Benchmarks hit fresh record closing high levels; Nifty conquers 10,950 mark

Extending their record hitting spree for fourth consecutive day, Indian equity benchmarks once again settled at fresh closing high levels, with Nifty conquering its crucial 10,950 mark, while Sensex ended tad below its crucial 35,800 level. After making an optimistic start, domestic gauges gained momentum in second half of trade, as traders took some encouragement with report that overseas investors have put in a whopping Rs 87 billion in the Indian capital markets this month so far on expectation of recovery in corporate earnings and attractive yields. This follows an investment of Rs 2 trillion in the capital markets (equity and debt) in the entire 2017. Some support also came after a report enlightened that a greater proportion of provident fund savings could be headed for the stock market with shares rising to successive records in past weeks. Such a move could more than double the provident fund money invested in exchange-traded funds (ETFs) over time. The government is considering a plan to raise the equity investment limit for the Employees’ Provident Fund Organisation (EPFO) to 25% from 15%.

Traders also got some support with IMF Chief Christine Lagarde and Norway’s Prime Minister Erna Solberg's statement that raising women's participation in the labour force to the same level as men can boost India's Gross Domestic Product (GDP) by 27 per cent. Private report stating that India will overtake China to be the fastest growing large economy in 2018 and the country’s equity market will become the fifth largest in the world, too aided sentiments. The report added that while the rest of the world offers low growth and insufficient structural change, India, by contrast, is seen as a reforming economy with the prospect of strong long-term growth. Meanwhile, Prime Minister Narendra Modi has indicated that the upcoming Budget will not be a populist one and it’s a myth that the common man expects ‘freebies and sops’ from the government. He also pledged that his government will stay on the course of the reforms agenda that has pulled out India from being among the ‘fragile five’ economies of the world to being a bright spot.

On the global front, European markets were trading mostly in red in early deals despite Germany’s Social Democrats voted to enter coalition talks with Chancellor Angela Merkel’s government, helping end months of political uncertainty in Europe's largest economy. Asian markets ended mostly in green, as global investors shrugged off the latest US government shutdown.

Back home, public sector banking stocks remained under pressure on ASSOCHAM-CRISIL report enlightened that India’s banking sector will be saddled with gross non-performing assets (GNPAs) worth a staggering Rs 9.5 lakh crore by March-end, up from Rs 8 lakh crore in the year-ago period. The report added that GNPAs will increase to Rs 9.5 lakh crore as on March 31, 2018 i.e. about 10.5 per cent of total advances, while stressed assets are expected to be at Rs 11.5 lakh crore. Steel stocks edged lower despite report that the steel ministry is in talks with Railways to ensure adequate availability of rakes for industries that have been saying the problem has led to a shortage of raw materials at plants.

Finally, the BSE Sensex surged 286.43 points or 0.81% to 35,798.01, while the CNX Nifty was up by 71.50 points or 0.66% to 10966.20.

The BSE Sensex touched a high and a low of 35,827.70 and 35,544.68, respectively and there were 16 stocks on gaining side as against 14 stocks on losing side, while 1 stock remained unchanged on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.63%, while Small cap index was up by 0.78%.

The top gaining sectoral indices on the BSE were Energy up by 2.42%, IT up by 2.01%, Realty up by 1.95%, Capital Goods up by 1.79% and TECK was up by 1.38%, while Telecom down by 1.49%, Metal down by 0.82%, Utilities down by 0.54% and PSU was down by 0.21% were the few losing indices on BSE.

The top gainers on the Sensex were TCS up by 5.36%, Reliance Industries up by 4.50%, Axis Bank up by 3.52%, ONGC up by 3.28% and Bajaj Auto up by 2.00%. On the flip side, Wipro down by 2.33%, Tata Motors - DVR down by 2.05%, Bharti Airtel down by 1.56%, Asian Paints down by 1.40% and HDFC down by 1.38% were the top losers.

Meanwhile, with a view to boost shipments and job creation, the Commerce Ministry has urged for continuation of tax incentives being enjoyed by units in special economic zones (SEZs) and also asked for removal of minimum alternate tax on SEZs. In the Budget 2016-17, Finance Minister Arun Jaitley had stated that income-tax benefits to new SEZ units would be available to only those units which commence activity before March 31, 2020. The Ministry wants the removal of this sunset clause as it would negatively impact the growth of these zones.

According to industry experts, the clause that indicates the date in advance on which tax incentives will cease to exist is a retrograde step and would impact investments and job creation in these zones. Export Promotion Council for EOUs and SEZs (EPCES) former Chairman Rahul Gupta has said that the sunset clause will impact investments. Projects, which would not be able to get completed by March 2020, may become unviable. So, the government should consider removing this.

Units in SEZs enjoy 100 percent income-tax exemption on export income for the first five years, 50 percent for the next five years thereafter and 50 per cent of the ploughed back export profit for another five years. SEZs, which emerged as major export hubs in the country, started losing their sheen after the imposition of minimum alternate tax and introduction of sunset clause. Besides, during April-September 2017-18, exports from these zones grew 13 percent to about Rs 2.67 lakh crore.

The CNX Nifty traded in a range of 10,975.10 and 10,881.40. There were 27 stocks in green as against 23 stocks in red on the index.

The top gainers on Nifty were TCS up by 4.66%, Indiabulls Housing Finance up by 4.62%, Reliance Industries up by 4.18%, ONGC up by 3.74% and Axis Bank up by 3.57%. On the flip side, HPCL down by 3.32%, GAIL India down by 2.42%, Wipro down by 2.05%, HDFC down by 1.84% and BPCL down by 1.61% were the top losers.

European markets were trading mostly in red; Germany’s DAX decreased 12.47 points or 0.09% to 13,421.98 and France’s CAC was down by 6.25 points or 0.11% to 5,520.26, while UK’s FTSE 100 was up by 1.08 points or 0.01% to 7,731.87.

Asian equity markets ended mostly in green on Monday after global investors shrugged off the latest US government shutdown. Investors waited for progress in talks to end the US government shut down that began at midnight on Friday after the Senate failed to reach agreement over a short-term funding bill. Investors also kept an eye on political developments in Europe after Germany's Social Democrats voted to enter coalition talks with Chancellor Angela Merkel's government and French President Emmanuel Macron said it would be possible for Britain to secure a bespoke trade deal if the UK accepts certain ‘preconditions’. Chinese shares ended higher, helped by gains in defensive and technology stocks. Meanwhile, Japanese stocks closed little changed as safe-haven assets such as gold and yen edged higher following the US government shutdown.