Benchmarks add gains; Sensex above 32,000 mark

Indian equity benchmarks added gains and continued their firm trade hovering near the highest point of the day in the morning session on account of buying in frontline blue chip counters. Foreign Portfolio Investors stood net sellers in domestic equity markets on Monday and sold shares worth Rs 126.56 crore with gross purchases and gross sales of Rs 3,843.82 crore and Rs 3,970.38 crore, respectively. Traders took encouragement with report that Direct Tax collections in the first five months of the current fiscal grew 17.5% to Rs 2.24 lakh crore, mainly on account of income tax mop-up from individuals. This is 22.9% of the total budget estimates of direct taxes, which comprise personal income and corporate tax, for the current financial year. Some support also came with Former Reserve Bank of India (RBI) governor Raghuram Rajan’s statement that reviving stalled projects and a thrust on infrastructure will be the key to India reaching the 8% economic growth in the short-term. He added that India should focus on removing the bottlenecks on all stalled projects in order to achieve 8-9% growth.

Meanwhile, global rating agency ARC Ratings, in its latest report has affirmed the ‘BBB+’ rating to the India and maintained a stable outlook on expectation of a strong economic growth. The rating agency also affirmed its ‘A-’ foreign currency and ‘A’ local currency country ceilings for the country. It has said that a solid outlook for economic dynamism continues to drive the sovereign ratings and added that India continues to enjoy solid economic performance and a strong medium term growth outlook, with real GDP growing 7.1% in FY2017. Investors took note that the government expects a double-digit improvement in India’s rank in the global index on ease of doing business, likely to be announced by the World Bank next month. Separately, as the American economy is surging ahead with a firm recovery, the USA is ranking as India’s number one destination for engineering products with shipments aggregating $2.9 billion between April and July period of the current fiscal, according to EEPC India data.

Traders were seen piling up position in Realty, Metal and Basic Materials stocks, while selling was witnessed in Telecom sector stocks. In scrip specific development, Jaiprakash Associates and Jaypee Infratech were trading under pressure after Supreme Court on Monday lifted stay on insolvency resolution proceedings against Jaypee Infratech and ordered its parent, Jaiprakash Associates, to deposit Rs 2,000 crore by October 27. Auto stock were buzzing after data released by industry body Society of Indian Automobile Manufacturers (SIAM) showed that passenger vehicle sales grew 14% year on year at 2,94,335 units in August, while two-wheeler sales hit a record 18,91,062 units, beating the previous monthly high of 18,68,952 posted in September 2016.

On the global front, Asian markets were trading mostly in green, with investors breathing a sigh of relief as North Korean fears eased slightly and the worst-case scenario from Hurricane Irma looked to have been avoided. 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, the BSE Sensex and NSE Nifty were trading above the psychological 32,000 and 10,050 levels respectively. The market breadth on BSE was positive in the ratio of 1301:838, while 99 scrips remained unchanged.

The BSE Sensex is currently trading at 32032.17, up by 150.01 points or 0.47% after trading in a range of 31950.24 and 32039.37. There were 21 stocks advancing against 10 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.68%, while Small cap index was up by 0.78%.

The top gaining sectoral indices on the BSE were Realty up by 1.72%, Metal up by 1.13%, Basic Materials up by 1.05%, Oil & Gas up by 0.98% and FMCG up by 0.86%, while Telecom down by 0.36% was the sole losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 3.39%, Hindustan Unilever up by 1.66%, SBI up by 1.42%, Tata Motors - DVR up by 1.21% and Asian Paints up by 1.02%.

On the flip side, ONGC down by 0.92%, Cipla down by 0.92%, Dr. Reddy’s Lab down by 0.75%, Coal India down by 0.74% and Bharti Airtel down by 0.46% were the top losers.

Meanwhile, a day ahead of the release of the August retail inflation data, a Reserve Bank of India (RBI) paper has said that farm loan waiver amounting to Rs 88,000 crore likely to be released in 2017-18 by seven states, including Uttar Pradesh and Maharashtra, may push inflation on permanent basis by 0.2 per cent.

In the fourth release Mint Street Memos titled ‘Agriculture Loan Bank Accounts - A Waiver Scenario Analysis and the fifth series titled ‘Farm Loan Waivers, Fiscal Deficit and Inflation, said that some Indian states have announced farm debt waivers recently, which bear ramifications for the fiscal burden of states over the medium term. Empirical estimates suggest that fiscal deficit can have an inflationary impact. If the combined fiscal deficit for 2017-18 goes up by 40 bps on account of farm loan waivers(both actual and intended), with the budgeted combined fiscal deficit at around 5.9 percent for 2017-18 and inflationary momentum remaining benign, ceteris paribus, this may lead to around 20 bps permanent increase in inflation, starting 2017-18.

Elaborating further, it said that loan waivers could add to the fiscal burden over the medium term as they are essentially a transfer from tax payers to borrowers. Based on stylized assumptions, the total loan waiver amount that is likely to be released in 2017-18 by seven states is around Rs 881 billion (0.5 per cent of Gross Domestic Product, GDP). Depending on possible sources of financing, the additional burden including (i) additional market borrowing and (ii) pruning of wasteful expenditure, this may result in an increase in the consolidated Gross Fiscal Deficit - Gross Domestic Product (GFD-GDP) ratio of the states by about 20-40 basis points (bps). Higher fiscal deficits per se can lead to an increase in inflation expectations and actual inflation.

The CNX Nifty is currently trading at 10051.25, up by 45.20 points or 0.45% after trading in a range of 10028.05 and 10056.85. There were 37 stocks advancing against 14 stocks declining on the index.

The top gainers on Nifty were Tata Steel up by 3.23%, BPCL up by 2.81%, Zee Entertainment up by 2.46%, ACC up by 2.19% and Bank of Baroda up by 2.18%.

On the flip side, IndusInd Bank down by 1.83%, Cipla down by 1.18%, Tech Mahindra down by 1.13%, Dr. Reddy’s Lab down by 0.79% and Bharti Airtel down by 0.78% were the top losers.

The Asian markets were trading mostly in green; Jakarta Composite increased 0.94 points or 0.02% to 5,872.82, FTSE Bursa Malaysia KLCI increased 2.22 points or 0.12% to 1,784.96, KOSPI Index increased 3.88 points or 0.16% to 2,362.96, Shanghai Composite increased 4.35 points or 0.13% to 3,380.77, Taiwan Weighted increased 21.12 points or 0.2% to 10,593.28 and Nikkei 225 increased 230.29 points or 1.18% to 19,776.06.

On the other hand, Hang Seng decreased 2.67 points or 0.01% to 27,952.46.