Benchmarks extend gains; Sensex above 34,500 mark

Indian equity benchmarks extended their gains in morning session on account of buying in frontline blue chip counters a day after the RBI MPC maintained a status quo and neutral stance while being cautious on inflation outlook. The Indian rupee opened lower against dollar. The dollar recovered from its lows on robust data and resolution of debt ceiling. Sentiments remained upbeat after a sharp fall in oil prices 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. Traders 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% to a record $250 billion this year, with India and China leading the emerging markets in this space. Some support also crept in on 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 were seen piling position in Realty, IT and Healthcare sector stocks. In scrip specific development, Specialty chemicals manufacturer Galaxy Surfactants was trading in green after debuting in stock market having concluded its Initial Public Offer last week. The company’s Rs 937-crore IPO was subscribed 20 times during January 29-31. Reliance Infrastructure was trading in green on bagging two road projects worth Rs 1,881 crore from the National Highways Authority of India. The orders include six-laning of a 69.5-km stretch from Aurangabad to the Bihar-Jharkhand border (Chordaha) on National Highway 2.

On the global front, the Asian markets were trading mostly in green. China reported trade balance data with a $20.34 billion surplus, compared to a $54.10 billion surplus seen for January. Exports rose 11.1%, compared to a 9.6% gain seen and up from 10.9% in December, while imports soared 36.9%, compared to a 9.8% rise expected, and a jump from 4.5% in December. Back home, the BSE Sensex and NSE Nifty were trading above the psychological 34,500 and 10,600 levels respectively. The market breadth on BSE was positive in the ratio of 1972:389, while 84 scrips remained unchanged.

The BSE Sensex is currently trading at 34507.39, up by 424.68 points or 1.25% after trading in a range of 34108.76 and 34508.50. There were 25 stocks advancing against 6 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 1.41%, while Small cap index was up by 2.04%.

The top gaining sectoral indices on the BSE were Realty up by 2.88%, IT up by 2.44%, Healthcare up by 2.41%, TECK up by 2.31% and Telecom up by 2.03%, while there were no losers on BSE sectoral front.

The top gainers on the Sensex were Sun Pharma up by 3.39%, Dr. Reddy’s Lab up by 3.26%, Infosys up by 3.17%, HDFC up by 2.37% and TCS up by 2.23%.

On the flip side, Power Grid down by 1.40%, Asian Paints down by 0.80%, NTPC down by 0.52%, Tata Motors down by 0.25% and ONGC down by 0.18% were the top 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 10601.15, up by 124.45 points or 1.19% after trading in a range of 10479.55 and 10614.30. There were 40 stocks advancing against 10 stocks declining on the index.

The top gainers on Nifty were Cipla up by 5.60%, Sun Pharma up by 3.35%, Dr. Reddy’s Lab up by 3.15%, Infosys up by 3.14% and BPCL up by 2.79%.

On the flip side, Indian Oil down by 4.16%, Vedanta down by 1.58%, Power Grid down by 1.28%, NTPC down by 0.97% and Hindalco down by 0.65% were the top losers.

The Asian markets were trading mostly in green; FTSE Bursa Malaysia KLCI increased 3.06 points or 0.17% to 1,839.74, KOSPI Index increased 22.99 points or 0.96% to 2,419.55, Hang Seng increased 38.89 points or 0.13% to 30,362.09 and Nikkei 225 increased 193.38 points or 0.89% to 21,838.75.

On the other hand, Shanghai Composite decreased 52.75 points or 1.59% to 3,256.51, Taiwan Weighted decreased 31.95 points or 0.3% to 10,519.59 and Jakarta Composite decreased 9.26 points or 0.14% to 6,525.61.