Benchmarks edge higher on Monday; Nifty regains 10,500 mark

Monday turned out to be a fabulous day of trade for Indian equity benchmarks, with frontline gauges recouping previous sessions’ losses and ending above their crucial 10,500 (Nifty) and 34,300 (Sensex) levels, as traders opted to buy beaten down but fundamentally strong stocks after recent sell-off. Key gauges made a gap-up opening and traded jubilantly throughout the session on Reserve Bank of India (RBI) Governor Urjit Patel’s statement that stock market bubble will not cause any major problem. He also said transmission of RBI decisions by banks have improved now, partly aided by demonetisation. Some support also came with Finance minister Arun Jaitley expressing confidence over comfortable revenue collection in 2018-19, seeking to remove doubts about any likely slippage in fiscal deficit from the revised target of 3.3% of GDP ahead of the general elections in 2019. Adding to the optimism, the government’s revenue collection continued to register a steady growth in the April-January period, on the back of healthy growth in corporate tax collections. The net direct tax collections up to January, 2018 stood at Rs 6.95 lakh crore, registering a growth of 19.3% higher than the net collections for the corresponding period of last year. The collection indicated that 69.2% of the Revised Estimates of Direct Taxes for FY 2017-18 (Rs 10.05 lakh crore) has been achieved.

Traders also took some encouragement with report that India’s external debt has remained within manageable limits as indicated by the external debt indicators, and the country is not among the world’s top debtors. India’s external debt stock stood at $495.7 billion at quarter ending September 2017. Traders also drew some support with private report that retail inflation is expected to moderate and print at 5% after rising consecutively for five months, helped largely by seasonal dip in vegetable prices, while trade deficit is also likely to improve, in January.

Firm opening in European markets too aided sentiments, as jitters over a sudden spike in volatility that wiped off $1 trillion in market capitalization last week appeared to ease. Asian markets ended mostly in green after US lawmakers managed to end a brief government shutdown with a bill raising spending caps and funding the government until March 23. China will boost its job creation effort and promote entrepreneurship this year, under pressure to find work for millions of unemployed people and new college graduates.

Back home, stocks related to banking space edged higher on report that gross non-performing assets (NPAs) of banks declined marginally to 9.8% at the end of September 30, 2017 from 10% as on June 30, 2017. Infrastructure related stocks too remained in focus on report that the Centre has released nearly Rs 9,940 crore to the states so far for the Smart Cities Mission, with Maharashtra accounting for the highest amount of Rs 1,378 crore, followed by Madhya Pradesh getting Rs 984 crore. Realty stocks firmed up after a survey by private poll highlighted that with the real estate market beginning to adjust to various reforms like Demonetization, GST and RERA, most Indian metros witnessed recovery with sales improving, while property prices corrected or maintained status-quo. Select sugar stocks remained in sweet spot after sugar prices jumped by Rs 1/kg to Rs 30.50/kg immediately after the Central government capped sales by mills for the next two months starting Thursday.

Finally, the BSE Sensex surged 294.71 points or 0.87% to 34,300.47, while the CNX Nifty was up by 84.80 points or 0.81% to 10,539.75.

The BSE Sensex touched a high and a low of 34,351.34 and 34,115.12, 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 jumped 1.31%, while Small cap index was up by 1.60%.

The top gaining sectoral indices on the BSE were Power up by 1.87%, Realty up by 1.73%, Capital Goods up by 1.65%, Utilities up by 1.64% and Industrials was up by 1.57%, while IT down by 0.43% and TECK was down by 0.34% were the only losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 4.22%, Yes Bank up by 2.89%, Power Grid Corporation up by 2.51%, Indusind Bank up by 2.12% and Hero MotoCorp up by 1.94%. On the flip side, SBI down by 2.67%, Infosys down by 0.72%, ITC down by 0.53%, Mahindra & Mahindra down by 0.43% and ICICI Bank down by 0.23% were the top losers.

Meanwhile, the Reserve Bank of India (RBI) governor Urjit Patel has said that the monetary policy decisions need to be forward-looking rather than looking at inflation rates of today or yesterday. On the monetary policy framework, he said that the Monetary Policy Committee (MPC), which decided to keep key repo rate unchanged for the third time at 6%, has explained its reasons for the decisions it takes as per the policy framework and the inflation targeting system that has been followed on account of legislative change. He added that the MPC decision took into account all the downside risks and mitigating factors.

Stating that it is difficult to forecast global oil prices trend in the coming years, the governor said that in recent days oil prices had shown two-way movement and there is a need to be prepared for both the scenarios of rising and falling rates. In addition, he observed that a few months ago, June or so, people were talking about oil prices never going above $45 per barrel and some of the advise had come to MPC was based on that. He pointed out that while the global oil prices have cooled a bit in last 2-3 days, there have been concerns about the potential headwinds from a rise in crude prices. Besides, he exuded confidence about improving credit growth and the encouraging trend of companies being able to raise a fair amount of funds from the capital markets.

Talking about the volatility in the equity markets, Patel said that there has already been a correction not only globally but in India and therefore in a way it underscores how capital markets can change direction. He noted that so far neither globally nor in India have they felt that this bubble could lead to a very major problem. However, he said that as financial market regulators both RBI and SEBI need to be cognizant of the risk going forward.

The CNX Nifty traded in a range of 10,555.50 and 10,485.40. There were 33 stocks in green as against 17 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 green; France’s CAC soared 72.77 points or 1.43% to 5,151.98, UK’s FTSE 100 increased 85.24 points or 1.2% to 7,177.67 and Germany’s DAX was up by 210.14 points or 1.74% to 12,317.62.

Asian stocks ended mostly in green on Monday after US lawmakers managed to end a brief government shutdown with a bill raising spending caps and funding the government until March 23. Underlying sentiments remained supported as oil prices rebounded following six straight days of declines. Meanwhile, investors are watching for inflation data from the United States later this week for signs of the intensity of expected US interest rate increases. Chinese shares rebounded, led by small-caps, as some investors hunted for bargains after last week’s ferocious sell-off. The Japanese market was closed for the National Foundation Day holiday.