Bargain hunting help benchmarks to snap five days losing streak

Snapping five days losing streak, Indian equity benchmarks showed splendid recovery on Monday with frontline gauges garnering gains of three fourth of a percent, as traders opted to buy beaten down but fundamentally strong stocks. After a gap-up opening markets traded with traction through the session and reclaimed their crucial 9,800 (Nifty) and 31,500 (Sensex) levels, though marginal sell off in dying hour of trade pulled key indices below those levels. Sentiments remained optimistic with Niti Aayog Vice Chairman Arvind Panagariya’s statement that resolution of bad loans in the banking system is on right track and will open the door to rapid credit expansion and growth. Some support also came with the report that foreign investors have pumped in over Rs 10,000 crore in the Indian debt markets this month so far, following the RBI’s decision to cut key interest rates. Adding to the optimism, Union Minister of State for Finance and Corporate Affairs Arjun Ram Meghwal said that the number of tax slabs in the Goods and Services Tax (GST) regime would be reduced with improvement in revenue.

Private report stating that the Indian economy is at the cusp of entering its strongest growth phase and a full blown bull market is yet to play out with the wide-based Nifty expected to touch 11,500 in 2018, too aided sentiments. Market participants shrugged off wholesale price index (WPI) inflation data which increased to 1.88% in the month of July versus 0.90% in the month of June and 0.63% during the corresponding month of the previous year. Build up inflation rate in the financial year so far was 0.62% compared to a build up rate of 3.81% in the corresponding period of the previous year. Also, investors have not paid any attention towards India’s industrial production data which entered the negative territory in June. India’s industrial output contracted by 0.1% in the month of June 2017, as compared to an expansion of 8% in the previous year-ago period, also lower than 2.8% growth in May.

Firm opening in European counters too aided sentiments with CAC, DAX and FTSE trading in green in early deals after senior US officials sought to play down risks of a military conflict with North Korea. Asian markets ended mostly in green, however Japanese Nikkei was down despite second-quarter Japan GDP surprising to the upside. Japan’s second quarter surged an unexpected 4.0% on year as investment in plant and equipment lifted sentiments for the sixth straight quarter of expansion.

Back home, there was broad based buying witnessed in the markets and apart from the blue chips, the broader markets too participated strongly in the rally. On the sectoral front, telecom remained buzzing, as the telecom regulator RS Sharma said that recommendations on contentious interconnect usage charge should be finalised by August end. However, the PSU Banking stocks remained under pressure on report that the banking regulator is examining whether auditors at these state-run lenders followed RBI guidelines on write-downs, provisioning and NPAs. The RBI has questioned scores of auditors at 27 PSBs on the process and logic they had used to compute and report write-downs at the lenders.

The NSE’s 50-share broadly followed index Nifty gained over eighty points to end tad below its psychological 9,800 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex soared over two hundred and thirty points to end above its crucial 31,400 mark. The broader markets too traded with traction and ended the session with a massive gain of around two and a half percent. The market breadth was in the favour of advances, as there were 1861 shares on the gaining side against 704 shares on the losing side, while 161 shares remain unchanged.

Finally, the BSE Sensex surged 235.44 points or 0.75% to 31,449.03, while the CNX Nifty was up by 83.35 points or 0.86% to 9,794.15.

The BSE Sensex touched a high and a low of 31,526.40 and 31,298.90, respectively and there were 22 stocks on gaining side as against 9 stocks on losing side on the index.

The broader indices ended in green; the BSE Mid cap index soared 2.49%, while Small cap index was up by 2.51%.

The top gaining sectoral indices on the BSE were Realty up by 5.95%, Metal up by 3.53%, Basic Materials up by 2.82%, Consumer Durables up by 2.53% and Power was up by 2.50%, while IT down by 0.56% and TECK was down by 0.40% were the only losing indices on BSE.

The top gainers on the Sensex were Cipla up by 5.03%, Sun Pharma up by 4.70%, Tata Steel up by 4.21%, Adani Ports & SEZ up by 3.07% and Hero MotoCorp up by 2.87%. On the flip side, TCS down by 1.00%, Bharti Airtel down by 0.98%, SBI down by 0.93%, Kotak Mahindra Bank down by 0.87% and Infosys down by 0.84% were the top losers.

Meanwhile, amid reports that there is still lack of clearness on the 5 percent goods and services tax (GST) levy on equipment required for generating solar power, Union power and renewable energy minister Piyush Goyal has reiterated that there is no question of ambiguity as the government is very clear on the issue. He also noted that it has been made very clear that 5 percent GST will be applicable on solar panel equipment.

The industry has claimed that though the government said GST would be applied to solar modules at a concessional rate of 5 percent, there is still no clarity on whether it will be extended to other equipment as well. The minister has said that the GST regime was introduced to bring in more clarity and transparency and avoids double taxation in the system. He also said “I think our stand is very clear in this.”

Goyal further said that the ambitious plan of increasing solar capacity to 100GW by 2022 and promoting solar energy products would boost small and medium-sized enterprises (SMEs). He also said that they have set a target of 40,000 MW of rooftop solar capacity by 2022 and SMEs can take active participation in this. Apart from this, the minister mentioned that there is scope in sectors like solar pumps, solar streetlights and energy-efficient systems among others. He also observed that India is moving from a job-seeking to job-creating economy.

The CNX Nifty traded in a range of 9,818.30 and 9,752.10. There were 36 stocks in green as against 15 stocks in red on the index.

The top gainers on Nifty were Cipla up by 5.29%, Sun Pharma up by 4.84%, Tata Steel up by 4.52%, Tata Power up by 3.92% and Hindalco up by 3.69%. On the flip side, Bosch down by 2.14%, Bharti Airtel down by 1.45%, HCL Tech down by 1.40%, BPCL down by 1.23% and TCS down by 1.07% were the top losers.

European markets were trading in green; UK’s FTSE 100 increased 40.47 points or 0.55% to 7,350.43, France’s CAC surged 47.7 points or 0.94% to 5,108.62 and Germany’s DAX was up by 134.53 points or 1.12% to 12,148.59.

Asian equity markets closed mostly higher on Monday, although Japanese shares fell sharply to hit a 3-1/2-month low following a holiday weekend and as tension between the United States and North Korea prompted investors to shed riskier assets. Concerns over a rising yen too kept Japanese shares under selling pressure. While upbeat Japanese GDP data, deteriorating Fed rate expectations and easing geopolitical concerns helped spur some bargain hunting after last week's steep losses, lower oil prices and disappointing Chinese data kept a lid on overall gains in the region. China's industrial production growth eased at a faster-than-expected pace in July, official data from the National Bureau of Statistics showed. Industrial production climbed 6.4 percent year-over-year in July, slower than the 7.6 percent spike in June. Economists had expected the growth to moderate to 7.1 percent. Retail sales advanced 10.4 percent annually in July, following an 11.0 percent surge in the prior month. The expected rate of growth for the month was 10.8 percent. Fixed asset investment grew at a slightly slower pace of 8.3 percent in July from a year ago, after an 8.6 percent hike in June.