Post Session: Quick Review

Indian equity markets traded on a firm note for most part of the day but selling in the last hour of trade erased all their gains to close with minor cut. Telecom, IT and TECK stocks dragged due to covering up the positions by participants as today being the last session of July derivatives expiry. The equity benchmarks made a positive start and traded jubilantly in early deals and catapulted to record life highs powered by a broad based rally taking cues from the political developments in Bihar. Bharatiya Janata Party (BJP) strengthened its foothold in Bihar after Nitish Kumar ended his party, JDU’s mahagathbandhan or Grand Alliance with Lalu Yadav’s RJD and the Congress last evening and joined hands with his former partner BJP. The continuing record breaking rally was also on account of optimistic sentiments of investors ahead of the corporate earnings, which drove the markets to further peaks and spread of positive cues after the US Federal Reserve kept the benchmark lending rates unchanged.

Sentiments remained up-beat on news that retirement fund body the Employees’ Provident Fund Organization plans to pump in Rs 22,500 crore in exchange traded funds in 2017-18 following the go-ahead from the central board of trustees of EPFO to increase the equity investment from 10% to 15%. The EPFO has invested Rs 6,577 crore in ETFs in 2015-16 and Rs 14,984 crore in 2016-17. Meanwhile, investors took note of global financial services major report that the Reserve Bank of India is expected to go for a 25 basis points (bps) repo rate cut in its policy review meet on August 2 as inflation is likely to have reached a new normal of 4 per cent. The report highlighted that inflation in India has fallen dramatically, and though the excessively low level it witnessed this fiscal is not sustainable, the rebound may not be too sharp either.

On the global front, Asian markets closed in green. Earnings for China’s industrial firms surged 19.1 percent in June from a year earlier accelerating from May in a sign economic momentum remains solid even as rising borrowing costs have raised concerns about pressure on margins. The European markets were trading mostly in green as investors reacted to a slew of earnings reports. Growth in bank loans to euro zone corporations slowed sharply in June but household lending held at a post-crisis high and a key money supply indicator, which often predicts future economic activity firmed.

The BSE Sensex ended at 32367.75, down by 14.71 points or 0.05% after trading in a range of 32325.33 and 32672.66. There were 10 stocks advancing against 21 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index was down by 0.57%, while Small cap index was down by 0.52%. (Provisional)

The top gaining sectoral indices on the BSE were Bankex up by 0.67%, Capital Goods up by 0.29%, Realty up by 0.08% and Utilities up by 0.05%, while Telecom down by 1.88%, IT down by 1.80%, TECK down by 1.63%, Healthcare down by 1.33% and Energy down by 1.18% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were HDFC up by 5.42%, HDFC Bank up by 1.73%, Asian Paints up by 1.50%, Kotak Mahindra Bank up by 1.27% and SBI up by 0.96%. (Provisional)

On the flip side, Dr. Reddy’s Lab down by 4.08%, Tata Motors - DVR down by 3.29%, Tata Motors down by 3.09%, TCS down by 2.83% and Infosys down by 2.43% were the top losers. (Provisional)

Meanwhile, revising the outlook on several Indian banks to stable or negative from positive, global credit rating agency Moody’s in its latest report has said that India's banking system remain most vulnerable among South and Southeast Asia. The report further said that capital levels will continue to be weak for most rated public sector banks (PSBs) over the next 12-18 months, as low profitability impinges on their ability to build capital levels through retained earnings.

The rating agency noted that PSBs remain undercapitalized and burdened by bad debts despite receiving Rs 500 billion in capital injections under the 'Indradhanush' plan. Besides, it said that the proposed infusion of additional capital of Rs 200 billion in the two financial years up to March 2019 under the plan also falls short of the amount still required for banks to address solvency challenges and recapitalize themselves.

Moody’s also signalled lowered government support to some extent as it appeared reluctant to increase capital injections into the PSU banks, despite the limited ability of these to access equity markets for the much-needed capital. Indian PSBs have experienced significant asset quality problems and capital shortages over the last three years. In 2015, the government announced its 'Indradhanush' plan to address its own estimate of Rs 1,800 billion shortfall in capital that PSBs would need between 2015 to 2019 to meet Basel III requirements.

The CNX Nifty ended at 10019.30, down by 1.35 points or 0.01% after trading in a range of 10005.50 and 10114.85. There were 18 stocks advancing against 33 stocks declining on the index. (Provisional)

The top gainers on Nifty were HDFC up by 5.24%, Yes Bank up by 4.15%, HDFC Bank up by 2.14%, Zee Entertainment up by 1.82% and BPCL up by 1.79%.  (Provisional)

On the flip side, Dr. Reddy’s Lab down by 4.00%, Tech Mahindra down by 3.16%, TCS down by 3.09%, Tata Motors - DVR down by 2.99% and Bharti Airtel down by 2.86% were the top losers. (Provisional)

The European markets were trading mostly in green; UK’s FTSE 100 increased 2.17 points or 0.03% to 7,454.49, France’s CAC increased 5.78 points or 0.11% to 5,195.95, while Germany’s DAX decreased 64.42 points or 0.52% to 12,240.69.

All the Asian equity markets ended in green on Thursday as a slew of corporate earnings came through and as markets digested the Federal Reserve's widely expected decision to hold interest rates steady at the end the Federal Open Market Committee's two-day policy meeting Wednesday. While the Fed laid the groundwork to soon begin winding down its massive stimulus program, investors honed in on the committee's choice of language on when the move to trim the central bank's balance sheet would kick off. Normalization of the balance sheet would be implemented ‘relatively soon’, the post meeting statement noted. This was a slight tweak compared to the Fed's use of ‘this year’ after the June meeting. Japanese shares ended up on expectations that the Bank of Japan would maintain its monetary stimulus program longer than most other global central banks. Further, Chinese shares ended little changed even as data showed China's major industrial firms posted increased profit growth in June.