it focused on keeping CPI inflation at 4% on a durable basis. It sees inflation in 2-3.5 percent range in the first half of the ongoing financial year and 3.5-4.5 percent in the second half. However, the central bank cautioned against rush of farm loan waivers, warning of a risk on fiscal slippages and inflationary spillovers.

On the global front, Asian markets closed mixed, as the street cautiously awaited a trio of potential major risk events on Thursday, including the UK election, a European Central bank review and former FBI director James Comey’s testimony to the Senate stateside. European stock markets were trading mostly in green ahead of voting in the UK’s general election. German factory orders fell to a seasonally adjusted -2.1%, from 1.1% in the preceding month whose figure was revised up from 1.0%.

Back home, shares of IT majors like Infosys, TCS, Wipro, Tech Mahindra and HCL Technologies closed in red amid report that clients are asking IT services companies to carry out the same projects at prices which are 20-30 percent lower than before. The slowdown in tech spending is expected to continue for the next 12-18 months as clients are not reinvesting in new technologies at a rapid pace. This is putting immense pressure on revenue growth of existing IT companies.

The BSE Sensex ended at 31287.01, up by 96.45 points or 0.31% after trading in a range of 31172.98 and 31346.99. There were 21 stocks advancing against 9 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index was up by 0.57%, while Small cap index was up by 0.76%. (Provisional)

The top gaining sectoral indices on the BSE were Metal up by 0.99%, Healthcare up by 0.99%, Energy up by 0.92%, Bankex up by 0.87% and FMCG up by 0.71%, while IT down by 2.03% and TECK down by 1.61% were the only losing indices on BSE. (Provisional)

The top gainers on the Sensex were Reliance Industries up by 2.05%, ICICI Bank up by 1.99%, Mahindra & Mahindra up by 1.40%, SBI up by 1.34% and Hindustan Unilever up by 1.30%. (Provisional)

On the flip side, TCS down by 2.85%, Wipro down by 2.02%, Infosys down by 1.99%, Adani Ports & Special Economic Zone down by 0.70% and Dr. Reddy’s Lab down by 0.59% were the top losers. (Provisional)

Meanwhile, the government’s various initiatives to improve the country’s infrastructure is likely to result in Indian infrastructure market witnessing growth in future, with increasing demand for investment in roads, railways, ports, power transmission and water utilities. The Fitch group company, BMI Research in its latest report has forecasted that the infrastructure market of India, which is the third-largest in Asia may surpass Japan’s market in nominal value terms in next five years.

The research agency has said that even if the construction activity got hampered due to a negative impact of demonetization, robust growth will return in 2017 as work resumes on the large pipeline of infrastructure, residential and non-residential projects in the country. Though, it also stated that the industry remains immensely challenging on account of delay and cost overrun of infrastructure projects and remains relatively risky owing to the slow pace of reform.

BMI Research pointed that the government has made some progress in addressing underlying issues in the sector, such as streamlining the land-acquisition process in some states. Furthermore, it said that the several programmes aimed at improving logistics, stimulating investment in manufacturing and building affordable housing will contribute to growth in the construction industry over the next 10 years, noting that reforms to foreign investment laws under Make in India initiative have made it easier for international companies to invest and participate in India's infrastructure projects.

The CNX Nifty ended at 9662.15, up by 25.00 points or 0.26% after trading in a range of 9630.55 and 9678.55. There were 37 stocks advancing against 14 stocks declining on the index. (Provisional)

The top gainers on Nifty were Aurobindo Pharma up by 2.20%, Reliance Industries up by 2.07%, ICICI Bank up by 1.88%, Eicher Motors up by 1.82% and Vedanta up by 1.66%. (Provisional)

On the flip side, TCS down by 3.01%, Tech Mahindra down by 2.12%, Wipro down by 2.05%, Infosys down by 2.05% and BPCL down by 1.17% were the top losers. (Provisional)

The European markets were trading mostly in green; UK’s FTSE 100 increased 12.94 points or 0.17% to 7,537.89, France’s CAC increased 20.4 points or 0.39% to 5,289.62, while Germany’s DAX decreased 11.49 points or 0.09% to 12,678.63.

Asian equity markets made a mixed closing on Wednesday as investors adopted a cautious stance ahead of the UK elections, the ECB policy meeting and former FBI Director James Comey's congressional testimony- all scheduled for Thursday. Japanese shares ended flat in thin trade as the dollar wallowed near a six-week low against the yen. Meanwhile, Chinese shares rallied after several companies called on employees to buy shares and the People's Bank of China injected liquidity into the system in an attempt to ease a seasonal liquidity strain.