Benchmarks witness spirited performance; Nifty reclaims 10K mark

Bulls tightened their grip on Dalal Street on Monday with Nifty recapturing their crucial 10,000 level, while Sensex ended just shy of 31,900 mark, as global investors relieved from the fact that North Korea did not indulge in any fresh provocative move that would flare up geopolitical tensions. Sentiments remained jubilant since morning with frontline gauges started the session with gap-up opening as traders reacted positively to the outcome of the crucial meeting of the Goods and Services Tax (GST) Council that took place on Saturday, where the council cut GST rate for over 40 items of mass consumption. Markets extended their rally on foreign brokerage firm’s report that India’s trade deficit is expected to improve in August to about $10.3 billion from $11.5 billion in July, largely on moderation in export as well as import growth. According to the global financial services major, the moderation, on a year-on-year basis, is likely owing to higher oil prices and unfavourable base effects. It estimates a moderation of export growth to 3.4% year-on-year in August from 3.9% in July and imports of 11.3% in August from 15.4% in July.

Meanwhile, welcoming the decision of the GST Council of reducing the rate on supply of various scrips from 12% to 5%, the Federation of Indian Export Organizations (FIEO) said the move will give a boost to the exports sector. Market participants shrugged off report that the investments in the domestic capital market through participatory notes (P-notes) slumped to a five-year low of Rs 1.35 lakh crore in July amid stringent norms put in place by SEBI.

Firm global cues too aided sentiments with European counters trading in green in early deals, as market recovered from the European Central Bank’s most recent policy statement and as investors continued to track the advancement of Hurricane Irma in the US. Asian markets ended mostly in green. China’s producer price inflation accelerated more than expected to a four-month high in August, fueled by strong gains in raw materials prices and pointing to strong, sustained growth for both factory profits and the economy.

Back home, majority of auto companies closed in green as domestic car companies sounded relieved after the GST Council on Saturday raised the vehicle cess by less than the maximum possible, although luxury automakers were more circumspect in their assessment of the new rates.  Power stocks remained buzzing, as Fitch Ratings in its report said that India may produce surplus power in the current financial year but sporadic outages continue to plague the country and 24% households are yet to be electrified. Hotel stocks remained on buyers’ radar taking cues from a survey that the domestic hotel industry is expected to see room revenue rising at about 11-13% CAGR over the next five years, mainly on the back of economic growth. According to the study by CARE Ratings, the industry is expected to register an overall healthy increase in revenue on back of economic growth and consistently growing middle-class along with rising disposable income.

Finally, the BSE Sensex surged 194.64 points or 0.61% to 31,882.16, while the CNX Nifty was up by 71.25 points or 0.72% to 10,006.05.

The BSE Sensex touched a high and a low of 31,952.87 and 31,797.89, respectively and there were 21 stocks on gaining side as against 10 stocks on losing side on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.71%, while Small cap index was up by 0.77%.

The top gaining sectoral indices on the BSE were Capital Goods up by 2.60%, Power up by 1.87%, Utilities up by 1.86%, Industrials up by 1.48% and Bankex up by 1.14%, while Telecom down by 0.24%, IT down by 0.14%, TECK down by 0.13% and Healthcare was down by 0.03% were the top losing indices on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 3.80%, Asian Paints up by 2.84%, Tata Motors - DVR up by 2.55%, Maruti Suzuki up by 2.41% and HDFC Bank up by 1.95%. On the flip side, Mahindra & Mahindra down by 1.10%, Infosys down by 0.66%, Sun Pharma down by 0.51%, SBI down by 0.40% and ICICI Bank down by 0.34% were the top losers.

Meanwhile, global rating agency, Fitch ratings in its latest report has said that India could actually produce surplus power in the financial year 2017-18, with an energy deficit of just 0.6 percent in the first three months of this fiscal year- a period of usually high seasonal electricity demand. It noted that a combination of subdued demand growth, consistent capacity additions along with relatively better networks is driving a widening surplus at energy exchanges. Though, it also said that sporadic outages continue to plague the country. At the same time, it pointed out that about 24 percent of households are yet to be electrified in India.

The ratings agency observed that the inability of financially stressed power distribution companies to purchase power, along with the absence of adequate network coverage, exerts significant downward pressure on India's thermal power utilisation. It noted that the cost-revenue gap remains at Rs 0.42 per kilowatt hour (kWh) along with aggregate technical and commercial (AT&C) losses of 20.6 per cent (for 24 states). It expects that improving these operational inefficiencies will drive any sustainable improvement.

On the other hand, the report stated that the government exceeded its target of setting up transmission lines again in 1H17, helping addressing power woes. It highlighted that electricity prices at exchanges declined by another 11 percent to Rs 2.4 per unit (kWh) in 2016-17. It also mentioned that tariffs are taking a hit mainly from the prevailing electricity demand-supply dynamics, lower coal costs and a decline in renewable tariffs.

As per the report, distribution utilities are shying away from signing new long-term power purchase agreements (PPAs) for both thermal and wind capacity - while awaiting clarity on the auction route for wind power, supported by the availability of cheaper spot electricity. It said that the new tariff-based auction for wind power yielded prices of Rs 3.5 per kWh (or unit) in February 2017, down from the lowest regulatory tariff of Rs 4.2. It also noted that solar tariffs also hit a new low of under Rs 3 a unit in May 2017 - making solar the cheapest source of electricity in the country.

The CNX Nifty traded in a range of 10,028.65 and 9968.80. There were 33 stocks in green as against 17 stocks in red, while one stock remained unchanged on the index.

The top gainers on Nifty were Indusind Bank up by 5.55%, Tata Power up by 5.06%, GAIL India up by 3.80%, Larsen & Toubro up by 3.72% and Yes Bank up by 3.19%. On the flip side, Indiabulls Housing down by 1.01%, Mahindra & Mahindra down by 0.99%, TCS down by 0.63%, Sun Pharma down by 0.60% and Infosys down by 0.49% were the top losers.

European markets were trading in green; UK’s FTSE 100 increased 41.51 points or 0.56% to 7,419.11, France’s CAC surged 59.98 points or 1.17% to 5,173.47 and Germany’s DAX was up by 135.77 points or 1.1% to 12,439.75.

Asian equity markets ended mixed on Tuesday, with Japanese markets succumbing to selling pressure to hit a one-week low, after reports that the government is drafting a plan to bring thousands of South Korea-based nationals to safety in the event of a military conflict with North Korea. South Korea's Asia Business Daily, citing an unidentified source, reported on Tuesday that North Korea had been spotted moving a rocket that appeared to be an intercontinental ballistic missile (ICBM) towards its west coast. Meanwhile, Chinese shares ended higher after a private business survey showed activity in China's services sector expanded at a faster pace in August.