Bull run continues on Dalal Street; Metal shines

Indian equity benchmarks continued their bullish run in late morning session, with all the sectoral indices trading in green territory on the back of firm Asian cues. The Nifty crossed the psychological level of 9950 mark, while the broader markets were performing with traction in line with the larger peers. Sentiments remained optimistic with Commerce and Industry Minister Suresh Prabhu’s statement that he is working together with the finance ministry and other departments to firm up policy initiatives along with fiscal incentives. He added that the country's economy is doing well and it has a huge growth potential in coming years. Besides, traders were taking relief with World Bank President Jim Yong Kim’s statement that the recent slowdown in India's economic growth is an ‘aberration’ caused by temporary disruptions in preparation for the Goods and Service Tax (GST) and asserted that it will get corrected in the near future. He said that GST is going to have a positive impact on the Indian economy.

On the global front, Asian markets were trading in mostly in green, following the overnight gains on Wall Street as better-than-expected economic data reinforced optimism in the world's largest economy. However, gains were modest in most markets as investors turned cautious ahead of the release of the closely-watched monthly US jobs report for September later in the day.

Back home, in scrip specific development, Maruti Suzuki India gained after the company launched a refreshed CELERIO, in a move to delight customers this festival season. Brand CELERIO has been a synonym of modern and progressive design and technology. Stylish front grille design, elegant back door garnish, modern seat fabric design and a host of safety features make the new CELERIO designed to impress.

The BSE Sensex is currently trading at 31799.28, up by 207.25 points or 0.66% after trading in a range of 31632.81 and 31814.36. There were 28 stocks advancing against 3 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.96%, while Small cap index was up by 1.17%.

The top gaining sectoral indices on the BSE were Metal up by 2.52%, Basic Materials up by 1.68%, Utilities up by 1.63%, PSU up by 1.52% and Power up by 1.33%, while there were no losers on the BSE sectoral front.

The top gainers on the Sensex were Tata Steel up by 3.92%, NTPC up by 2.61%, SBI up by 2.25%, Infosys up by 1.66% and Coal India up by 1.34%. On the flip side, HDFC down by 0.42%, Dr. Reddy’s Lab down by 0.39% and Hero MotoCorp down by 0.29% were the few losers.

Meanwhile, India Ratings and Research (Ind-Ra) in its latest report has said that the transition to the new nationwide goods and services tax (GST) regime would significantly affect the micro, small and medium enterprise (MSME) space more than other industries, as industry participants lack compliance infrastructure to map the entire outstanding inventory with tax invoices. It also noted that MSMEs’ weak credit profile and risk weights attached to the loans extended to this sector in banks’ books could force the sector to resort to borrowings from non-bank finance companies. Furthermore, it has warned that this is more costly than borrowing from banks and could aggravate the credit impact of the GST transition on the MSME space.

However, the rating agency said that large corporates and firms with streamlined infrastructure may find it easy to map the entire outstanding inventory with tax invoices. It also noted that the new tax regime would also result in higher working capital requirements for most participants in manufacturing sector like steel, textile, auto and auto ancillary, owing to their requirement to pay the entire tax at the point of the dispatch of goods from factory gates, and also for the movement to warehouses. It estimated that working capital requirement to rise by 200 - 450 basis points of revenue for steel sector, 500 basis points of net value addition across the value chain for the textile industry. It also indicated that the increase in working capital requirement, as a proportion of revenue, would aid bank credit growth for large corporates.

Ind-Ra believes that industry participants’ ability to tide over working capital mismatches during the implementation phase and beyond would be relative to their balance sheet strengths and capital market access. It also observed that the ability of banks to fund these mismatches depends on the risk weights attached to such lending. The report noted that while it would be beneficial for the banking system, given the low incremental credit deposit ratio, banks may refrain from providing additional financial supports to entities with a weak credit profile.

The CNX Nifty is currently trading at 9965.10, up by 76.40 points or 0.77% after trading in a range of 9906.60 and 9967.95. There were 43 stocks advancing against 6 stocks declining on the index, while 1 stock remained unchanged.

The top gainers on Nifty were Tata Steel up by 3.88%, GAIL India up by 3.57%, Hindalco up by 2.97%, NTPC up by 2.48% and Bajaj Finance up by 2.37%. On the flip side, Dr. Reddy’s Lab down by 0.48%, HDFC down by 0.42%, Hero MotoCorp down by 0.36%, Zee Entertainment down by 0.18% and UPL down by 0.11% were the top losers.

Asian market were trading mostly in green; FTSE Bursa Malaysia KLCI increased 0.59 points or 0.03% to 1,759.68, Taiwan Weighted increased 14.54 points or 0.14% to 10,532.81, Nikkei 225 increased 55.83 points or 0.27% to 20,684.39 and Hang Seng increased 69.83 points or 0.25% to 28,449.01.

 On the flip side, Jakarta Composite decreased 2.25 points or 0.04% to 5,899.66.