Markets snap three-days losing streak; Sensex reclaims 33,800 mark

Indian equity benchmarks ended the Wednesday’s trade in green terrain with Sensex recapturing its crucial 33,800 level, while Nifty ending just shy of 10,400 mark, as traders opted to buy beaten down but fundamentally strong stocks after three days of continuous drubbing. After making firm start, markets turned choppy as renewed selling by foreign investors on worries over the Rs 11,300 crore fraud case at Punjab National Bank (PNB), concerns over the government’s fiscal position and chances of another interest rate hike from the Federal Reserve in March may keep underlying sentiment cautious. However, markets gained traction, as traders turned optimistic with report that the Reserve Bank of India (RBI) has set up a five-member expert panel to look into the reasons for high divergence observed in asset classification and provisioning by banks. Meanwhile, Finance minister Arun Jaitley has come down heavily on public sector banks for not safeguarding taxpayers’ money spent to keep them afloat. He warned that the government would explore all options to punish the ‘cheats’ responsible for bank frauds.

Some support also came with foreign brokerage report that India’s medium-term potential growth is likely to be above 7 percent, backed by policy reforms, higher investments and stable global growth environment. The report added that India ranks higher in medium-term growth potential compared to other emerging markets like Brazil, Russia, Indonesia and China. Buying got accelerated in last leg of trade with market participants taking some encouragement with rating agency India Ratings and Research revising the outlook on infrastructure sector to stable for the next fiscal on signs of improvement in projects. The agency added that the infrastructure sector is showing signs of stability, although pockets of stress still linger. Moreover, the outlook for telecom has been revised to negative-to-stable from negative. The outlooks for thermal power, oil and gas, power, ports and airports remain unchanged.

On the global front, European markets were trading in red in early deals after a survey showed that euro zone business growth has slowed more than expected this month. Asian markets ended mostly in green on Wednesday. The former BOJ board member Sayuri Shirai said that the new Bank of Japan leadership won’t be able to raise interest rates this year as the central bank missed the best opportunity to do so in 2017.

Back home, software related stocks edged higher on report that India’s software services sector will see revenue growth of 7-9 percent in constant currency terms in the fiscal year to March 2019. The forecast, which was put out at the annual summit of the National Association of Software and Services Companies (NASSCOM), is in line with the 7.8 percent revenue growth it expects in the six months to the end of March 2018. Mixed reactions were witnessed in sugar stocks on ICRA’s report that a raft of government measures earlier this month has come as a relief for sugar mills and sugarcane farmers alike. These include increase in import duty on raw and white sugar to 100%, and restriction on sugar sales by imposition of stockholding limits for February and March. The twin government moves are expected to prop up falling sales realizations, support the profitability of mills by enabling them to tide over the supply glut, and keep their credit profiles stable.

Finally, the BSE Sensex surged 141.27 points or 0.42% to 33,844.86, while the CNX Nifty was up by 37.05 points or 0.36% to 10,397.45.

The BSE Sensex touched a high and a low of 33,911.36 and 33,702.50, respectively and there were 18 stocks on gaining side as against 13 stocks on losing side on the index.

The broader indices were trading in red; the BSE Mid cap index slipped 0.05%, while Small cap index was down by 0.17%.

The top gaining sectoral indices on the BSE were IT up by 2.20%, TECK up by 1.79%, FMCG up by 0.75%, Energy up by 0.67% and Oil & Gas was up by 0.42%, while Metal down by 1.27%, Healthcare down by 1.20%, Basic Materials down by 0.87%, Realty down by 0.79% and Capital Goods was down by 0.58% were the top losing indices on BSE.

The top gainers on the Sensex were TCS up by 3.33%, ITC up by 2.00%, ONGC up by 1.66%, SBI up by 1.28% and Infosys up by 1.23%. On the flip side, Sun Pharma down by 6.19%, Indusind Bank down by 1.93%, Tata Steel down by 1.57%, Tata Motors down by 1.23% and Bajaj Auto down by 0.97% were the top losers.

Meanwhile, India’s retirement fund manager, the Employees Provident Fund Organization (EPFO), is expected to retain 8.65 percent interest rate on provident fund (PF) deposits for its nearly 5 crore members for 2017-18. Earlier this month, the EPFO has already sold a portion of its investments in the exchange traded funds (ETF) worth Rs 2,886 crore to maintain 8.65 percent interest for this fiscal.

The EPFO had provided 8.65 percent rate of interest on PF deposits for 2016-17, a tad lower than 8.8 percent in 2015- 16. It has earned a return of around 16 percent at Rs 1,054 crore on sale of ETFs, which would be sufficient to provide 8.65 per cent rate of interest this fiscal. The EPFO started investing in ETFs since August 2015 and it has so far not monetised the ETF investments. It has invested around Rs 44,000 crore in the ETFs till date.

EPFO at its trustees’ meet proposed to decide on the proposal for rate of interest on the EPF deposits for the current fiscal. Besides, the trustees may also review the proposal to credit the ETFs into the members' EPF account because a large number of members do not have that level of financial literacy. It is proposed that the members should be given option to have ETF credits in their EPF account.

The CNX Nifty traded in a range of 10,426.10 and 10,349.60. There were 29 stocks in green as against 21 stocks in red on the index.

The top gainers on Nifty were HCL Tech up by 4.14%, Tech Mahindra up by 3.54%, TCS up by 3.31%, ITC up by 1.82% and Eicher Motors up by 1.80%. On the flip side, Sun Pharma down by 6.36%, Hindalco down by 3.11%, Bajaj Finance down by 2.36%, Indusind Bank down by 1.58% and Tata Motors down by 1.42% were the top losers.

European markets were trading in green; Germany’s DAX declined 92.22 points or 0.74% to 12,395.68, France’s CAC decreased 28.15 points or 0.53% to 5,261.71 and UK’s FTSE 100 was down by 20.56 points or 0.28% to 7,226.21.

The Asian markets closed mostly in green on Wednesday despite weak overnight cues from Wall Street. Underlying sentiment remained cautious somewhat after yields on US treasury debt hit a four-year high on Tuesday on expectations of a faster pace of interest rate increases from the Federal Reserve. The Federal Reserve will release minutes of its January 30-31 meeting later today, as investors look for further insight on inflation and interest rates. The dollar hit a one-week high versus a basket of major currencies, while oil prices fell ahead of the release of US inventory figures expected to show a rise in crude oil stockpiles in the week to February16. Japanese shares ended the choppy session slightly in green as a weaker yen helped offset flash data from IHS Markit showing the country’s manufacturing activity grew at a slightly slower pace in February. Mainland Chinese markets remained closed for Lunar New Year holiday.