Bulls make come back on Dalal Street; Nifty end just shy of 10,500 mark

Friday turned out to be a remarkable day of trade for Indian equity benchmarks where bulls made come back on Dalal Street, with Sensex recapturing its crucial 34,100 mark, while Nifty end just shy of 10,500 mark. The markets’ mood remained up-beat throughout the day and benchmarks fervently gained from strength to strength, as investors continued hunt for fundamentally strong stocks. Key gauges made a gap-up opening as traders took some encouragement with Niti Aayog Vice Chairman Rajiv Kumar’s statement that India will emerge as a model for the rest of the world once it completes economic, political and social transitions. He highlighted India’s development process, outlined country’s experiences since Independence and laid out a future vision for achieving a New India by 2022. Some support also came with private report stating that exports of India-made retail and lifestyle products clocked a 16% growth in 2017, over the same period last year. It further noted that in terms of growth, India has surpassed China which traditionally led from the region, and now stands at number 3.

Buying got accelerated in second half of the trade with market participants getting some support with CRISIL’s report stating that asset quality of microfinance institutions (MFIs), including small finance banks, has come out of the impact of demonetisation and stabilised since June 2017. The report added that asset quality has improved, as evidenced by reducing portfolio delinquencies and cumulative collection efficiencies have risen to over 99 percent for disbursements since April 2017. Traders ignored private report that America’s bilateral trade deficit with four major countries, including India, narrowed in the first three quarters of 2017 as compared to the previous year. According to the report, India’s growth has slowed due to the effects of its structural economic reforms.

Positive opening in European counters too aided sentiments as multiple speeches from Fed officials due later today for further insight on inflation and interest rates. Germany’s economy expanded as initially estimated in the fourth quarter largely on foreign demand. Asian markets ended mostly in green after US government debt yields fell from multiyear highs reached on Wednesday, helping ease worries over inflation and higher interest rates.

Back home, metal stocks remained on buyers’ radar after India Ratings and Research (Ind-Ra) revised the outlook on the steel sector to stable for FY19 from negative in FY18, led by demand growth in domestic and global markets. While it expects stressed steel assets to meet incremental demand over next 18-24 months, the ratings firm felt steel players would gain from improved sales realizations driven by improvement in operational and financial performance in FY19. Banking stocks edged higher with Fitch rating stating that the RBI’s new norms for overhauling the mechanism to deal with bad loans is aimed at speeding up the NPA resolution, but would undermine the banking sector earnings in the near-term. Stocks related to chemical sector edged higher on report that the government is likely to impose anti-dumping duty of up to $211 per tonne on a chemical used in textiles and pharma industry, imported from China and Turkey for a period of five years.

Finally, the BSE Sensex surged 322.65 points or 0.95% to 34,142.15, while the CNX Nifty was up by 108.35 points or 1.04% to 10,491.05.

The BSE Sensex touched a high and a low of 34,167.60 and 33,832.00, respectively and there were 26 stocks on gaining side as against 5 stocks on losing side on the index.

The broader indices ended in green; the BSE Mid cap index gained 1.47%, while Small cap index was up by 1.54%.

The top gaining sectoral indices on the BSE were Metal up by 3.16%, Basic Materials up by 2.43%, Healthcare up by 1.91%, Telecom up by 1.90% and Power was up by 1.44%, while there were no losers on the BSE sectoral front.

The top gainers on the Sensex were Tata Steel up by 6.26%, Sun Pharma up by 5.17%, Yes Bank up by 2.28%, Dr. Reddy’s Lab up by 2.26% and Bharti Airtel up by 2.26%. On the flip side, Asian Paints down by 1.38%, Coal India down by 0.51%, Infosys down by 0.42%, Mahindra & Mahindra down by 0.22% and Hindustan Unilever down by 0.16% were the top losers.

Meanwhile, Fitch Ratings in its latest report has stated that the Reserve Bank of India’s (RBI) new norms for overhauling the mechanism to deal with the bad debt, is likely to push up banks’ credit costs and weaken earnings in the near term. However, it believed that stronger regulatory efforts to deal with the problem of mounting bad loans in Indian banking system along with planned recapitalisation of state banks, could help support a recovery in the sector over the medium term.

The US-based agency has stated that regulators appear increasingly impatient with the slow resolution of NPL stock, which has prolonged the non-performing loan (NPL) cycle. It also noted that the new framework gives banks less discretion over the reporting and resolution of bad assets and attempts to address the complexities involved in resolving the stressed loans of large borrowers. Under the new framework for NPL resolution, it observed that banks will need to report defaults by large borrowers weekly, indicating a more invasive approach to tracking bad assets.

According to the report, the new framework’s overall focus is on recognising and quickly resolving bad loans. The agency also asserted that it is likely to result in a rise in NPLs, as banks are forced to reclassify stressed accounts previously recorded as special mention loans or restructured loans. It added that more accounts are also likely to be pushed toward insolvency courts and into liquidation, particularly since the new guidelines require all of a borrower’s lenders to agree on a resolution plan to keep it away from the courts.

The CNX Nifty traded in a range of 10,499.10 and 10,396.65. There were 43 stocks in green as against 7 stocks in red on the index.

The top gainers on Nifty were Tata Steel up by 6.03%, Sun Pharma up by 6.01%, UPL up by 3.97%, Tech Mahindra up by 3.55% and Vedanta up by 3.06%. On the flip side, Asian Paints down by 1.53%, GAIL India down by 1.43%, Infosys down by 0.55%, Eicher Motors down by 0.50% and HUL down by 0.37% were the top losers.

European markets were trading mostly in green; France’s CAC rose 5.03 points or 0.09% to 5,314.26 and Germany’s DAX was up by 25.54 points or 0.2% to 12,487.45, while UK’s FTSE 100 was down by 11.04 points or 0.15% to 7,241.35.

The Asian markets closed in green on Friday following the lead from Wall Street, with energy firms lifted by a rally in oil prices. The market sentiments improved further after US government debt yields fell from multiyear highs reached on Wednesday, helping ease worries over inflation and higher interest rates. Japanese shares eked out modest gains as bond markets regained stability. Further, Chinese shares extended their rebound, struggling off Beijing’s seizure of high-flying conglomerate Anbang Insurance Group amid signs the government is once again supporting the country’s stock markets after their recent rout.