Post Session: Quick Review

Indian equity benchmarks traded on a lackluster note throughout the day and ended the session with modest gains ahead of Gross Domestic Product (GDP) figures to be announced later in the day. The market breath was in favor of advances with three stocks advancing against every two declining stocks. The equity benchmarks made a cautious start and traded in red terrain in early deals but buying at latter part of the day pulled the markets above neutral line with Nifty closing above 9,900 mark. Traders remained concerned with assessment of RBI in its annual report that fiscal consolidation may come under threat at the central and state levels due to the immediate effects of the goods and service tax (GST), loan waivers and pay revisions, putting pressure on the overall growth matrix. The central bank said that the amount of counterfeit notes in the system is more than double of what the RBI had estimated in the past. The likely quantum of counterfeit notes in the system is estimated to be Rs 23,235 crore. In its Annual report, the Reserve Bank of India (RBI) said that there are evidences of a bubble building up in Indian stock prices based on an econometric model, but there is no bubble yet since the current stock rally is driven by strong fundamentals. Separately, a global financial service major enlightened that India’s economic growth is likely to remain soft and the GDP is expected to grow by 6% in April-June, down from 6.1% in the preceding quarter. The report added that higher private consumption and government spending is likely to be dulled by weak investment and exports growth over the quarter. Repercussions of an early budget and the newly implemented GST rates, receipts and rebates are likely to distort upcoming GDP readings.

Buying crept in with positive rollover in derivatives segment coupled with Finance Minister Arun Jaitley’s statement that the Goods and Services Tax (GST) is bound to impact the direct tax collection as well due to the increased detection technology and greater compliance. The Finance Minister also said that even before GST was rolled out, the impact of demonetization has expanded the number of assessees under the personal income tax. Some support also came after global credit rating agency, Moody’s Investors Service’s latest report highlighted that its outlook on India’s banking system is stable, in line with the stable outlooks for 10 of the 15 banks which it has rated, reflecting stable view of operating environment, amid improved prospects for asset quality. Moody’s further said that though the indicators like net new nonperforming loan (NPL) formation and problem loan ratios suggest a bottoming of the credit cycle, deteriorating asset quality in agriculture, and micro, small- and medium-sized enterprise (MSME) portfolios pose risks.

On the global front, Asian markets closed mixed. Bank of Japan board member Takako Masai said she is confident that the economy is getting closer to achieving the bank’s elusive inflation target, countering market views that slow wage growth and fragile consumption will constrain price growth. Growth in China’s manufacturing sector unexpectedly accelerated in August, suggesting the world’s second-largest economy is still expanding at a healthy clip despite rising financing costs and a cooling housing market. The European markets were trading in green as sentiments continued to improve and as markets awaited the release of euro zone inflation data due later in the trading session.

Back home, Tata Motors and Mahindra & Mahindra closed in red after India’s top automakers expect a slump in demand following the cabinet on Wednesday approved an ordinance that will allow the cess on larger passenger cars and sports utility vehicles (SUVs) to be raised to as much as 25% from 15% under the GST regime.

The BSE Sensex ended at 31723.79, up by 77.33 points or 0.24% after trading in a range of 31551.85 and 31757.18. There were 15 stocks advancing against 16 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 0.82%. (Provisional)

The top gaining sectoral indices on the BSE were Realty up by 1.23%, Energy up by 1.10%, Consumer Disc up by 0.85%, Power up by 0.62% and Oil & Gas up by 0.61%, while Healthcare down by 0.46%, Bankex down by 0.19%, IT down by 0.09%, Metal down by 0.02% and TECK down by 0.01% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Wipro up by 2.31%, Bajaj Auto up by 2.04%, Maruti Suzuki up by 1.99%, Reliance Industries up by 1.99% and Asian Paints up by 1.44%. (Provisional)

On the flip side, Coal India down by 1.45%, Dr. Reddy’s Lab down by 1.44%, Infosys down by 1.26%, Mahindra & Mahindra down by 1.15% and ONGC down by 1.04% were the top losers. (Provisional)

Meanwhile, amid improved prospects for asset quality, global credit rating agency, Moody's Investors Service has said that its outlook on India's banking system is stable, in line with the stable outlooks for 10 of the 15 banks which it has rated, reflecting stable view of operating environment.

Moody's further said that though the indicators like net new nonperforming loan (NPL) formation and problem loan ratios suggest a bottoming of the credit cycle, deteriorating asset quality in agriculture, and micro, small- and medium-sized enterprise (MSME) portfolios pose risks.

The report further said that public and private sector banks will continue to be bifurcated due to capitalization due to government's reluctance to infuse more capital into private sector banks. However, it noted that further improvement in the system's overall loan loss coverage along with subdued loan growth will ease pressure on capitalization.

As per the report, banks’ profitability remains low but it is improving. Besides it said that funding and liquidity of banks will remain strong following demonetization which has led to surge in low cost deposits with banks. Furthermore, the agency pointed that despite a reluctance to bolster bank capital, government support will remain strong for public sector banks, since failure for any of these banks could pose risks to systemic confidence.

 The CNX Nifty ended at 9916.20, up by 31.80 points or 0.32% after trading in a range of 9856.95 and 9925.10. There were 28 stocks advancing against 23 stocks declining on the index. (Provisional)

The top gainers on Nifty were Wipro up by 2.70%, Maruti Suzuki up by 2.15%, Tata Power up by 2.06%, Reliance Industries up by 2.04% and Bajaj Auto up by 1.76%. (Provisional)

On the flip side, Bharti Infratel down by 2.92%, Bosch down by 2.28%, Coal India down by 1.45%, Infosys down by 1.35% and Aurobindo Pharma down by 1.22% were the top losers. (Provisional)

The European markets were trading in green; UK’s FTSE 100 increased 47.21 points or 0.64% to 7,412.47, Germany’s DAX increased 69.62 points or 0.58% to 12,072.09 and France’s CAC increased 29.63 points or 0.59% to 5,085.97.

Asian equity markets ended mixed on Thursday as renewed tensions between Washington and North Korea as well as weak commodity prices on the back of a firmer dollar overshadowed upbeat data from the US and China. Geopolitical tensions returned to the fore after US President Donald Trump declared ‘talking is not the answer’ to the tense standoff with North Korea. Chinese stocks ended slightly lower as investors paused for breath after a recent rally on the back of robust earnings from major Chinese companies. Activity in China's manufacturing sector continued to expand in August, and at a faster rate, the latest survey from the National Bureau of Statistics showed today with a PMI score of 51.7. That beat forecasts for 51.3 and was up from 51.4 in July. However, the official non-manufacturing PMI came in with a score of 53.4, down from 54.5 in the previous month. Moody's Investors Service raised China's growth forecast, citing stronger expansion in the first half of the year. The rating agency raised China's growth outlook for 2017 to 6.8 percent from 6.6 percent. Meanwhile, Japanese shares hit two-week highs as the yen weakened and US Treasury yields rose in response to upbeat US economic data, helping spur gains in exporters and financials. The Malaysian market was closed for the National Day holiday.