Post Session: Quick Review

Indian equity markets traded in green throughout the day and ended the session on a mixed note. The equity benchmarks made a gap-up opening and traded jubilantly in early deals after Japanese financial services major reported that India’s GDP growth witnessed a trough in January-March quarter, but going forward the economy is expected to see gradual improvement in growth numbers primarily driven by consumption. The report added that consumption has recovered from the demonetization shock and while external demand may be down, it remains supportive of growth. Some GST-related disruptions could spill into early part of the third quarter. But good monsoons, strong rural wage growth, pay hikes for state government employees, lower lending rates and a modest pick-up in external demand may push GDP growth to 7.1% in September quarter and further to 7.7% in the next quarter. Another foreign brokerage firm enlightened that loan growth in the country is expected to pick up to 15 per cent in 2017-18, from 9.1 per cent in the previous fiscal. The loan growth in the country is now at a historic low and is expected to bottom out.

Separately, India has made a strong pitch to the World Bank seeking improvement in the country’s ranking on the ease of doing business from a poor 185 to among top 25. The Centre on Wednesday made its first presentation before a World Bank team and showcased how its procedures, cost of construction and time taken in approvals have improved manifold. In the ease of doing business rankings for construction permits for 2017, announced last year by the World Bank, India was ranked 185 among the 190 countries surveyed. Selling crept in after Fitch Ratings in its latest report raised concerns over the recent spate of declarations of farm loan waivers across the country, adding that these moves could have a significant impact on state government finances and might undermine efforts to bring down general government debt. The rating agency noted that the farm loan waivers will also lead to further fiscal slippage at the state level or will reduce the funds available for public investment.

On the global front, Asian markets closed in green, with finance stocks broadly leading gains after all major US financial institutions received approval from the Federal Reserve to ramp up dividend payouts and share buybacks. Japan’s retail sales fell to a seasonally adjusted annual rate of 2.0%, from 3.2% in the preceding month. Japan’s Nikkei share average closed near two-year highs with tech shares such as Advantest Corp and Shin-Etsu Chemical outperforming the overall market. The European markets were trading mostly in red. Bank of England Governor Mark Carney surprised many by conceding a hike was likely to be needed as the economy came closer to running at full capacity. Mario Draghi had earlier said that stimulus might need to be toned down so it does not become more accommodative as the economy recovers.

Back home, InterGlobe Aviation, the operator of low cost carrier IndiGo, closed in red as reports emerged of it showing interest to buy stake in Air India. According to report, the airline gave an unsolicited expression of interest in buying the stake and is believed to be the first company to show interest in the stake.

The BSE Sensex ended at 30819.45, down by 14.87 points or 0.05% after trading in a range of 30794.61 and 31097.92. There were 13 stocks advancing against 18 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index was up by 0.30%, while Small cap index was up by 1.02%. (Provisional)

The top gaining sectoral indices on the BSE were Metal up by 2.25%, Basic Materials up by 1.13%, Realty up by 1.04%, Telecom up by 0.87% and FMCG up by 0.49%, while Energy down by 0.25%, Bankex down by 0.10%, PSU down by 0.07%, Auto down by 0.05% and Healthcare down by 0.04% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were Axis Bank up by 3.56%, Tata Steel up by 2.90%, Bharti Airtel up by 1.68%, Cipla up by 1.21% and Hero MotoCorp up by 1.12%. (Provisional)

On the flip side, Kotak Mahindra Bank down by 1.95%, Tata Motors - DVR down by 1.82%, SBI down by 1.27%, Tata Motors down by 1.16% and TCS down by 1.07% were the top losers. (Provisional)

Meanwhile, raising concerns over the recent spate of declarations of farm loan waivers across the country, the credit rating agency, Fitch Ratings in its latest report has said that these moves could have a significant impact on state government finances and might undermine efforts to bring down general government debt. The rating agency noted that the farm loan waivers will also lead to further fiscal slippage at the state level or will reduce the funds available for public investment.

The report titled ‘Indian loan waivers are a risk to fiscal consolidation’ said that larger state deficits would delay an expected gradual reduction in general government debt, which includes central and state government debt. While the central government has indicated that it will not participate in the waivers, the report pointed that the combined finances of the states - which are included in general government debt and deficits - have been under pressure. Besides, the agency said that public pay hikes, election spending and higher interest costs stemming from the UDAY scheme - under which state governments have taken on debt from power distribution companies - are all likely to add to expenditure.

Fitch rating highlighted that banks could also be affected by the waiver schemes, but it could benefit banks if they offload farm loans with weak repayment prospects to state governments. The agency also indicated uniform farm loan waivers could lead to moral hazard and weaken the general repayment culture among financially healthy farmers, but they will still have an incentive to repay loans in order to retain access to future funding.

The CNX Nifty ended at 9500.00, up by 8.75 points or 0.09% after trading in a range of 9494.70 and 9575.80. There were 22 stocks advancing against 29 stocks declining on the index. (Provisional)

The top gainers on Nifty were Axis Bank up by 4.32%, Vedanta up by 3.65%, Tata Steel up by 2.65%, Cipla up by 1.74% and GAIL India up by 1.74%. (Provisional)

On the flip side, Tata Motors - DVR down by 2.39%, Kotak Mahindra Bank down by 2.17%, Sun Pharma down by 1.79%, Tata Motors down by 1.49% and SBI down by 1.34% were the top losers. (Provisional)

The European markets were trading mostly in red; Germany’s DAX decreased 18.64 points or 0.15% to 12,628.63, France’s CAC decreased 33.21 points or 0.63% to 5,219.69, while UK’s FTSE 100 increased 20.16 points or 0.27% to 7,407.96.

Asian equity markets ended in green on Thursday, reflecting investors’ confidence in the global economic outlook after central bankers around the world signaled that interest rates may need to rise. Bank of England Governor Mark Carney indicated on Wednesday that monetary stimulus may need to be withdrawn to some extent in future, if UK wages pick up and business investment strengthens. Meanwhile, the dollar wallowed at one-year lows against the euro despite media reports suggesting that markets misinterpreted comments made a day earlier by ECB President Mario Draghi about adjustment in the central bank's monetary stimulus. Chinese shares ended higher as investors awaited monthly indexes on factory and service sector activity on Friday for further clues on the world's second-largest economy. Further, Japanese shares closed near their highest level in nearly two years as the yen held steady despite North Korea's warning that the country would keep building up its nuclear arsenal regardless of sanctions, pressure or military attack. Investors also shrugged off weak retail sales figures, which showed that Japanese retail sales fell a seasonally adjusted 1.6 percent sequentially in May. The Indonesian markets remains closed today.