Benchmarks add gains amid firm Asian cues

Indian equity markets added gains and continued their trade in green in early afternoon session on fresh buying by investors amid a firming trend in Asian markets. Sentiments remained positive with report that Foreign Direct Investment (FDI) into the country grew by 37% to $10.4 billion during the first quarter of the current fiscal. According to DIPP, India had received $7.59 billion FDI during April-June 2016-17. Some solace also came with report that as much as Rs 42,000 crore has already come in as taxes so far in the first monthly filing under the new Goods and Services Tax (GST) regime and the revenues are expected to swell further as the filing cycle closes later this week. Moreover, healthy buying which was witnessed in Oil & Gas, Energy, PSU and Metal stocks also helped key indices to trade with gains. In scrip specific development, Lupin was up by around two percent after receiving notification that the inspection carried out by the USFDA in April 2017 at its Aurangabad facility is now closed and the agency has issued an Establishment Inspection Report.

On the global front, Asian markets were trading mostly in green, taking solace from modest gains on Wall Street even as investors remained wary ahead of the annual central banking conference in Jackson Hole later this week. Back home, the BSE Sensex is currently trading at 31380.85, up by 122.00 points or 0.39% after trading in a range of 31241.50 and 31484.28. There were 25 stocks advancing against 6 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was up by 0.10%, while Small cap index was down by 0.04%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.71%, Energy up by 1.30%, PSU up by 0.84%, Metal up by 0.71% and Healthcare up by 0.61%, while Realty down by 0.87%, Consumer Durables down by 0.21%, Consumer Disc down by 0.18% and Power down by 0.14% were the top losing indices on BSE.

The top gainers on the Sensex were Lupin up by 1.95%, Dr. Reddy’s Lab up by 1.93%, Wipro up by 1.58%, Axis Bank up by 1.47% and ONGC up by 1.46%. On the flip side, Asian Paints down by 0.55%, Tata Steel down by 0.47%, Power Grid down by 0.23%, Hero MotoCorp down by 0.10% and Bajaj Auto down by 0.04% were the top losers.

Meanwhile, the domestic rating agency, ICRA in its latest report has said that the growth of renewable energy (RE) sector is likely to be hit adversely if power distribution companies (discoms) in states like Andhra Pradesh, Karnataka and Uttar Pradesh implement renegotiation or cancellation of signed power purchase agreements (PPAs) with the wind and solar power developers. If attempts by these state-owned discoms are implemented, ICRA noted that this would also impact the credit profile of the independent power producers (IPPs) and investment interest from the private sector in this sector.

As per the report, given the circumstances, significant uncertainty exists for wind-based IPPs, which have recently signed PPAs based on feed-in tariffs. It also said that the resolution of the PPA renegotiation or cancellation issue remains crucial to retain investors’ interest in the sector. However, ICRA explained that such cancellation or renegotiation by discoms may be legally challenged by the affected power producers and its resolution could be a protracted affair. It also noted that the wind capacity in the states like Andhra Pradesh and Karnataka is around 830 MW and 490 MW, respectively.

The rating agency understands that the central government is trying to dissuade state discoms from such unilateral action on PPAs. Apart from this, it noted that several PPAs tied-up by wind and solar power developers with state-owned discoms do not have any termination penalty clause related to any discom event of default. The report further indicated that that these PPAs usually do not have any deemed generation clause and are based on single part tariff – which is linked to actual generation.  As a result, it pointed out that the wind and solar energy projects with PPAs at a relatively higher tariff in comparison with average power purchase cost of the off-taker discom remains exposed to a risk of forced back-down or grid curtailment, a situation which has occasionally been seen in a few states in the past.  

The CNX Nifty is currently trading at 9794.95, up by 40.60 points or 0.42% after trading in a range of 9752.60 and 9828.45. There were 35 stocks advancing against 16 stocks declining on the index.

The top gainers on Nifty were Indian Oil Corp. up by 3.03%, Hindalco up by 2.58%, BPCL up by 2.20%, Dr. Reddy’s Lab up by 2.18% and Tech Mahindra up by 1.79%. On the flip side, Indiabulls Housing Finance down by 1.88%, Hero MotoCorp down by 0.98%, Asian Paints down by 0.66%, Bosch down by 0.49% and Eicher Motors down by 0.47% were the top losers.

The Asian markets were trading mostly in green; Shanghai Composite rose 1.31 points or 0.04% to 3,288.22, FTSE Bursa Malaysia KLCI added 2.35 points or 0.13% to 1,773.97, KOSPI Index surged 10.33 points or 0.44% to 2,365.33, Jakarta Composite was up by 12.21 points or 0.21% to 5,873.21, Taiwan Weighted increased 65.68 points or 0.64% to 10,392.07 and Hang Seng jumped 315.05 points or 1.16% to 27,469.73.

On the flip side, Nikkei 225 was down by 9.29 points or 0.05% to 19,383.84.