Benchmarks extend winning streak as RBI maintains status quo

Extending northward journey for fourth straight session, Indian equity benchmarks ended the session with a gain of over half a percent on Wednesday, reclaiming their crucial 9,900 (Nifty) and 31,600 (Sensex) levels, as the Reserve Bank of India’s (RBI's) decision to keep repo rate unchanged at 6.0 percent was in line with investors’ expectation in view of upward trend in inflation. The central bank, however, has slashed the statutory liquidity ratio or the percentage of deposits that banks have to park in government securities, by 0.50 percent to 19.50 percent. The move is expected to raise buoyancy in the loans market as banks will have slightly higher funds for lending. Soon after a cautious start markets gained momentum and traded with traction through the session, as traders took encouragement with the growth of eight core infrastructure industries which surged to five-month high by 4.9 percent in August 2017, as compared to 2.4 percent 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 percent higher compared to the index of August, 2016.

Sentiments also remained buoyed with foreign brokerage report highlighting that a majority 77 percent 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.

On the global front, European markets were trading mostly in red in early deals, 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. Asian markets ended mostly in green on Wednesday. Japanese shares edged higher led by auto stocks as US demand for cars ballooned following damage from recent hurricanes.

Back home, stocks related to oil and gas counters remained on buyers’ radar, as the government reduced basic excise duty rate on both branded and unbranded petrol and diesel by Rs 2 per litre. The Finance Ministry said that this has been done to cushion the impact of rising international prices of crude petroleum oil, petrol and diesel on their retail sale prices. Also, a report by Moody’s has said that India will surpass China as the fastest-growing Asian market for petroleum products in 2018, on the back of a 6 per cent demand growth. Public sector bank’s stocks edged higher 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.

Finally, the BSE Sensex surged 174.33 points or 0.55% to 31,671.71, while the CNX Nifty was up by 55.40 points or 0.56% to 9,914.90.

The BSE Sensex touched a high and a low of 31,752.16 and 31,457.78, respectively and there were 20 stocks on gaining side as against 11 stocks on losing side on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.39%, while Small cap index was up by 0.79%.

The top gaining sectoral indices on the BSE were Healthcare up by 1.83%, Energy up by 1.75%, FMCG up by 1.57%, Oil & Gas up by 1.28% and Industrials up by 0.80%, while Telecom down by 0.54%, Metal down by 0.24%, TECK down by 0.23%, IT down by 0.17% and Consumer Durables down by 0.10% were the top losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 2.98%, Tata Motors - DVR up by 2.68%, Reliance Industries up by 2.61%, ITC up by 2.30% and Kotak Mahindra Bank up by 2.16%. On the flip side, Bharti Airtel down by 2.26%, ICICI Bank down by 0.88%, HDFC Bank down by 0.66%, Axis Bank down by 0.63% and Maruti Suzuki down by 0.58% were the top losers.

Meanwhile, the global ratings agency, Moody’s Investors Service in its latest report has said that India will overtake China as the fastest-growing Asian market for petroleum products by the year 2018, on the back of a 6 percent demand growth in the sector. As economic activity in China slows down, the report expected that China’s refined product demand growth will moderate to 2.5-3 percent in FY18, which is nearly half of compounded annual growth rate of 5 percent in 2012-16. It pointed out that in absolute terms, China will still account for 48 percent of Asia's R&M sector's demand growth in 2018. 

Despite the weakening growth numbers in China and India, the ratings agency believed that both the countries will continue to be the key growth engines for the sector in Asia, representing over 80 percent of the expected growth in 2018. Citing the American energy information administration projections, it said that the demand for petroleum products in the Asia Pacific will rise a modest 2 percent or 0.7 million barrels per day in to 34.6 million bpd in 2018.

Given the oil sector's reliance on China and increasingly India, the report further mentioned that demand would face considerable risks if economic growth weakens materially below their expectations. Driven by China’s and India’s appetite for petroleum products and continued capacity rationalisation, the report said that refining margins will remain firm, thereby supporting the earnings growth. It also expected the average Asian refining margins to be largely in line with the average of $6.2 per barrel for the last three years, but better than $5.1 per barrel in 2016.

The CNX Nifty traded in a range of 9,938.30 and 9,850.65. There were 33 stocks in green as against 17 stocks in red on the index.

The top gainers on Nifty were Reliance Industries up by 3.21%, Sun Pharma up by 3.05%, Aurobindo Pharma up by 3.01%, Dr Reddy’s up by 2.42% and HPCL up by 2.36%. On the flip side, Bharti Airtel down by 2.07%, ICICI Bank down by 0.86%, HDFC Bank down by 0.82%, Eicher Motors down by 0.79% and Axis Bank down by 0.76% were the top losers.

European markets were trading mostly in red; France’s CAC decreased 16 points or 0.3% to 5,351.41 and UK’s FTSE 100 was down by 4.81 points or 0.06% to 7,463.30, while Germany’s DAX was up by 5.53 points or 0.04% to 12,908.18.

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.