Benchmarks end higher ahead of Fed policy outcome

Extending previous session’s rally, Indian equity benchmarks ended the Wednesday’s trade in green terrain with frontline gauges recapturing their crucial 10,150 (Nifty) and 33,100 (Sensex) levels, ahead of outcome of the US Federal Reserve policy meet. The Fed is expected to raise interest rates at its first policy meeting under Chairman Jerome Powell and may signal more hikes are coming in response to tax cuts and government spending that could further stoke a robust US economy. Markets started the session on an optimistic note as traders took some encouragement with former governor of Reserve Bank of India Raghuram Rajan’s statement that India should be thinking of the next 10 to 20 years when it would need a massive push to create jobs. Rajan enlightened that India could achieve even 10% growth if it built infrastructure, cleared the way for companies, eased the way for them to do business, and improved the quality of human capital including healthcare and education. Traders also get some support with a foreign brokerage report that India remains vulnerable in its external position, but this does not pose any concern about the country’s macro stability and is quite manageable. The report added that India’s CAD doubled from 0.7% of GDP in 2016-17 to 1.4% in 2017-18 and the widening of CAD is likely to continue in the next financial year as well albeit at a slower pace.

However, market participants pared some of their early gains in second half of the trade as traders turned little anxious on report that a private investment bank has downgraded India’s economic forecasts from 8 per cent to 7.6 per cent for Financial Year 2018-19. It, however, retained growth forecast for FY 2019-20 at 8.3 per cent. The investment bank lowered the growth projection in the wake of multi-billion banking scam and warned that it could spark tighter regulation of the banking sector that would constrain credit growth. Investors also remained cautious with a private report stating that Indian firms are most concerned about the increase in protectionism across the world. The report noted that the perception of rising protectionism is much higher than the global average, where three in five (61 per cent) of the 6,000 companies surveyed, think that their governments are steadily moving towards protectionism.

On the global front, European markets were trading in red in early deals as investors awaited a likely hike in US interest rates later in the day. British workers’ overall pay rose at the fastest pace in nearly two-and-a-half years over the three months to January, bolstering the chances that the Bank of England will raise borrowing costs in May. Asian markets exhibited mixed trend on Tuesday, as oil prices surged and ahead of the Federal Reserve's first meeting since the appointment of its new chair, Jerome Powell.

Back home, select metal stocks remained under pressure as the Trump Administration decided to slap an anti-dumping duty on the stainless steel flanges imported from China and India after it found in its preliminary probe that both the countries had provided subsidies to the exporters. Information Technology (IT) stocks erased gains as the Indian IT industry’s woes from its largest market - the United States - just do not seem to abate. A legislation proposed by Democrat Senator Sherrod Brown has now brought the focus on the business process outsourcing (BPO) industry while the US immigration agency has suspended a faster H-1B visa application route. Sugar stocks remained in limelight after the government scrapped export duty on raw and refined sugar to boost shipments, as the country is all set to produce record 29.5 million tonnes (MT) of the sweetener in the current 2017-18 marketing season. Export duty on sugar was 20%.

Finally, the BSE Sensex surged 139.42 points or 0.42% to 33,136.18, while the CNX Nifty was up by 30.90 points or 0.31% to 10155.25.

The BSE Sensex touched a high and a low of 33,354.93 and 33,070.53, respectively and there were 17 stocks on gaining side as against 14 stocks on losing side on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.22%, while Small cap index was up by 0.31%.

The top gaining sectoral indices on the BSE were Telecom up by 2.36%, Realty up by 0.75%, Capital Goods up by 0.56%, Energy up by 0.54% and Utilities was up by 0.48%, while Metal down by 0.54%, Healthcare down by 0.46%, Basic Materials down by 0.15% and Auto was down by 0.12% were the few losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 4.39%, NTPC up by 2.11%, Larsen & Toubro up by 1.14%, HDFC Bank up by 1.00% and HDFC up by 1.00%. On the flip side, Tata Steel down by 1.85%, Tata Motors down by 1.58%, Adani Ports & SEZ down by 1.44%, Hero MotoCorp down by 1.25% and Power Grid Corporation down by 0.90% were the top losers.

Meanwhile, in order to boost shipments, the government has scrapped the export duty of 20 percent on raw sugar, white or refined sugar. The 20 percent export duty was in force since June 2016. Earlier, the government had doubled import duty to 100 percent to check cheaper imports from overseas markets.

According to industry body Indian Sugar Mills Association (ISMA), India’s sugar production is estimated to rise by 45 percent to record 29.5 million tonnes (MT) in the 2017-18 marketing year (October-September), on the back of higher cane output in Maharashtra, Karnataka and Uttar Pradesh. Sugar output of India, the world's second largest producer after Brazil, stood at 20.3 MT in the 2016-17 marketing year.

With domestic prices falling below cost of production, ISMA and National Federation of Cooperative Sugar Factories (NFCSF) had been demanding scrapping of export duty to liquidate surplus domestic stock. As per ISMA, cane arrear to sugarcane farmers touched Rs 14,000 crore at the end of January and might rise further in wake of slide in sugar prices. Mills have produced 25.80 MT sugar till March 15 of the 2017-18 marketing year (October-September).

The CNX Nifty traded in a range of 10,227.30 and 10,132.95. There were 23 stocks in green as against 27 stocks in red on the index.

The top gainers on Nifty were Bharti Airtel up by 4.32%, Bajaj Finance up by 2.55%, NTPC up by 2.16%, Indiabulls Housing Finance up by 1.77% and BPCL up by 1.35%. On the flip side, Tata Steel down by 1.80%, Bosch down by 1.76%, Hero MotoCorp down by 1.66%, Adani Ports & SEZ down by 1.62% and Eicher Motors down by 1.62% were the top losers.

The European markets were trading in red; UK’s FTSE 100 declined 39.5 points or 0.56% to 7,021.77, France’s CAC decreased 15.23 points or 0.29% to 5,237.20 and Germany’s DAX was down by 3.18 points or 0.03% to 12,304.15.

Asian equity markets ended mixed on Wednesday as oil prices surged and ahead of the Federal Reserve's first meeting since the appointment of its new chair, Jerome Powell. The Federal Reserve policymakers have begun a two-day policy meeting that is expected to result in another interest rate increase on Wednesday. The Fed has said it expects to raise interest rates a total of three times this year, and one of the key debates on Wall Street is whether it will wind up increasing rates three times or four. The current meeting is the Fed's first since Jerome Powell became chairman, and investors will be watching his comments at a press conference Wednesday. Chinese shares ended lower, weighed down by start-up firms, as investors booked profits in shares of technology companies. Meanwhile, the Japanese market is closed for the Vernal Equinox.