Indian benchmarks end higher; RBI keeps key interest rate unchanged

Indian equity indices concluded the season on a positive note on Wednesday, as investor turned optimistic after Reserve Bank of India (RBI) used a less hawkish tone and reduced the Statutory Liquidity Ratio (SLR) in its second bi-monthly monetary policy for financial year 2017-18. The slashed in SLR or the percentage of deposits that banks have to park in government securities by 0.5% to 20% will allow banks to increased lending. RBI left repo and reverse repo rates unchanged at 6.25% and 6%, respectively and lowered its inflation estimates for the current financial year. The central bank, however, raised concerns over the possibility of fiscal slippages due to the farm loan waivers. RBI also cut the economic growth projection to 7.3% for the current fiscal from 7.4% earlier. With the UK elections, the European Central Bank's (ECB) policy meeting, and former FBI director James Comey's Senate testimony all set for Thursday, investors were noticeably risk averse across the globe.

Sentiments got some support after the Met Department has upgraded the South-West monsoon forecast to 98% of the long-term average rainfall from 96% earlier. Rainfall during the June-September monsoon season is expected to be normal, with a high possibility of all four broad geographical regions receiving evenly distributed rains. Some support also came with NITI Aayog CEO Amitabh Kant's statement that the Goods and Services Tax, 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. Meanwhile, many banking stocks gained traction on hopes of early resolution to stressed assets issue and recapitalisation of PSUs. The Reserve Bank of India said it would continue to work in partnership with the government to address the stress in banks' balance sheets.

On the global front, Asian equity markets made a mixed closing on Wednesday, as traders preferred to remain on the sidelines ahead of several major political and economic events later this week. These include the UK elections, the ECB policy meeting and former FBI Director James Comey's congressional testimony. However, China stocks rose as a growing number of listed firms encouraged employees to buy shares, and as the central bank injected more funds into the banking system to ease fears of a mid-year liquidity crunch. Meanwhile, European counterparts were trading in the positive territory though with marginal gains with France's CAC being the top gainer in the space.

Back home, after trading in cautious note for most part of the session, the local benchmarks ended the trading day with moderate gains. The NSE's 50-share broadly followed index Nifty got buttressed by over quarter percent to settle above the crucial 9,650 support level, while Bombay Stock Exchange's Sensitive Index-Sensex accumulated over eighty points and closed above the psychological 31,250 mark. Moreover, the broader markets managed a touch better than the larger peers today as the BSE's midcap and smallcap indices settled with gains of 0.46% and 0.75% respectively. The market breadth remained optimistic, as there were 1466 shares on the gaining side against 1188 shares on the losing side, while 149 shares remained unchanged.

Finally, the BSE Sensex gained 80.72 points or 0.26 % to 31271.28, while the CNX Nifty was up by 26.75 points or 0.28% to 9,663.90. 

The BSE Sensex touched a high and a low of 31346.99 and 31172.98, respectively and there were 21 stocks on gainers side as against 9 stocks on the losers side on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.46%, while Small cap index was up by 0.75%.

The top gaining sectoral indices on the BSE were Healthcare up by 1.08%, Metal up by 0.97%, Energy up by 0.89%, Bankex up by 0.73% and Auto up by 0.70%, while IT down by 1.97% and TECK down by 1.52% were the only losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 1.96%, ICICI Bank up by 1.91%, Mahindra & Mahindra up by 1.49%, Sun Pharma up by 1.31% and Hindustan Unilever up by 1.27%. On the flip side, TCS down by 2.97%, Wipro down by 2.10%, Infosys down by 1.83%, Tata Motors down by 0.64% and Adani Ports & SEZ down by 0.59% were the top losers.

Meanwhile, domestic rating agency, ICRA in its latest report has said that the new 5 percent rate finalized on solar PV cells and modules under the goods and services tax (GST) regime, which is to be implemented from next month, is likely to have a marginally negative impact on new solar power projects due to an increase in capital cost arising from the higher tax rate.

ICRA has said that with 5 percent GST rate, the impact on capital cost for new solar power projects is estimated to be limited at about 6 percent, which would thus translate into an increase in levellised cost of generation by 11-12 paise per unit for such projects. It also stated that the developers would incur a higher capital cost for the already undergoing solar projects under the competitive bidding route in last six-month period against the cost envisaged at the time of bidding. It added that given that the competitively bid-based solar tariffs have significantly come down over the last 4-5 month period, timely approval by regulators for pass-through of any higher cost incidence due to change in taxation which is permitted under change in law, remains crucial from developers’ perspective.

Rating agency has mentioned that the solar project awards in last 5-6 month period stood at about 2.5-3 GW mainly under National Solar Mission route and state policy route, wherein tariffs have dropped to Rs 2.44 in May 2017 from Rs 4.4 unit in November 2016 for projects in Badla Solar Park in Rajasthan. It also pointed out that the viability of such bid tariffs hinges on structuring of debt with longer tenures, competitive funding costs and the ability of the project developers to keep the cost of modules within the budgeted levels.

The CNX Nifty traded in a range of 9,678.55 and 9,630.55. There were 37 stocks in green as against 14 stocks in red on the index.

The top gainers on Nifty were Aurobindo Pharma up by 2.20%, Reliance Industries up by 2%, ICICI Bank up by 1.88%, Eicher Motors up by 1.82% and Vedanta up by 1.66%. On the flip side, TCS down by 3.04%, Tech Mahindra down by 2.12%, Infosys down by 2.05%, Wipro down by 2.05% and HCL Tech down by 1.17% were the top losers.

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.