Benchmarks snap seven days losing streak; Sensex regains 34,400 mark

Snapping seven days of losing streak, Indian equity benchmarks ended the session with a gain of around a percentage point, with frontline gauges recapturing their crucial 34,400 (Sensex) and 10,550 (Nifty) levels, as traders opted to buy beaten down but fundamentally strong stocks after seven sessions of continuous drubbing. After opening mildly in green markets gained momentum, as traders also took some encouragement with ASSOCHAM chief’s statement that the Reserve Bank of India’s (RBI’s) decision to keep the policy rate unchanged is on the expected lines, though the less than hawkish stance has come about as a relief for the industry which had even feared a possible hike in the lending rates, following inflationary concerns. A sharp fall in oil prices also eased investors’ concerns surrounding inflation and rising twin deficits. The EIA’s Short-Term Energy Outlook predicted that US oil production would top 11 million barrels per day this year. Sentiments also got boost by a report that India’s oil refining capacity is set to jump 80%, or by 194 MT, by 2030 as state refiners, Reliance Industries and Rosneft line up expansion plans, undeterred by the renewables explosion, hoping to meet future demand.

Traders also got some support with report that the CBDT has directed the taxman not to undertake ‘coercive’ steps in recovering pending taxes from startups under a specific provision of the Income Tax Act, a move aimed to help budding entrepreneurs in the country. Meanwhile, Moody’s said that the global green bond issuances are likely to surge by 60 per cent to a record $250 billion this year, with India and China leading the emerging markets in this space. However, markets pared some of their gains in last leg of trade, as anxiety spread among the traders with the exporters’ body, Federation of Indian Export Organisations’ (FIEO) statement that liquidity problems emanating from delay in refund of Goods and Services Tax (GST) is forcing exporters to turn down new orders. It also noted that micro, small and medium enterprises (MSMEs) are cutting their workforce due to cash crunch.

On the global front, European markets were trading in red terrain, as investors waded through the latest batch of corporate earnings, ahead of a central bank decision in the UK. The Bank of England’s latest monetary policy meeting and inflation report are both due during the session. Asian markets ended mostly in green, as traders went for bargain hunting after the week’s sharp losses.

Back home, stocks related to public sector banks (PSBs) remained in focus after Economic Advisory Council to the Prime Minister (EAC-PM) chairman Bibek Debroy said that accretion of fresh non-performing assets (NPAs) of PSBs has virtually stopped. Infrastructure related stocks too edged higher despite report that as many as 302 infrastructure projects worth Rs 150 crore and above are delayed with a total cost over-run of Rs 1.45 lakh crore as on November 01, 2017.

Finally, the BSE Sensex surged 330.45 points or 0.97% to 34,413.16, while the CNX Nifty was up by 100.15 points or 0.96% to 10,576.85.

The BSE Sensex touched a high and a low of 34,634.35 and 34,108.76, respectively and there were 24 stocks on gaining side as against 7 stocks on losing side on the index.

The broader indices ended in green; the BSE Mid cap index gained 1.82%, while Small cap index was up by 2.25%.

The top gaining sectoral indices on the BSE were Healthcare up by 2.91%, Realty up by 2.51%, Basic Materials up by 2.48%, Consumer Discretionary Goods & Services up by 1.63% and Industrials was up by 1.45%, while Oil & Gas down by 0.25% was the lone losing index on BSE.

The top gainers on the Sensex were Sun Pharma up by 6.32%, Dr. Reddy’s Lab up by 3.18%, SBI up by 2.97%, Infosys up by 2.33% and Axis Bank up by 1.75%. On the flip side, Power Grid Corporation down by 1.20%, Tata Motors down by 0.70%, NTPC down by 0.70%, ONGC down by 0.66% and Adani Ports & SEZ down by 0.43% were the top losers.

Meanwhile, the Chairman of the Economic Advisory Council to the Prime Minister EAC-PM), Bibek Debroy has said that the fresh non-performing assets (NPAs) accretion of the public sector banks (PSBs) had almost stopped. He said “Many NPA figures are floating, I think India’s bank NPA is not more than Rs 3 lakh crore.” However, he indicated that according to recent Reserve Bank of India (RBI) data, bad loans of PSBs stood at Rs 7.34 lakh crore at the end of Q2 FY18, a bulk of which came from corporate defaulters.

The EAC-PM chairman also said that it was perfectly possible to scrap income tax and other direct taxes and replace them with indirect taxes, but indirect taxes could never be progressive. Referring to issue of low income tax collection, he said that one reason is that the number of personal income taxpayers is so low is because the rural sector is completely out of purview of income taxation. He added that it is a state subject, so the Union government cannot do anything.

Adding further, Debroy said “But the question I am asking is how many of us are arguing that tax should be levied and if such a tax is levied, then obviously, it should be levied above a certain threshold.” He also said that fiscal profligacy had its cost. Besides, he pointed out that fiscal deficit for the current financial year was higher because the goods and services taxes (GST) could be counted only for 11 months. He added that had it not been, fiscal deficit would have been closer to 3.2 percent of GDP this fiscal.

The CNX Nifty traded in a range of 10,637.80 and 10,479.55. There were 41 stocks in green as against 9 stocks in red on the index.

The top gainers on Nifty were Cipla up by 8.21%, Ambuja Cement up by 7.13%, Sun Pharma up by 6.44%, Bharti Infratel up by 3.47% and Indiabulls Housing Finance up by 3.47%. On the flip side, Aurobindo Pharma down by 2.45%, NTPC down by 1.03%, ONGC down by 0.66%, Adani Ports & SEZ down by 0.49% and ITC down by 0.45% were the top losers.

European markets were trading in red; Germany’s DAX declined 126.97 points or 1.01% to 12,463.46, UK’s FTSE 100 decreased 51.11 points or 0.7% to 7,228.31 and France’s CAC was down by 39.27 points or 0.75% to 5,216.63.

Asian stocks ended mostly in green on Thursday following the week's sharp losses but traders are struggling to get a firm footing in a volatile February, spooked by heavy selling and warnings of more upheaval to come. Meanwhile, US bond yields crept up towards four-year highs and Brent crude prices hit a 2018 low on worries over surging US output, keeping underlying sentiments cautious. Japanese shares rose sharply on bargain hunting as the yen weakened against the dollar on the back of a return in investors’ risk appetite. Chinese shares ended lower even as a government report showed the country's exports grew at a faster-than-expected pace in January. In dollar terms, exports advanced 11.1 percent year-over-year in January, faster than the 10.7 percent rise economists had forecast. Imports jumped 36.9 percent from a year ago, well above the expected growth of 10.6 percent. Another report from the People's Bank of China revealed that China's foreign exchange reserves grew around $21.5 billion to $3.161 trillion in January, marking the 12th straight month of increase.