Benchmarks manage to end at all time closing highs

Indian equity benchmarks, paring most of their early gains, managed to settle at new all time closing highs with modest gains on Tuesday. Markets started the day on optimistic note and extended their northward journey to attain crucial 31,800 (Sensex) and 9,800 (Nifty) bastions, as investors expect inflation for the month of June to be at record low which could lead to a rate cut in the next monetary policy review. According to a private report, easing further from May’s 2.18%, Consumer price inflation (CPI) for June is predicted to cool to 1.70%, below the RBI’s medium-term target of 4% for the eighth successive month. The CPI is slated to be announced tomorrow. Traders also took some encouragement with India Meteorological Department’s (IMD’s) statement that the seasonal monsoon rains have covered most of India and the amount of precipitation so far is within expectations, raising hopes for higher farm output after increased sowing of rice and soybean crops.

Adding to the optimism, Revenue Secretary Hasmukh Adhia enlightened that the Goods and Services Tax (GST) will help bring down the inflation by one to two per cent by the end of this year. The secretary said that the government’s objective is to ensure that inflation does not increase, and added that the government has tried to keep items frequently used by the consumers under the lower tax bracket. However, it was the last hour of trade which played spoil sports for the markets and traders opted to book most of their initial gains at higher levels. Meanwhile, IMF chief Christine Lagarde, warning against complacency in the current phase of global economic recovery has asked the members of G20 group, which includes India, to step up reforms by reducing trade barriers and subsidies to promote a level playing field.

Weak opening in European counters too dampened sentiments, as markets kept an eye out for appearances from central bank members on both sides of the Atlantic. However, Asian markets ended mostly in green on Tuesday, as investors awaited testimony from Federal Reserve Chair Janet Yellen for clues on when the central bank would tighten US monetary policy.

Back home, kicking off the earnings season, IndusInd Bank remained flat even after it posted a 26.49% rise in its net profit at Rs 836.55 crore for the quarter ended June 30, 2017, as compared to Rs 661.38 crore for the same quarter in the previous year, helped by higher interest income. On the sectoral front, auto stocks remained in top gear despite SIAM’s report that domestic automobile sales saw a muted growth of one percent in June as the passenger vehicle (cars, utility vehicles and vans) segment declined more than 11 percent. A four percent growth in two-wheelers, however, helped the industry to remain in the green. Sugar stocks remained in sweet spot, as the government hiked the import duty on sugar from 40 percent to 50 percent, to check cheap imports. Cheaper imports have been adversely affecting domestic sugar mills.

The NSE’s 50-share broadly followed index Nifty gained by fifteen points to end above its psychological 9,750 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex rose by over thirty points to end near its crucial 31,750 mark. The broader markets, however, underperformed benchmarks and ended in red terrain on Tuesday. The market breadth remained in favour of decliners, as there were 1,166 shares on the gaining side against 1,564 shares on the losing side, while 148 shares remain unchanged.

Finally, the BSE Sensex gained 31.45 points or 0.10% to 31,747.09, while the CNX Nifty was up by 15 points or 0.15% to 9,786.05. 

The BSE Sensex touched a high and a low of 31,885.11 and 31,718.48, respectively and there were 16 stocks on gainers side as against 15 stocks on the losers side on the index.

The broader indices ended in red; the BSE Mid cap index declined 0.79%, while Small cap index was down by 0.58%.

The top gaining sectoral indices on the BSE were IT up by 0.91%, Auto up by 0.80%, TECK up by 0.35%, Capital Goods up by 0.28% and Power up by 0.24%, while Telecom down by 1.79%, Realty down by 1.56%, Consumer Durables down by 0.70%, Healthcare down by 0.65% and Metal down by 0.58% were the top losing indices on BSE.

The top gainers on the Sensex were Bajaj Auto up by 2.44%, Tata Motors up by 2.28%, NTPC up by 1.81%, Mahindra & Mahindra up by 1.77% and Infosys up by 1.75%. On the flip side, Bharti Airtel down by 2.59%, Cipla down by 2.06%, Wipro down by 1.92%, Coal India down by 1.85% and ONGC down by 1.54% were the top losers.

Meanwhile, the power ministry has said that there is no shortage of power and India’s generation resource is adequate to meet the growing demand of consumers who are having access to electricity. During 2013-14, demand-supply gap both in terms of energy and peak stood at 4.2 percent and 4.5 percent, respectively. While, in the financial year 2016-17, this has fell to an all-time low of 0.7 percent and 1.6 percent, respectively. Further, this gap is on account of factors other than inadequacy of power in the country.

The energy actually used by all the consumers including industries, grew at an even higher rate. The gross generation in the country, which reflects the consumption by consumers (other than about 0.2% growth rate of export to Bangladesh and Nepal), surged to 1,242 billion units (BUs) in 2016-17 from 1,020 BUs in 2013-14, showing a CAGR of 6.8 percent. The reason that there is a higher growth in gross generation, vis-à-vis energy supplied by State Distribution Utilities, is that many industries are now purchasing power through open access from IPPs without contracts with the states. Therefore, the consumption of these industries has reduced from the state utilities and increased through open access, which is reflected as generation increase from IPPs without contracts.

During the period 2012-17, generation capacity addition target from conventional sources was 99,209.47 MW as against a target of 88,537 MW, over-achieving the same by 112 percent. Besides, conventional generation capacity addition achieved in the past three years (2014-15, 2015-16 & 2016-17) has been 60,752.6 MW, which is about 61 percent of the total capacity addition achieved during this period. In 2015-16, conventional generation capacity addition achieved was 23,976.6 MW which is the largest ever capacity addition in a single year.

Moreover, installed capacity of renewable energy in India as on March 31, 2014 was 31,692.14 MW. As on March 31, 2017 India has achieved an installed capacity of 57,260.2 MW of renewable energy sources showing a rise of 80 percent during 2014 -2017. The quantum of energy not supplied has reduced substantially from 42.4 BU in 2013-14 to 7.6 BU in 2016-17, a reduction of 82 percent.

The CNX Nifty traded in a range of 9,830.05 and 9,778.85 45. There were 28 stocks in green as against 23 stocks in red on the index.

The top gainers on Nifty were Hindalco up by 2.48%, Bajaj Auto up by 2.27%, Tata Motors up by 2.24%, BPCL up by 2.05% and NTPC up by 2.03%. On the flip side, Bharti Airtel down by 2.53%, Bank of Baroda down by 2.37%, Cipla down by 1.96%, Wipro down by 1.88% and Coal India down by 1.66% were the top losers.

The European markets were trading mostly in red; UK’s FTSE 100 decreased 57.58 points or 0.78% to 7,312.45 and France’s CAC was down by 5.14 points or 0.1% to 5,160.50, while Germany’s DAX was up by 25.33 points or 0.2% to 12,471.25.

Asian equity markets ended mostly in green on Tuesday as investors awaited cues from the US corporate earnings season as well as Federal Reserve Chair Janet Yellen's semi-annual testimony before Congress on Wednesday and Thursday. Japanese shares rose to finish near two-week highs as the dollar hit a four-month high versus the yen, helping bolster exporters' shares. Tech shares also witnessed good buying following the strong Nasdaq performance overnight. Meanwhile, Chinese shares ended slightly lower amid selling in small-cap stocks on concerns over tight liquidity conditions.