Bulls make come back on Dalal Street; Nifty reclaims 10,700 mark

Monday turned out to be a remarkable day of trade for Indian equity benchmarks where bulls made come back on Dalal Street, with frontline gauges recapturing their crucial 35,200 (Sensex) and 10,700 (Nifty) levels. 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. Markets started the session on an optimistic note as traders took encouragement with ADB Chief Economist Yasuyuki Sawada’s statement that India’s projected GDP growth of over 7% for the current fiscal is amazingly fast and if this momentum is maintained the size of the economy can double within a decade. He also said that the country shouldn’t worry about not achieving 8% growth but focus on increasing domestic demand by reducing the income inequality. Some support also came with Commerce and Industry Minister Suresh Prabhu’s statement that the government is working on a strategy to promote services exports which have the potential to boost overall foreign shipments and economic growth.

Markets extended rally in second half of trade on report highlighting that with the GST collection in April crossing the Rs 1-trillion-mark, the FY19 target of Rs 12.9 trillion mop-up seems feasible. It added that going forward, with government introducing anti- evasion measures like TDS, TCS and credit matching, these could be hopeful of very good GST collection for FY19. Investors shrugged off a report that foreign investors have pulled out over Rs 15,500 crore from the Indian capital market in April, making it the steepest outflow in 16 months, due to surge in global crude prices and rise in yields of government securities here. This comes after an inflow of Rs 11,654 crore in equities in March and an outflow of over Rs 9,000 crore from the debt market during the same period.

Firm opening in European markets too aided sentiments despite a survey showing that investor morale in the euro zone deteriorated for the fourth month in a row this month to its lowest level since February 2017, hit by concerns about the possible introduction of US tariffs and a protectionist spiral. Asian markets exhibited mixed trend. Chinese central bank governor said that China’s huge trade imbalance with the United States is a structural and long-term problem and should be viewed with rationality.

Back home, banking stocks edged higher on a report that the Reserve Bank of India (RBI) is likely to give banks yet another leeway in accounting for their losses in government securities, potentially saving them hundreds of crore in provisions which will eventually benefit their bottom line. Separately, Indian Banks’ Association (IBA) has drawn a plan for measuring implementation of reforms agenda by public sector banks on six specified parameters, which include customer responsiveness, credit off-take and digitalization. Real estate stocks firmed up on report that the performance of some of the listed real estate companies in terms of residential sales over the past one year indicates that things are looking up. The pent-up demand for housing is now getting converted into actual sales. Mixed reactions witnessed in internet software stocks on report that as much as $2.1 billion worth of M&A (merger and acquisition) transactions were inked in 2017 in the booming Indian e-commerce industry, which may soon witness its largest-ever deal - the proposed Flipkart-Walmart nuptial.

Finally, the BSE Sensex surged 292.76 points or 0.84% to 35,208.14, while the CNX Nifty was up by 97.25 points or 0.92% to 10,715.50.

The BSE Sensex touched a high and a low of 35,259.81 and 34,977.74, respectively and there were 24 stocks on gaining side as against 7 stocks on losing side on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.55%, while Small cap index was up by 0.56%.

The top gaining sectoral indices on the BSE were Metal up by 1.68%, Oil & Gas up by 1.64%, Realty up by 1.51%, Energy up by 1.47% and Consumer Durables was up by 1.45%, while Healthcare down by 0.53% and IT was down by 0.01% were the only losing indices on BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 3.68%, Axis Bank up by 2.82%, Tata Steel up by 2.52%, ICICI Bank up by 2.30% and Hindustan Unilever up by 1.91%. On the flip side, Dr. Reddy’s Lab down by 1.75%, Coal India down by 1.64%, TCS down by 1.53%, Sun Pharma down by 1.00% and HDFC Bank down by 0.55% were the top losers.

Meanwhile, the study, commissioned by the textiles ministry and conducted by the Indian Institute of Foreign Trade (IIFT), has stated that there is need to relax set of labour laws and boost incentives in order to promote India as most preferred sourcing destination in textiles sector. It also suggested that strengthening the eco-system for textile exports, integrating fragmented textile value chain and investing in skill up-gradation as measures required to boost India's sourcing potential.

According to the report, outdated labour laws within the textile sector hamper India from becoming labour competitive. It also said that India is not perceived to be a low cost labour destination. It observed that the incentives offered in India are much below that offered in China, thereby making Indian products lose out on being price competitive in the global markets. Besides, it called for innovation in terms of new products, new business models and collaborations; digitisation of entire supply chain from product development to delivery and ensuring compliances related to quality and legal issues, so that India is recognised for producing world class products.

The report further said that IIFT also believes that key to success is encouraging product as well as market diversification for varied textiles & apparel products and clear positioning of Indian Textiles in International Markets. As per the study, the poor state of roads and connectivity around weaver hubs have led to reduced number of personal visits by buyers, leading to greater dependence on buying agents. Moreover, it said that the high import cost of latest machines deter many small manufacturers from upgrading to the latest technology, thereby contributing to compromises on quality.

The CNX Nifty traded in a range of 10,725.65 and 10,635.65. There were 37 stocks in green as against 13 stocks in red on the index.

The top gainers on Nifty were GAIL India up by 4.32%, Mahindra & Mahindra up by 3.77%, ICICI Bank up by 3.59%, Axis Bank up by 3.04% and Hindalco up by 2.79%. On the flip side, Lupin down by 2.61%, Dr. Reddy’s Lab down by 1.88%, TCS down by 1.52%, Coal India down by 1.44% and Cipla down by 1.02% were the top losers.

The European markets were trading in green; France’s CAC rose 1.11 points or 0.02% to 5,517.16, Germany’s DAX increased 48.99 points or 0.38% to 12,868.59 and UK’s FTSE 100 was up by 64.45 points or 0.86% to 7,567.14.

Asian equity markets ended mixed on Monday as investors digested mixed US jobs data for April and kept an eye on oil prices ahead of a key decision by the Trump administration to re-impose sanctions on Iran. Chinese shares ended higher amid optimism about robust April economic data despite lingering Sino-US trade tensions, as investors bid up tech shares after regulators detailed rules that pave the way for domestic flotation of overseas-listed technology giants. A flurry of Chinese data in the coming weeks is expected to show that the world’s second-largest economy remained strong in April, underpinned by a pickup in industrial output and a rebound in exports despite rising trade tensions with the United States. Meanwhile, Japanese shares ended on a flat note as falling US yields pulled down financials, offsetting investors’ optimism that the Bank of Japan will keep its purchases of exchange-traded funds (ETFs) and other risky assets. South Korean markets were closed in observance of Children's Day.