Markets start new F&O series on optimistic note

Extending their northward journey for third straight day, Indian equity benchmarks ended the new F&O series on optimistic note. Soon after a cautious start, markets gained traction and showed ample of strength in early deals, as traders chose to ignore weak Gross Domestic Product (GDP) numbers which came at a dismal 5.70 percent against 7.90 percent in the same quarter last year and a 13 quarter lowest level. According to data released by the government, quarterly GVA at basic prices for Q1FY18 from manufacturing sector grew by 1.2 percent as compared to the growth of 10.7 percent in Q1FY17. Traders focused on Finance Minster Arun Jaitley’s statement the lower GDP numbers to pre-GST destocking of goods and expressed hope that the economy will grow at 7 percent, saying manufacturing has bottomed out. Also, Chief Statistician of India T C A Anant said that the slowdown in GDP growth for the first quarter of 2017-18 to 5.7 percent was due to de-stocking by firms as caution ahead of the GST roll-out on July 1.

Markets continued its strong run till end with Sensex ending near its crucial 31,900 mark, while Nifty ending above their crucial 9,950 mark, as traders shrugged off eight core sectors which slowed down to 2.4 percent in July. The contraction was mainly seen in output of crude oil, refinery products, fertiliser and cement. Rebound in India’s manufacturing PMI in the month of August to 51.2 as compared to 47.9 in July, aided by rise in new orders and output across the country, also contributed to the up-move.

Firm opening in European counters too aided sentiments, with CAC, DAX and FTSE all trading in green in early deals, as investors geared up for more data releases, while taking note of the positive trading seen overseas. Asian markets ended mostly in green with regional manufacturing figures aiding sentiments. South Korea’s annual inflation surged in August to its highest in more than five years as heavy rain and a summer heat-wave pushed up the price of fresh foods.

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. Some support also came after Finance Minister Arun Jaitley put private sector debtors on notice, saying they will have to pay their dues to banks or others will step in and take control of the businesses. The minister also defended demonetization, declaring that its impact was along expected lines and the economy will benefit from it in the medium and long term.

On the sectoral front, auto stocks remained in top gear on reporting better sales numbers for the month of August. Tata Motors reported 14% growth in total sales, while Maruti Suzuki clocked 23.8% growth in August sales. Telecom stocks remained buzzing, as a government panel has refused to ease spectrum cap rules, which believes extending the fee-payment tenure for auctioned airwaves and lowering interest rates payable on dues will be enough to help restore the heavily indebted industry's financial health.

Finally, the BSE Sensex surged 161.74 points or 0.51% to 31,892.23, while the CNX Nifty was up by 56.50 points or 0.57% to 9,974.40.

The BSE Sensex touched a high and a low of 31,944.10 and 31,707.27, 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 gained 0.95%, while Small cap index was up by 0.87%.

The top gaining sectoral indices on the BSE were Realty up by 2.59%, Auto up by 1.94%, Metal up by 1.86%, Healthcare up by 1.84% and Consumer Discretionary Goods & Services was up by 1.43%, while Telecom down by 0.36%, Consumer Durables down by 0.27%, IT down by 0.17% and TECK was down by 0.10% were the few losing indices on BSE.

The top gainers on the Sensex were Dr. Reddy’s Lab up by 9.75%, Asian Paints up by 3.97%, Bajaj Auto up by 3.92%, Tata Motors up by 3.74% and Tata Motors - DVR up by 2.44%. On the flip side, TCS down by 1.34%, Bharti Airtel down by 1.26%, Power Grid down by 1.17%, HDFC down by 0.92% and Wipro down by 0.75% were the top losers.

Meanwhile, with the government setting a target of 175 GW renewable energy (RE) capacity by the end of 2022, the rating agency ICRA in its latest report has said that growth in the domestic coal demand is likely to witness a structural slowdown. It noted that over the years, the capital cost of setting up renewable energy (RE) in the country has been going down steadily with the tariffs of RE coming at par with the conventional sources. It also highlighted that this year, solar power tariff dropped to hit a new low of Rs 2.44 per unit in the auction conducted for Bhadla solar park.

The rating firm believes that a greater parity between conventional and RE tariffs, along with the current thermal overcapacity, will lead to a perceptible slowdown in fresh investments in setting up coal-based generation capacities in the next five years. It also expects that this trend would trigger a prolonged period of subdued demand of thermal coal for domestic miners. Considering that the country’s RE capacity reaches 125 GW in 2022, the report noted that domestic coal demand is likely to register a modest compounded annual growth rate of around 3.5 percent between FY2018 and FY2022, as against 5.6 percent registered between FY2013 and FY2017. Reflecting the trend, it further said that coal India’s ambitious coal production target of 1 billion tonne in FY2020 is likely to be missed by a wide margin.

However, the report maintained that notwithstanding the anticipated slowdown in average annual coal demand in the next five years, domestic coal production is likely to grow by a higher compounded annual growth rate (CAGR) of around 5.5 per cent between FY2018 and FY2022, leading to a significant reduction in India’s coal imports. It also said that thermal coal imports are expected to contract to below 100 metric tonne in FY2022, declining from 149 metric tonne in FY2017. It added that a gradual replacement of imported coal by domestic coal is expected to help domestic miners to an extent.

The CNX Nifty traded in a range of 9,983.45 and 9,909.85. There were 40 stocks in green as against 11 stocks in red on the index.

The top gainers on Nifty were Dr. Reddy’s Lab up by 9.46%, Aurobindo Pharma up by 4.42%, Asian Paints up by 3.98%, Tata Motors up by 3.84% and Bajaj Auto up by 3.64%. On the flip side, Indian Oil Corporation down by 1.47%, TCS down by 1.43%, Power Grid down by 1.37%, Bharti Airtel down by 1.10% and Wipro down by 1.04% were the top losers.

European markets were trading in green; UK’s FTSE 100 rose 18.81 points or 0.25% to 7,449.43, France’s CAC increased 42.78 points or 0.84% to 5,128.37 and Germany’s DAX was up by 87.09 points or 0.72% to 12,142.93.

Asian equity markets ended mostly higher on Friday in response to US President Donald Trump's speech on tax reform and positive regional manufacturing data. Subdued US inflation figures also added to bets that the Federal Reserve will hold off from increasing interest rates again this year. The focus remained on the all-important US jobs report due tonight, with economists expecting the report to show an increase of about 180,000 jobs in August. Chinese shares rose modestly to cap their third week of gains after a private survey showed Chinese manufacturing activity expanded at the fastest pace in six months in August, buoyed by a surge in export orders and higher prices. Further, Japanese shares ended higher as the dollar held steady against the yen and the latest survey from Nikkei showed activity in Japan's manufacturing sector continued to expand in August and at a faster rate. Meanwhile, Capital spending figures for the second quarter missed forecasts and a gauge of consumer sentiment weakened more-than-expected in August, taking some shine off the manufacturing data. Markets in Malaysia, Singapore and Indonesia were closed for Eid-ul-Adha.