Markets hit all time closing high ahead of Christmas

Friday turned out to be a fabulous day of trade for Indian equity benchmarks with frontline gauges ending at all time high levels ahead of Christmas. Markets after an optimistic start traded with traction throughout the session and the Santa Claus rally in final hour of trade helped Nifty to hit 10,500 mark for brief period, but ended tad lower of that level. Sentiments remained up-beat with Reserve Bank of India in its latest edition of the Financial Stability Report enlightened that while the stress in the banking sector remains elevated, it appears to be bottoming out. Some support also came with Chairman of the Economic Advisory Council to the Prime Minister (EAC-PM) Bibek Debroy’s statement that India is expected to be a $6.5-7 trillion economy by 2030, and at the current exchange rate it would touch $10 trillion by 2035-40. He said that India will be remarkably different country as the size of its economy will enhance the country's role in global affairs.

Markets continued jubilation in second half of trade as well with traders expecting a good budget and strong H2FY18 earnings. The street however shrugged off the IMF’s report that India’s financial sector is facing considerable challenges with high non-performing assets and slow deleveraging and repair of corporate balance sheets testing the resilience of the banking system and holding back growth. Separately, backed by improvement in major indicators, such as auto production, coal output and rail freight growth, credit rating agency, ICRA in its monthly review on Indian Economy, has said that the growth in the index of industrial production (IIP) is expected to rebound in November after hitting a three-month low of 2.2% in October this year.

On the global front, European markets were trading mostly in red in early deals red, as fresh political turmoil in Spain dampened markets’ sentiments and as trading volumes were expected to remain thin ahead of the Christmas holiday. Markets were jittery after a Catalan vote on Thursday resulted in a victory for separatists, sparking fresh concerns over political turmoil in Spain. Asian markets ended in green terrain, although trading volumes remained thin ahead of the Christmas weekend.

Back home, the 2G spectrum case related stocks remained buzzing after the special CBI court acquitted all 18 accused including A Raja and K Kanimozhi in 2G spectrum allocation case. Meanwhile, CRISIL report highlighted that warehousing cost for consumer durables and FMCG is likely to reduce by 25-50% mainly on the back of the implementation of the Goods and Services Tax (GST) regime even as states like Haryana and Assam are set to emerge as new hubs. Consequently, the number of warehouses for consumer durables company could reduce to 10-12 from a typical 25-30 and to 30-35 from 45-50 for FMCG companies.

Finally, the BSE Sensex surged 184.02 points or 0.55% to 33940.30, while the CNX Nifty was up by 52.70 points or 0.50% to 10493.00.

The BSE Sensex touched a high and a low of 33,964.28 and 33,767.73, 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 0.11%, while Small cap index was up by 0.58%.

The top gaining sectoral indices on the BSE were IT up by 1.31%, TECK up by 1.02%, Capital Goods up by 0.93%, Industrials up by 0.79% and Utilities was up by 0.79%, while Consumer Durables down by 0.58% and Metal was down by 0.06% were the only losing indices on BSE.

The top gainers on the Sensex were ONGC up by 2.87%, TCS up by 1.76%, Infosys up by 1.65%, Bajaj Auto up by 1.24% and Wipro up by 1.16%. On the flip side, Dr. Reddy’s Lab down by 0.80%, Coal India down by 0.75%, Tata Steel down by 0.68%, Indusind Bank down by 0.64% and Hero MotoCorp down by 0.61% were the top losers.

Meanwhile, the Reserve Bank of India (RBI) in its half-yearly Financial Stability Report (FSR) has warned against further downside risk for banks, as asset quality concerns are far from resolved and has said that the gross non-performing assets (NPAs) in the Indian banking sector shot up to 10.2 percent as of the September quarter, primarily led by private sector lenders. RBI’s stress tests suggest that in the baseline scenario, gross NPAs of the banking sector may rise to 10.8 percent in March 2018 and further to 11.1 percent by September 2018. However, it added that stress in the Indian banking sector remains high but it may be close to bottoming out.

According to the FSR, overall risk to financial system remained ‘stable’. Between March and September, the GNPA advances ratio of scheduled commercial banks (SCBs) increased from 9.6 percent to 10.2 percent, and the stressed advances ratio marginally increased from 12.1 percent to 12.2 percent. Public sector banks (PSBs) registered Gross NPA ratio at 13.5 percent and stressed advances ratio at 16.2 percent in September. It also noted that if the macro conditions deteriorate, CRAR or capital-to-risk (weighted) assets ratio of SCBs goes below the minimum regulatory requirements. Under the severe stress scenario, the system level CRAR declines from 13.5 percent in September 2017 to 11.5 percent by September 2018.

The central bank further said that the recent capitalisation plan announced by the government for PSBs is expected to significantly augment capital buffers of affected banks as also the credit growth. The FSR said that SCBs have continued to be the dominant players accounting for nearly 47 percent of the bilateral exposure followed by asset management companies managing mutual funds, NBFCs, insurance companies, housing finance companies and all-India financial institutions. The report also said that the overall investment climate remains challenging despite registering an improvement from the first quarter of the current fiscal. RBI added that the global economy has picked up steam and the growth momentum appears sustainable.

The CNX Nifty traded in a range of 10,501.10 and 10,448.25. There were 29 stocks in green as against 20 stocks in red, while 1 stock remained unchanged on the index.

The top gainers on Nifty were ONGC up by 2.95%, Hindalco up by 2.20%, TCS up by 1.97%, Bajaj Auto up by 1.60% and Bajaj Finance up by 1.60%. On the flip side, Ultratech Cement down by 1.15%, Lupin down by 0.88%, Coal India down by 0.75%, Dr. Reddy’s Lab down by 0.71% and Tata Steel down by 0.64% were the top losers.

The European markets were trading mostly in red; Germany’s DAX decreased 21.44 points or 0.16% to 13,088.30 and France’s CAC was down by 13.14 points or 0.24% to 5,372.83, while UK’s FTSE 100 was up by 4.48 points or 0.06% to 7,608.46.

Asian equity markets ended mostly in green on Friday, although trading volumes remained thin ahead of the Christmas weekend. Underlying sentiments remained supported by higher commodity prices, encouraging economic reports from the US and passage of the landmark tax reform bill. Investors shrugged off the news that voters in Catalonia favored separatists wanting to break away from Spain. Japanese shares closed slightly higher in quiet pre-holiday trade after the US House of Representatives gave final approval to the biggest US tax overhaul in 30 years. Though, Chinese shares ended lower, dragged down by financial and consumer staple stocks.