Indian benchmarks end higher ahead of Fed outcome

Indian equity markets started the session on a sluggish note but managed to eke out some gains by the end of trade, as the benchmark indices clawed back into the green terrain in the late afternoon trade on getting some supportive leads from the European markets ahead of US Federal Reserve's policy outcome. Besides, sentiments got a boost after the report that Inflation based on the wholesale price index (WPI) slipped to a five-month low of 2.17% in May, as food inflation turned negative and prices of manufactured items rose at their weakest pace in the past five months. Some support also came with reports that the government is working on a new industrial policy with a view to promoting and developing frontier technologies, innovation and enhancing competitiveness of domestic products. However, gains remained capped with a private report stating that  Indian employers expect steady hiring outlook for next three months, but their confidence have dipped to the least optimistic level since 2005 amid uncertainties in global markets. Further, traders remained cautious over the private report indicating that over 65% of the total Rs 9.50 lakh crore of agri debt may potentially get written-off. Maharashtra followed Uttar Pradesh in announcing a debt waiver for the farmers, which is expected to drill Rs 30,000 crore hole for the state exchequer. Meanwhile, India's engineering exports to Doha have been hit following sanctions imposed on Qatar by some nations including Saudi Arabia. Middle East and West Asia are one of the key destinations for Indian engineering exports, accounting for 13% of the country's total engineering exports.

On the global front, Asian equity markets ended mostly lower on Wednesday, as investors everywhere awaited clarity on Fed's future path for US policy after a likely rate rise later in the day. The Fed is widely expected to raise its benchmark interest rate this week due to a tightening labour market and may also provide more details on its plans to shrink the mammoth bond portfolio it amassed to nurse the economic recovery. Adding the pessimism among traders, Economic data out of China showed retail sales and industrial output topped forecasts in May, but a miss in urban investment reinforced views the world's second-largest economy will soon start to lose some momentum as lending costs rise and the property market cools. Meanwhile, European stocks rose for a second day, led by technology shares.

Back home, many PSU Banks gained traction after the Reserve Bank of India announced steps to speed up NPA resolution process by identifying 12 accounts that can be immediately taken up under the Insolvency and Bankruptcy Code (IBC). The gross bad debt of the Indian banking system as of March was at Rs 7.11 lakh crore, which means the 12 accounts would be responsible for about Rs 1.78 lakh crore.

The market breadth remained pessimistic, as there were 1243 shares on the gaining side against 1422 shares on the losing side, while 169 shares remained unchanged.

Finally, the BSE Sensex gained 52.42 points or 0.17% to 31155.91, while the CNX Nifty was up by 11.25 points or 0.12% to 9,618.15. 

The BSE Sensex touched a high and a low of 31190.36 and 31054.94, respectively and there were 17 stocks on gainers side as against 12 stocks on the losers side on the index, while 1 stock remained unchanged.

The broader indices ended in green; the BSE Mid cap index gained 0.01%, while Small cap index was up by 0.46%.

The top gaining sectoral indices on the BSE were Energy up by 1.53%, Realty up by 1.50%, Capital Goods up by 0.88%, Oil & Gas up by 0.68% and Industrials up by 0.43%, while Metal down by 0.73%, FMCG down by 0.68%, Basic Materials down by 0.25%, Healthcare down by 0.18% and Utilities down by 0.07% were the top losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 3.30%, Dr. Reddy’s Lab up by 1.41%, Larsen & Toubro up by 1.40%, ICICI Bank up by 1.38% and Hindustan Unilever up by 0.91%. On the flip side, Cipla down by 2.16%, ITC down by 1.62%, HDFC down by 1.29%, Wipro down by 1.27% and Tata Steel down by 1.13% were the top losers.

Meanwhile, Chief Economic Advisor Arvind Subramanian has said that the 13- year old Fiscal Responsibility and Budget Management (FRBM) framework has failed to prevent a build-up of dangerous fiscal imbalances and also did not succeed in putting debt in continuous declining trajectory. He added that FRBM in India worked up to certain point but not completely.

Subramanian has pointed out that when India first introduced FRBM around 2002-03, India was a very different country than what it is today. He explained that during 2002, the economic boom had not happened, in fact, things were looking pretty bad then, growth had declined, private investment had declined, and thus it was very different world then. He noted that today it's very different world because India is now much faster growing economy than in 2002 and added that there is a sense in which it is natural to review the FRBM.

In May last year, the FRBM committee was set up to review the working of the FRBM Act over the last 12 years and suggest the way forward 'keeping in view the broad objective of fiscal consolidation and prudence and the changes required in the context of the uncertainty and volatility in the global economy'. The panel, headed by former Revenue Secretary N K Singh, had recently suggested that fiscal deficit should be brought down to 2.5 percent of the GDP by 2022-23 in a phased manner.

The CNX Nifty traded in a range of 9,627.40 and 9,580.45. There were 25 stocks in green as against 24 stocks in red on the index, while 2 stocks remained unchanged.

The top gainers on Nifty were Reliance Industries up by 3.47%, Bank of Baroda up by 1.77%, Dr. Reddy’s Lab up by 1.35%, Hindustan Unilever up by 1.34% and ICICI Bank up by 1.32%. On the flip side, Yes Bank down by 3%, Cipla down by 2.25%, ITC down by 1.79%, HDFC down by 1.23% and ACC down by 1.20% were the top losers.

The European markets were trading in green; UK’s FTSE 100 increased 27.94 points or 0.37% to 7,528.38, Germany’s DAX increased 73.56 points or 0.58% to 12,838.54 and France’s CAC increased 48.95 points or 0.93% to 5,310.69.

Asian equity markets ended mostly in red on Wednesday as the markets awaited the Federal Reserve's decision on monetary policy in the US. The Fed is widely expected to raise interest rates, with markets looking for details regarding the reduction of the central bank's massive balance sheet. Japanese shares closed slightly lower as investors stayed away from making bets ahead of the Fed's interest-rate decision due later today, the Bank of England meeting on Thursday and the BoJ's two-day policy review ending on Friday. Chinese shares lost ground as reports alleging a probe of the head of financial conglomerate Anbang Insurance Group overshadowed positive data showing signs of stabilization in the world's second-largest economy. Chinese factory output grew an annual 6.5 percent in May to beat forecasts and retail sales advanced 10.7 percent, while fixed-asset investment growth moderated in the first five months.