Benchmarks trade with traction in early deals

Indian equity benchmarks made a positive start and are trading in fine fettle in early deals with frontline gauges recapturing their crucial 34,400 (Sensex) and 10,550 (Nifty) levels, as traders went for bargain hunting after seven days of continuous drubbing. A sharp fall in oil prices also easing investors’ concerns surrounding inflation and rising twin deficits. Traders also took some encouragement with ASSOCHAM chief’s statement that the 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. 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.

On the global front, Asian markets are exhibiting mixed trend in morning trade. The Japanese stock market is trading with a gain of over half a percent on the back of a weaker yen. US markets ended the choppy trade in red on Wednesday after a disappointing Treasury auction renewed concerns about rising rates, spooking investors’ sentiments.

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. In scrip specific development, Prestige Estates surged on entering into Rs 2,500 crore platform deal with HDFC, while Dilip Buildcon edged higher on incorporating SPV for Chandikhole-Bhadrak project.

The BSE Sensex is currently trading at 34419.43, up by 336.72 points or 0.99% after trading in a range of 34108.76 and 34419.65. There were 28 stocks advancing against 3 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index surged 1.06%, while Small cap index was up by 1.67%.

The top gaining sectoral indices on the BSE were Realty up by 2.57%, IT up by 2.00%, TECK up by 1.92%, Healthcare up by 1.66% and Telecom up by 1.55%, while there were no losers on the BSE sectoral front.

The top gainers on the Sensex were Infosys up by 2.91%, Sun Pharma up by 1.97%, Dr. Reddys Lab up by 1.89%, HDFC up by 1.64% and TCS up by 1.57%. On the flip side, Power Grid Corporation down by 1.33%, NTPC down by 0.58% and Asian Paints down by 0.41% were the few losers.

Meanwhile, in view of increasing inflation, the Reserve Bank of India (RBI) in its sixth bi-monthly policy has kept the repo rate under the liquidity adjustment facility (LAF) unchanged at 6% for the third straight meeting. Consequently, the reverse repo rate under the LAF remains at 5.75%, and the marginal standing facility (MSF) rate and the Bank Rate at 6.25%. The Central Bank’s stance was largely along expected lines. The decision of the MPC is consistent with the neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%, while supporting growth.

The Monetary Policy Committee (MPC) of RBI chaired by RBI Governor Urijit Patel has stated that hardening crude oil prices, the hike in minimum support prices (MSP) for the summer-sown kharif crop for this year, greater house rent payouts to millions of state government employees and higher import duty on several items can fan inflation. It noted that the inflation outlook is clouded by several uncertainties on the upside. First, the staggered impact of house rent allowances (HRA) increases by various state governments may push up headline inflation further over the baseline in 2018-19, and potentially induce second-round effects.

The Central Bank also said that fiscal slippage as indicated in the Union Budget could impinge on the inflation outlook. It added that apart from the direct impact on inflation, fiscal slippage has broader macro-financial implications, notably on economy-wide costs of borrowing which have already started to rise and this may feed into inflation. The RBI projected Q4 FY18 retail inflation, the main price gauge that the RBI tracks for interest rate-related decisions, at 5.1%, considering factors like rising petrol and diesel prices in January 2018, increase in HRA and less than usual moderation in seasonal food prices. It also projected inflation in the range of 4.3-4.7% for the second half (H2) of FY18. It also projected retail inflation in the range of 5.1-5.6% for the first half (H1) of 2018-19 and 4.5-4.6% in H2.

On the growth front, the RBI has lowered the India’s economic growth projection for the current fiscal year 2017-18 to 6.6% from its previous projection of 6.7%, in light of fresh production and corporate income data. But, it said that growth will accelerate to 7.2% in the fiscal year 2018-19, as the roll-out of goods and services tax (GST) stabilises and credit off-take improves. It also projected gross value added (GVA) growth in the range of 7.3-7.4% in H1 FY19 and 7.1-7.2% in H2 FY19 with risks evenly balanced.

The CNX Nifty is currently trading at 10568.20, up by 91.50 points or 0.87% after trading in a range of 10479.55 and 10571.25. There were 41 stocks advancing against 9 stocks declining on the index.

The top gainers on Nifty were Cipla up by 5.68%, Infosys up by 3.22%, BPCL up by 3.11%, Indiabulls Housing up by 2.79% and HPCL up by 2.71%. On the flip side, Indian Oil Corporation down by 4.14%, Vedanta down by 1.73%, Power Grid Corporation down by 1.18%, NTPC down by 1.00% and Hindalco down by 0.67% were the top losers.

Asian markets are trading mixed; FTSE Bursa Malaysia KLCI gained 3.03 points or 0.16% to 1,839.71, KOSPI Index increased 14.38 points or 0.6% to 2,410.94, Hang Seng rose 19.33 points or 0.06% to 30,342.53 and Nikkei 225 was up by 144.56 points or 0.67% to 21,789.93.

On the flip side, Shanghai Composite declined 49.56 points or 1.5% to 3,259.70, Taiwan Weighted decreased 18.06 points or 0.17% to 10,533.48 and Jakarta Composite was down by 9.01 points or 0.14% to 6,525.86.