Post Session: Quick Review

Indian equity benchmarks traded in green throughout the day and ended the session with gain of more than six tenth of a percent. The markets held gains even after RBI MPC kept repo rate unchanged. The benchmarks traded in fine fettle in early deals as traders took encouragement with the growth of eight core infrastructure industries which surged to five-month high by 4.9% in August 2017, as compared to 2.4% in July 2017, on the back of a double-digit jump in coal production and subsequent rise in electricity generation. According to the data released by the ministry of Commerce and Industry showed the combined Index of eight core industries stood at 123.6 in August, 2017, which was 4.9% higher compared to the index of August, 2016. Some support also came with a foreign brokerage report highlighting that a majority 77% of the mid market enterprises (MMEs) in the country are confident about the domestic economy and expect higher revenue growth compared to their global peers.

Separately, the government sees the decline in growth as a hiccup and expects the economy to pick up pace in the fiscal second quarter as teething troubles with GST get resolved and the effect of demonetization wanes. The latest high-frequency indicators such as commercial vehicles sales, core sector growth and manufacturing PMI bolster this contention. Finance secretary Ashok Lavasa enlightened that the economy is going through a phase of readjustment to a system of formalization that entails greater tax compliance and transparency in financial transactions. Meanwhile, investors took note that the Reserve Bank of India (RBI) kept its key lending rate - the repo rate - unchanged at 6 percent, dashing hopes of lower borrowing costs for households and the companies ahead of the festival season. RBI has said that the GVA growth forecast for FY18 has been revised to 6.7 percent from 7.3 percent earlier. Bank rate and marginal standing facility have been kept unchanged at 6.25 percent. The six member monetary policy committee (MPC), headed by RBI governor Urjit Patel, kept one eye firmly on the rising inflation that is perilously inching towards the RBI’s 4 percent threshold level.

On the global front, Asian markets closed mostly higher, with the Chinese central bank’s weekend move to free up more liquidity boosted sentiments as the world’s second-largest economy grows at a steady pace. Japan’s services sector expanded in September at the slowest rate in 11 months as the pace of new orders eased, though a raft of other data suggests the economic recovery remains intact even as momentum may have ebbed slightly in the third quarter. The European markets were trading mostly in red as investors kept a close eye on events in Catalonia, where the leader of the region’s separatist government has said he will declare independence in a matter of days.

Back home, public sector bank stocks rallied after the central bank, in its policy, made a pitch for recapitalization of PSU banks. It said that recapitalizing public sector banks adequately will ensure that credit flows to the productive sectors are not impeded and growth impulses not restrained.

The BSE Sensex ended at 31713.78, up by 216.40 points or 0.69% after trading in a range of 31457.78 and 31752.16. There were 20 stocks advancing against 11 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index was up by 0.46%, while Small cap index was up by 0.86%. (Provisional)

The top gaining sectoral indices on the BSE were Healthcare up by 1.98%, Energy up by 1.93%, FMCG up by 1.59%, Oil & Gas up by 1.40% and Industrials up by 0.89%, while Telecom down by 0.69%, TECK down by 0.19%, Metal down by 0.17%, IT down by 0.11% and Consumer Durables down by 0.07% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Sun Pharma up by 3.22%, Reliance Industries up by 3.18%, Tata Motors - DVR up by 2.85%, Dr. Reddy’s Lab up by 2.57% and ITC up by 2.16%. (Provisional)

On the flip side, Bharti Airtel down by 2.50%, Axis Bank down by 0.75%, HDFC Bank down by 0.73%, Maruti Suzuki down by 0.68% and Tata Steel down by 0.62% were the top losers. (Provisional)

Meanwhile, raising concerns over the accumulation of bad loans or non-performing assets (NPAs) in banking sector, credit rating agency, Crisil in its latest report has said that banks with high NPAs continue to choke Indian economy. Rs 11.5 lakh crore of bad loans is estimated as of March 31, 2017 in the sector.

Crisil further termed India Inc’s credit quality as a tale of two distinct loan books, by distinguishing in good and bad one. It said that the good one is where improvements have been seen over the past year, and which should sustain, while bad one is where sizeable stressed assets exist. However, the rating agency found improvement in the credit ratio of corporates on the back of better financial metrics. 

The report also noted that debt-weighted credit ratio of the companies surged to 3.19 times first half as against 0.88 times during the period a year ago. The credit ratio stood at 1.59 times and the debt-weighted credit ratio at 1.94 times, indicating that the trend of recovery in credit quality has sustained for a year now. A reading above 1 indicates upgrades outnumbering downgrades. On a rolling 12 months average basis, for the first time in the past five years, both these ratios are above 1. Crisil gave credit of improvement in credit ratio to the better financial indicators as corporates kept away from capex given the output gap-or substantial headroom in capacity utilisation-in many sectors. It is also expecting continuation in the upward trend till demand firms up and added that lower interest costs will provide further support.

The CNX Nifty ended at 9925.45, up by 65.95 points or 0.67% after trading in a range of 9850.65 and 9938.30. There were 34 stocks advancing against 16 stocks declining on the index. (Provisional)

The top gainers on Nifty were Sun Pharma up by 3.27%, Reliance Industries up by 3.24%, Aurobindo Pharma up by 2.82%, Dr. Reddy’s Lab up by 2.43% and HPCL up by 2.36%. (Provisional)

On the flip side, Bharti Airtel down by 2.12%, Eicher Motors down by 1.01%, Axis Bank down by 0.83%, HDFC Bank down by 0.77% and ICICI Bank down by 0.77% were the top losers. (Provisional)

The European markets were trading mostly in red; UK’s FTSE 100 decreased 8.4 points or 0.11% to 7,459.71, France’s CAC decreased 18.17 points or 0.34% to 5,349.24, while Germany’s DAX increased 13.02 points or 0.1% to 12,915.67.

Asian equity markets ended mostly higher on Wednesday. Japanese shares cheered by an upbeat outlook for the global economy though gains were trimmed by the close as the yen bounced against the dollar. Further, Hong Kong shares ended higher, with mainland automakers, banks and insurers leading the surge after the Chinese central bank’s weekend move to free up liquidity to support small enterprises. Meanwhile, markets in South Korea and China were closed for the Harvest Festival and National Day, respectively. Taiwan remained closed for the Med-Autumn Festival.