Post Session: Quick Review

Indian equity benchmarks traded on a firm note for most part of the day and ended the session in green at record closing highs. The equity benchmarks made a positive start and traded near all time high levels in morning deals amid firm global cues. Traders took some support from private report that economic indicators like PMIs, vehicle sales and steel demand suggest that growth momentum in India has gathered pace in December. However, prices are also on an uptrend with retail inflation likely to have firmed up further to 5.4% in December owing to a lower base of comparison. As per the report, exports continued to stay strong, growing at double digit levels of 23.2 per cent year-on-year in December. While, import growth is expected to have accelerated to 25.5 per cent YoY, on the back of favourable base effect and robust consumption trends in the month. Investors also took some encouragement with the statement of NITI Aayog Vice Chairman Rajiv Kumar, who dismissing concerns of fiscal slippage has said the next Union Budget will not be a populist one. He said that there shouldn’t be a fear of fiscal risk because of slippage, because if at all, a fiscal slippage happens, it would only be for the right reasons.

However, selling crept in during the mid-session wiping out morning gains after four Supreme Court judges raised concerns over administration of the top court. Traders also turned cautious ahead of Infosys Q3 earnings and macro data (November IIP and December CPI inflation) due later today. Additionally, some concerns also came with India Ratings and Research’s latest report that private sector capital expenditure growth is expected to remain muted with slowing pace, for next two financial years on account of weak domestic consumption demand, global overcapacity and negative impact of Goods and Services Tax (GST) on working capital.

But, buying resumed with benchmarks gaining strength with farm minister Radha Mohan Singh stating that India’s agriculture sector will expand more than 4% in 2017-18, trying to allay concerns raised by the statistical office’s projection of sluggish growth in one of the most important segments of the economy. The minister added that increased horticulture and fisheries production, a robust kharif harvest and near-normal planting in the ongoing rabi season will hold the growth at a healthy rate. Investors took note that India is set to unveil another revamp of the goods and services tax (GST) regime next week aimed at making compliance simpler. The GST Council meeting on January 18 is expected to take up changes in the definitions of terms such as supply and handicrafts as part of this effort besides replacing the three forms that need to be submitted with one.

Meanwhile, select steel stocks were buzzing as the Union Steel Minister Birender Singh said that exports should account for 6-7 per cent of India’s total steel production in the next few years, up from the 1.5 per cent at present. Telecom stocks Bharti Airtel, Idea Cellular and Reliance Communications were under pressure on report that the telecom regulator may reduce international termination rate (ITR) - a charge paid by international operators to local networks that receive calls - by almost half from the current 53 paise a minute, a move that would deal a body blow to India’s top telcos which receive bulk of international calls.

On the global front, Asian markets closed mostly in green. China reported trade data for December with exports up 10.9%, compared to a gain of 9.1% seen, imports posted a 4.5% rise, compared to a 13.0% increase expected and the trade balance came in at $54.69 billion surplus, compared to surplus of $37 billion seen. The European markets were trading in green on signs of progress on the German political front and as traders focused on a fresh batch of corporate earnings reports. Chancellor Angela Merkel entered into talks with a rival party earlier in the week in a last-ditch effort to form a coalition government.

The BSE Sensex ended at 34571.35, up by 67.86 points or 0.20% after trading in a range of 34342.16 and 34638.42. There were 11 stocks advancing against 20 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index was down by 0.22%, while Small cap index was down by 0.01%. (Provisional)

The top gaining sectoral indices on the BSE were Energy up by 0.64%, Oil & Gas up by 0.61%, Capital Goods up by 0.52%, Bankex up by 0.42% and Industrials up by 0.41%, while Realty down by 1.54%, FMCG down by 0.58%, Power down by 0.58%, Utilities down by 0.46% and Healthcare down by 0.42% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were ICICI Bank up by 2.60%, Maruti Suzuki up by 1.35%, ONGC up by 1.34%, HDFC up by 1.20% and Reliance Industries up by 0.94%. (Provisional)

On the flip side, Bharti Airtel down by 1.14%, Power Grid down by 1.13%, Wipro down by 0.95%, ITC down by 0.93% and Bajaj Auto down by 0.86% were the top losers. (Provisional)

Meanwhile, private sector capital expenditure growth is expected to remain muted with slowing pace, for next two financial years on account of weak domestic consumption demand, global overcapacity and negative impact of Goods and Services Tax (GST) on working capital. As per credit rating agency, India Ratings and Research’s (Ind-Ra) latest report, the private capex is likely to grow at a CAGR of only 5-8% over FY18-FY20 which is much lower than 13% growth rate during FY09-12, but better than the 4% annual average of FY13-17.

As per the report, during FY18-FY20, the companies will spend more on their maintenance and essential upgrades and meaningful capex recovery will happen after FY20. It further noted that the recovery will be led by 125 non-stressed companies out of total top 200 asset heavy companies, while remaining stressed companies will keep capital expenditure subdued over the next two to three years.

The report found that leveraged sectors like infrastructure, metals and mining and power could lower their capex spending over FY18-FY20 compared with oil and gas, auto and telecom sectors. Besides, within these 6 sectors, private entities will be major drivers of capex recovery as compared to the public sector undertaking (PSU). The rating agency also found that government spending declined, at growth rate of 6% only in FY17 as against 40% in FY16 and pointed that despite GST‘s augmentation to the government revenues, the overall investment cycle is unlikely to revive, owing to the limited ability of the government to scale up spending owing to fiscal rectitude.

The CNX Nifty ended at 10675.25, up by 24.05 points or 0.23% after trading in a range of 10597.10 and 10690.40. There were 22 stocks advancing against 28 stocks declining on the index. (Provisional)

The top gainers on Nifty were ICICI Bank up by 2.49%, Zee Entertainment up by 2.35%, Bharti Infratel up by 2.03%, Vedanta up by 1.72% and ONGC up by 1.44%. (Provisional)

On the flip side, Lupin down by 1.26%, Bharti Airtel down by 1.13%, UPL down by 1.10%, Ambuja Cement down by 1.09% and Bosch down by 1.07% were the top losers. (Provisional)

The European markets were trading in green; UK’s FTSE 100 increased 10.75 points or 0.14% to 7,773.69, Germany’s DAX increased 16.68 points or 0.13% to 13,219.58 and France’s CAC increased 3.85 points or 0.07% to 5,492.40.

Asian equity markets ended mostly in green on Friday after oil prices rallied overnight and China dismissed media reports that officials have recommended slowing or halting purchases of US debt. Optimism about the earnings season also offered some support. Chinese shares closed higher for the eleventh straight session as investors looked past soft trade data. Official data showed that China's exports and imports growth slowed in December in a sign of weaker global and domestic demand. December exports grew an annual 10.9 percent, beating forecasts but down from a robust 12.3 percent gain in November. Imports grew an even slower pace of 4.5 percent. Though, Japanese shares ended lower as the yen's recent strength hurt exporters. Uniqlo-owner Fast Retailing posted record quarterly profit, helping limit the downside.