Benchmarks extend winning streak for third straight session

Extending northward journey for third straight session, Indian equity benchmarks ended the Monday’s trade with a gain of around half a percent with frontline gauges recapturing their crucial 35,100 (Sensex) and 10,700 (Nifty) levels, as tensions in the Korean Peninsula eased after a spectacularly successful inter-Korean summit. Markets started the session on an optimistic note and traded in tight band throughout the session. Sentiments remained upbeat with Niti Aayog Vice Chairman Rajiv Kumar’s statement that India’s economy to grow by at least 7.5 per cent in 2018-19 on the back of improvement in investment cycle and capacity utilisation. The government should now concentrate on consolidating the reform initiatives undertaken in the last 47 months, he added. Traders also took some encouragement with report stating that the Reserve Bank of India (RBI) is withdrawing a restriction that limited foreign investors to only investing in government and corporate bonds with tenures of three years or more, a move that could bolster the domestic bond market.

Some support came with Economic Affairs Secretary Subhash Chandra Garg’s  statement that the process of economic reforms is still continuing in reasonably major way and noted that there are no signs of de-reform in the system. Meanwhile, Fitch has kept India’s rating unchanged with a stable outlook, saying the rating balances a strong medium-term growth outlook and favourable external balances with weak fiscal finances and some lagging structural factors, including governance standards and a still-difficult, but improving, business environment. Some optimism also came with report that the Centre has a surplus of Rs 20,000 crore in the GST cess fund as of March 31 which will be used to compensate the states for revenue shortfall suffered due to the roll out of the Goods and Services Tax.

Firm opening in European counters too aided sentiments, after a data from the European Central Bank showed that lending to euro zone households and companies accelerated in March while a broader indicator of money circulating in the currency bloc, which often foreshadows future activity, slowed sharply. Asian markets closed in green as tensions in the Korean Peninsula eased and first-quarter earnings shone.

Back home, investors took note of report that the early trend in the March 2018 quarter results season looks encouraging though driven by large companies such as Reliance Industries, Tata Consultancy Services, Infosys, and Wipro. Net sales of a sample of 113 companies that declared results for the quarter grew by 16.9 per cent year-on-year while net profit rose by 3.9 per cent. Excluding banks and financial companies, sales growth improved to 17.5 per cent and net profit growth shot up to 9.6 per cent. On the sectoral front, select metal stocks were buzzing after data showed that India has registered a 2.46 per cent rise in crude steel production to 26.363 million tonnes (MT) in the last quarter of 2017-18. The country had produced 25.729 MT during the January-March period of 2016-17. Select power related stocks were buzzing in today’s taking cues from Prime Minister Narendra Modi statement that the government has started supplying electricity to every village in the country and the task has been completed before due date. The government will now shift attention towards improving the quality of supply and connecting every household to the grid.

Finally, the BSE Sensex surged 190.66 points or 0.55% to 35,160.36, while the CNX Nifty was up by 47.05 points or 0.44% to 10,739.35.

The BSE Sensex touched a high and a low of 35,213.30 and 35,004.00, respectively and there were 25 stocks on gaining side as against 6 stocks on losing side on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.56%, while Small cap index was up by 0.89%.

The top gaining sectoral indices on the BSE were Realty up by 1.50%, Capital Goods up by 1.48%, IT up by 1.44%, FMCG up by 1.35% and Industrials was up by 1.18%, while Energy down by 1.99%, Oil & Gas down by 1.08%, Telecom down by 0.35% and Consumer Durables was down by 0.13% were the few losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 3.90%, Hindustan Unilever up by 2.34%, TCS up by 2.22%, Kotak Mahindra Bank up by 1.83% and Larsen & Toubro up by 1.73%. On the flip side, Axis Bank down by 3.87%, Reliance Industries down by 3.18%, ICICI Bank down by 1.25%, Coal India down by 0.77% and Power Grid Corporation down by 0.38% were the top losers.

Meanwhile, in an attempt to boost domestic bond market, the Reserve Bank of India (RBI) has withdrew a rule that mandated foreign portfolio investors (FPIs) to invest only in government bonds with a minimum residual maturity of three years. For corporate bonds, FPIs are now permitted to invest in bonds with minimum residual maturity of above one year as against minimum maturity of three years. The central bank has also revised the cap on aggregate FPI investments in any central government security to 30% from 20% of the outstanding stock of that security.

The minimum residual maturity requirement for central government securities (G-secs) and State Development Loans (SDLs) stands withdrawn, subject to the condition that investment in securities with residual maturity below 1 year by an FPI under either category should not exceed, at any point of time, 20 percent of the total investment of that FPI in that category. Currently, FPIs are permitted to invest in G-secs till the limit utilization reaches 90%, after which the auction mechanism is triggered for allocation of the remaining limit. With Clearing Corporation of India (CCIL) commencing online monitoring of utilisation of G-sec limits, it has been decided to discontinue the auction mechanism with effect from June 1, 2018. Thereafter, utilisation of FPI limits shall be monitored online.

With regard to single or group investor-wise limit in corporate bonds, investment by any FPI, including investments by related FPIs, should not exceed 50 percent of any issue of a corporate bond. FPIs should not have an exposure of more than 20 percent of its corporate bond portfolio to a single corporate including exposure to entities related to the corporate. No FPI shall invest in partly paid instruments and these directions would be applicable with immediate effect.

The CNX Nifty traded in a range of 10,759.00 and 10,704.60. There were 33 stocks in green as against 16 stocks in red, while 1 stock remain unchanged on the index.

The top gainers on Nifty were Yes Bank up by 3.45%, TCS up by 2.23%, Kotak Mahindra Bank up by 2.01%, Hindustan Unilever up by 1.90% and L&T up by 1.88%. On the flip side, Axis Bank down by 3.84%, Reliance Industries down by 3.29%, UPL down by 2.96%, GAIL India down by 1.59% and Bharti Infratel down by 1.33% were the top losers.

The European markets were trading in green; France’s CAC increased 9.22 points or 0.17% to 5,492.41, Germany’s DAX gained 12.95 points or 0.1% to 12,593.82 and UK’s FTSE 100 was up by 37.4 points or 0.5% to 7,539.61.

Asian equity markets ended in green on Monday as tensions in the Korean Peninsula faded and investors digested a slew of earnings releases and economic reports. The dollar held below three-month highs amid a pullback in Treasury yields and ahead of the Fed’s policy decision and a jobs report due this week, while oil prices slipped as investors waited for signs on whether the US would re-impose sanctions on Iran. Trading volumes remained thin across Asia amid holidays in China and Japan. Investors shrugged off official data from China showing that the country's manufacturing sector grew at a slower pace in April. The official manufacturing PMI fell slightly to 51.4 from 51.5 in March. However, the non-manufacturing PMI that covers services and construction, improved to 54.8 from 54.6 a month ago.