Benchmarks make optimistic start on firm global cues

Buoyed by firm global cues, Indian equity benchmarks made an optimistic start and are trading in fine fettle in early deals on Tuesday with frontline gauges recapturing their crucial 33,900 (Sensex) and 10,400 (Nifty) levels. Sentiments remained upbeat on report that the economy will grow up to 7.5 per cent in FY19, supported by domestic consumption, policy push, and synchronised global growth. In the current fiscal, GDP growth is expected to be 6.5 per cent. The Economic Survey 2018 has pegged FY19 growth at 7-7.5 per cent. Traders also took some encouragement with a private report estimating that the Goods and Services Tax collection for 2018-19 would grow at a rate of 14-16 per cent, bringing it closer to the decadal growth rate in indirect taxes of just under 14 per cent.

Global cues too remained supportive with Asian markets trading mostly in green at this point of time after U.S. President Donald Trump faced growing pressure from political allies to pull back from proposed steel and aluminum tariffs, easing investors’ worries about an imminent trade war. The US markets closed higher on Monday ahead of the Labor Department’s monthly employment report due to be released on Friday.

Back home, the Centre will constitute a group to suggest necessary changes in the policy for special economic zones (SEZs). Designed to facilitate exports, units in SEZs get certain fiscal and non-fiscal incentives such as no licencing required for imports and full freedom of sub-contracting, as well as direct and indirect tax benefits. In scrip specific development, JSW Energy advanced on acquiring JSW Electric Vehicles, while Ramco Industries edged higher on entering into agreement to sell Clinker Grinding Unit.

The BSE Sensex is currently trading at 33978.84, up by 232.06 points or 0.69% after trading in a range of 33937.72 and 34060.13. There were 23 stocks advancing against 8 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index surged 0.91%, while Small cap index was up by 0.81%.

The top gaining sectoral indices on the BSE were Metal up by 1.84%, Realty up by 1.65%, Basic Materials up by 1.28%, Consumer Durables up by 1.10% and Capital Goods was up by 0.97%, while there were no losers on the BSE sectoral front.

The top gainers on the Sensex were Tata Steel up by 2.54%, Indusind Bank up by 2.33%, Yes Bank up by 1.53%, HDFC up by 1.32% and Tata Motors up by 1.31%. On the flip side, Mahindra & Mahindra down by 0.87%, Coal India down by 0.31%, Sun Pharma down by 0.25%, Power Grid Corporation down by 0.23% and Asian Paints down by 0.21% were the top losers.

Meanwhile, with rising domestic consumption, policy push and synchronised global growth, credit ratings agency, Crisil Ratings in its latest report has projected that India’s gross domestic product (GDP) growth will improve sharply to 7.5% in the next fiscal year 2018-19 (FY19) and added that the country’s GDP will grow at the rate of 6.5% in the current fiscal year (FY18). Besides, the Economic Survey 2018 has pegged India’s growth in the range of 7-7.5% for FY19. However, the rating agency said that the key risks to its forecasts stem from inability to resolve Goods and Services Tax (GST)-related issues quickly and fiscal stress leading to a cut in capex by the government.

The report titled ‘The FouRs of Growth’ has stated that the country’s growth dynamics and its sustainability depend on the four thrust vectors - resolution of stressed assets in banking sector, rural rejuvenation, relentless implementation of reforms and rising global growth. It also said that the key engines supporting the upturn are largely domestic and policy-driven, though a synchronous upturn in global growth will provide some tailwind. It added that the upturn in growth will be aided partly by the low-base effect.

With gross non-performing assets (NPAs) in the public sector banks (PSBs) touching 10.5%, the ratings agency said that the asset quality issues plaguing PSBs has reached to a point that no meaningful and sustainable economic recovery is plausible without beginning of a resolution process. It also said that while haircuts are likely to be deep, the scale and timeframe of recovery will mark a watershed for the country's banking system. It further added that fresh slippages will moderate and NPAs will likely peak at 11% by March 2019, with improving economy and turning credit cycle.

Crisil Ratings stated the focus on demand and job creation through spending on rural and labour-intensive infrastructure space is likely to support growth next fiscal, and push demand in the consumer sectors. It further said that the sustainability of recovery also depends on effective implementation of key reforms such as GST, the Real Estate (Regulation and Development) Act of 2016, and the Uday rolled out in the last few years. It also said global growth is gathering pace, and the momentum in global trade is expected to continue in 2018 as well and it should buoy exports, but the pick-up is unlikely to be material, given poor local infrastructure, higher cost of capital and labour productivity issues.

The CNX Nifty is currently trading at 10422.60, up by 63.75 points or 0.62% after trading in a range of 10415.30 and 10441.35. There were 35 stocks advancing against 14 stocks declining on the index, while 1 stock remained unchanged.

The top gainers on Nifty were Vedanta up by 2.74%, Tata Steel up by 2.44%, Aurobindo Pharma up by 1.92%, Indusind Bank up by 1.76% and Indiabulls Housing up by 1.62%. On the flip side, Bharti Infratel down by 2.06%, Mahindra & Mahindra down by 1.20%, Tech Mahindra down by 1.20%, Coal India down by 0.77% and Lupin down by 0.55% were the top losers.

Asian markets are trading mostly in green; FTSE Bursa Malaysia KLCI gained 5.97 points or 0.32% to 1,848.59, Shanghai Composite increased 6.78 points or 0.21% to 3,263.71, KOSPI Index soared 34.44 points or 1.45% to 2,409.50, Taiwan Weighted jumped 131.64 points or 1.24% to 10,774.54, Hang Seng surged 414.57 points or 1.39% to 30,300.96 and Nikkei 225 up by 430.34 points or 2.05% to 21,472.43.

On the flip side, Jakarta Composite down by 2.48 points or 0.04% to 6,548.11.