Benchmarks extend northward journey for third straight session

Indian equity benchmarks extended their rally for third straight day and went home with a gain of over half a percent, recapturing their crucial 33,400 (Sensex) and 10,300 (Nifty) levels. Sentiments remained up-beat throughout the session with markets making a gap-up opening after CII’s Business Confidence Index climbed to 59.7 during October-December 2017, against 58.3 in the previous quarter, as reform measures such as the Goods and Services Tax (GST) instilled optimism in India Inc. Traders also took some encouragement with statement of the prime minister’s economic advisory panel member Rathin Roy who has expressed hope that the forthcoming budget will not be a 'populist' and will reflect the commitment of the government to improve quality of expenditure. Meanwhile, industry body Assocham has said that the government needs to accord top priority to agriculture in the budget as a major shortfall in kharif production resulted in sluggish growth of farm sector in the second quarter this fiscal.

Markets accelerated speed in last leg of trade to end near intraday high levels after former Reserve Bank Governor Y V Reddy said that Indian economy may require two more years to consolidate and it should aim to go back to 7.5-8 percent growth in two years. Some support also came with the Bihar Deputy Chief Minister Sushil Modi’s statement that the Goods and Services Tax (GST) Council would examine the possibility of merging the 12 and 18 percent tax rates to a new slab. He added that more than 90 percent of issues related to tax rates have been resolved after the Council brought down 178 items from higher rates to lower one. Besides, report that Direct Tax collections, which comprise personal income and corporate tax, surged 14.4 percent to Rs 4.8 lakh crore in the first eight months ending November 2017, mainly on account of income tax mop-up from individuals, too aided sentiments.

Firm opening in European counters too supported sentiments with CAC, DAX and FTSE trading in green ahead of the meeting of European Union leaders on Thursday and Friday. Asian markets ended mostly in green after data showed that the US economy created more jobs than expected last month.

Back home, some support also came with Union Finance Minister Arun Jaitley’s statement that Indian economy is set for a higher growth trajectory on the back of a slew of structural reforms. Demonetization and GST were carried out keeping in mind their long-term benefits to the economy. On the sectoral front, auto sector stocks remained in top gear after data released by the Society of Indian Automobile Manufacturers (SIAM) showed that domestic car sales were up 4.49 per cent to 1,81,395 units as against 1,73,607 units in November last year. Motorcycle sales last month rose 23.25 per cent to 9,59,122 units as against 7,78,173 units a year earlier. Telecom stocks showed mixed reaction on ICRA report which enlightened that the telecom industry could pare as much as Rs 90,000 crore debt if stake sale deals of mobile tower assets, currently being discussed, materialize. It predicted structural and material changes for the telecom tower industry in the medium term. The agency also anticipated some headwinds in the short term, as consolidation of telecom operators leads to rationalization of tenancies, but remained confident about the growth prospects in coming years.

Finally, the BSE Sensex soared 205.49 points or 0.62% to 33,455.79, while the CNX Nifty was up by 56.60 points or 0.55% to 10,322.25.

The BSE Sensex touched a high and a low of 33,535.97 and 33,313.17, respectively and there were 21 stocks on gaining side as against 9 stocks on losing side on the index, while 1 stock remained unchanged.

The broader indices ended in green; the BSE Mid cap index gained 0.36%, while Small cap index was up by 0.22%.

The top gaining sectoral indices on the BSE were IT up by 1.00%, TECK up by 0.88%, Healthcare up by 0.69%, Auto up by 0.65% and FMCG was up by 0.61%, while Oil & Gas down by 0.23%, Energy down by 0.19% and Realty was down by 0.13% were the few losing indices on BSE.

The top gainers on the Sensex were TCS up by 2.35%, Mahindra & Mahindra up by 2.16%, Lupin up by 2.15%, HDFC up by 2.14% and Wipro up by 2.12%. On the flip side, NTPC down by 1.36%, ONGC down by 0.78%, Reliance Industries down by 0.55%, Hindustan Unilever down by 0.48% and Adani Ports & SEZ down by 0.42% were the top losers.

Meanwhile, predicting India's gross domestic product (GDP) growth in short-term is a very difficult task given shock factors like Goods and Services Tax (GST), demonitisation and the mountain of non-performing assets (NPAs) of banks, former Reserve Bank Governor Y V Reddy has said that Indian economy may require two more years to consolidate and it should aim to go back to 7.5-8 percent growth in two years. Besides, he pointed out that in a shock, negative element is front loaded and there will be some moderation, and there can be gain. 

Reddy also indicated that the country’s economy was helped by a positive shock for almost three years, following the massive drop in crude price, which, he underlined, were at a third of what they were doing during his governorship. Reddy, whose conservative approach to regulation is lauded and described as one of the reasons which limited the impact of the 2008 global financial crisis, said the potential output growth rate has come down to 7 percent now from the 8.5 percent levels pre-crisis. He also explained that the drop is due to both international factors, where the global economic growth has declined and also domestic ones like the negative shocks.

Former RBI Governor further said that opinion is divided on how to look at these negative shocks, which he said are looked at by foreigners as institutional changes in India. He also said that all these three, some people take it has permanently affected potential output, whereas some others say it is a transitory shock. He noted that such shocks makes the methodology of estimating growth undependable in the short-term. He added that the RBI is expecting growth on a gross value added basis to shoot up to 7.8 percent by the fourth quarter of FY18, which it feels will pull the yearly growth rate up to 6.7 percent, which was maintained in the last policy review on December 6.

The CNX Nifty traded in a range of 10,329.20 and 10,282.05. There were 33 stocks in green as against 17 stocks in red on the index.

The top gainers on Nifty were Aurobindo Pharma up by 2.74%, TCS up by 2.63%, UPL up by 2.47%, Mahindra & Mahindra up by 2.14% and Lupin up by 2.07%. On the flip side, Bharti Infratel down by 1.50%, NTPC down by 1.50%, Asian Paints down by 0.70%, Yes Bank down by 0.58% and ONGC down by 0.55% were the top losers.

The European markets were trading in green; France’s CAC rose 0.69 points or 0.01% to 5,399.78, Germany’s DAX increased 23.06 points or 0.18% to 13,176.76 and UK’s FTSE 100 was up by 47.51 points or 0.64% to 7,441.47.

Asian equity markets ended mostly in green on Monday after data showed that the US economy created more jobs than expected last month and the UK reached a divorce deal with the European Union, setting stage to move on to future trade talks post-Brexit. Regional gains remained somewhat muted outside China and Hong Kong as investors waited for cues from key policy meetings of the Federal Reserve, Bank of England, the European Central Bank and the Swiss National Bank due this week. Chinese stocks ended higher, led by consumer staple and healthcare companies, after media reports indicated the government is in no hurry to finalize its new asset management rules. Further, Japanese shares rose for a third straight session to hit a fresh 25-year high as the yen held weaker and a survey showed Japan's business survey index of large manufacturers strengthened again in the fourth quarter.