Benchmarks trade marginally in green; Sensex reclaims 31,700 mark

Indian equity benchmarks have made a decent start and are trading slightly in green in early deals on Thursday, after the Reserve Bank of India (RBI) held its policy rate steady near seven-year lows on Wednesday after inflation surged. Sentiments remained upbeat with NITI Aayog CEO Amitabh Kant’s statement that while there has been a 'little bit of dip' in the Indian economy, it is now bouncing back. Prime Minister Narendra Modi too has asserted that the economy is much better than critics make it out to be and that his government is “totally committed” to reverse the slowdown in GDP growth in recent quarters. Some support also came with RBI stating that it will review the foreign portfolio investment norms and come out with a new set of regulations, to be effective next April.

Global cues too remained supportive with most of the Asian counters trading in green terrain at this point of time, taking their cues from strong US data although holiday-thinned trade and uncertainty about the impact of recent hurricanes on the US economy are likely to keep investors cautious. The US markets moved further high in the last session and the major averages climbed to new record closing highs.

Back home, banking stocks remained in action with RBI’s 50 basis points cut in SLR, which will further ease liquidity in the banking system. Prataap Snacks made a stellar listing on the bourses today and are trading with a gain of around 40%. The Rs 482 crore IPO was oversubscribed 47.39 times.

The BSE Sensex is currently trading at 31768.43, up by 96.72 points or 0.31% after trading in a range of 31679.91 and 31772.41. There were 24 stocks advancing against 7 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index jumped 0.81%, while Small cap index was up by 0.90%.

The top gaining sectoral indices on the BSE were Healthcare up by 1.31%, Realty up by 1.23%, Basic Materials up by 0.79%, Industrials up by 0.71% and Auto up by 0.69%, while Telecom down by 0.87% and Oil & Gas down by 0.04% were the only losing indices on BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 1.84%, Dr. Reddy’s Lab up by 1.19%, Cipla up by 1.07%, Lupin up by 1.04% and Sun Pharma up by 0.97%. On the flip side, Power Grid down by 0.84%, Bharti Airtel down by 0.46%, Hero MotoCorp down by 0.44%, SBI down by 0.32% and TCS down by 0.19% were the top losers.

Meanwhile, the Reserve Bank of India (RBI), amid lingering concerns over inflation, maintained the status quo in its fourth Bi-Monthly Monetary Policy Statement, 2017-18 and kept the policy repo rate, at which it lends to banks, unchanged at a near seven-year low of 6.0 percent, despite a sharp slowdown in economic growth. Consequently, the reverse repo rate, at which RBI borrows from banks, remains at 5.75 percent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.25 percent. The committee also did not tweak the cash reserve ratio (CRR), which remained unchanged at 4 percent, however statutory liquidity ratio (SLR) was cut by 50 basis points to 19.5 percent from 20 percent, which will be effective from October 14.

The six member monetary policy committee (MPC), headed by RBI governor Urjit Patel, also decided to keep the policy stance neutral and monitor incoming data closely in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 percent. The MPC expects inflation to rise from current level and range between 4.2-4.6 percent in the second half of this year. It added that various structural reforms introduced in the recent period will likely be growth augmenting over the medium-to-long-term by improving the business environment, enhancing transparency and increasing formalisation of the economy.

Acknowledging sluggish economic activity, the central bank revised the projection of real gross value added (GVA) growth forecast downward to 6.7 percent from an August 2017 projection of 7.3 percent, with risks evenly balanced. It also said that teething problems linked to the Goods and Services Tax (GST) and bandwidth constraints may get resolved relatively soon, allowing growth to accelerate in second half. It further said that the GST implementation had an adverse impact, rendering prospects for the manufacturing sector uncertain in the short term. This may further delay the revival of investment activity, which is already hampered by stressed balance sheets of banks and corporates.

The RBI said that it is imperative to reinvigorate investment activity which, in turn, would revive the demand for bank credit by industry as existing capacities get utilised and the requirements of new capacity open up to be financed. It added that recapitalising public sector banks adequately will ensure that credit flows to the productive sectors are not impeded and growth impulses not restrained. However, it cautioned that farm loan waivers and fiscal stimulus could push up the combined (Centre plus States) fiscal deficit to gross domestic product (GDP) ratio by around 100 basis points in 2017-18.

The CNX Nifty is currently trading at 9938.35, up by 23.45 points or 0.24% after trading in a range of 9911.55 and 9940.70. There were 35 stocks advancing against 15 stocks declining on the index.

The top gainers on Nifty were Yes Bank up by 2.78%, Aurobindo Pharma up by 2.23%, Mahindra & Mahindra up by 1.90%, Cipla up by 1.30% and Indiabulls Housing up by 1.14%. On the flip side, Bharti Infratel down by 2.58%, Power Grid down by 1.00%, HPCL down by 0.97%, BPCL down by 0.92% and Tech Mahindra down by 0.89% were the top losers.

Asian markets were trading mostly in green; Nikkei 225 increased 16.72 points or 0.08% to 20,643.38, Taiwan Weighted increased 50.06 points or 0.48% to 10,519.41 and Jakarta Composite was up by 24.74 points or 0.42% to 5,926.73.

On the flip side FTSE Bursa Malaysia KLCI was down by 3.4 points or 0.19% to 1,758.44.