Post Session: Quick Review

09 May 2018 Evaluate

Indian equity benchmarks traded in green for most part of the day and ended with gains of around three tenth of a percent. Though the markets started off on a weak note but pared all of their initial losses to enter into green terrain digesting the developments coming in from the White House as well as higher crude prices. The sentiments got some support with International Monetary Fund’s (IMF) report which reaffirmed that India will be the fastest growing major economy in 2018, with a growth rate of 7.4% that rises to 7.8% in 2019 with medium-term prospects remaining positive. The IMF’s Asia and Pacific Regional Economic Outlook report said that India was recovering from the effects of demonetization and the introduction of the Goods and Services Tax and the recovery is expected to be underpinned by a rebound from transitory shocks as well as robust private consumption. Investors took note that the Finance Ministry is looking at an idea to relieve banks of the burden of non-performing loans and allow them to focus on the core issue of financial intermediation by issuing provisional ‘shore-up certificates’ (PSCs) against their stressed assets to shore up their capital.

However, markets entered red terrain in morning session as investors turned cautious with a survey showing that optimism level among Chief Financial Officers about the country’s financial and macro-economic conditions for the second quarter of this year has declined nearly 18%, touching a four-year low. The composite CFO Optimism Index declined 17.8%, on a quarter-on-quarter basis, to 96.2 for the second quarter of 2018. Separately, as per Grant Thornton’s quarterly global business survey, at a time when business optimism is at an all-time high globally with the index at net 61%, in India, business sentiment has been at the weakest in four years. India slipped to the 6th position globally in the business optimism index for the first quarter of this year. With a score of 89, India is at the sixth place in the index. But, soon the markets erased losses and were back in the green terrain.

Select power companies stocks were under pressure after Reserve Bank of India rejected the government’s demand to relax the guidelines on resolution of stressed assets for power companies, pushing over 20,000 MW projects closer to liquidation. The regulator has said it was difficult to give any special treatment to any one sector and has said such issues must be addressed by the concerned ministries. Separately, a private report showed that India has ranked fourth out of 25 nations in the Asia-Pacific region on an index that measures their overall power, with the country being pegged as a giant of the future but trails behind in indicators of defence networks and economic relationships. Select tea stocks were buzzing on report that Indian tea industry has recorded the highest ever production as well as exports in FY18. The total tea production was 1325.05 million kgs, an increase of 74.56 million kgs as compared to 2016-17.

Meanwhile, mixed reactions were witnessed in FMCG stocks with CRISIL’s report highlighting that with a revenue growth of Rs 3.4 lakh crore, the Fast Moving Consumer Goods (FMCG) sector is seen rising by around 300-400 basis points to 11-12% in FY19 compared to 8% in FY18. The optimism comes from revival in rural demand and new product launches, which will further lead to a significant improvement in operating performance of FMCG companies and benefit their credit profiles.

Some sugar stocks were under pressure after ICRA in its report highlighted that the overall outlook for sugar remained weak even when the government’s cane subsidy might marginally improve operational profitability of the mills. The report added that in in-spite of the expected marginal improvement in operating profitability, the overall profitability outlook for the sugar sector remained weak for FY19.

On the global front, Asian markets closed mixed. Japanese workers’ inflation-adjusted real wages rose for the first time in four months in March, in a sign of a gradual increase in salaries that should help stimulate consumer spending. The European markets were trading in green. Britain’s consumer economy failed to rebound in April after snowy weather kept shoppers at home the month before, adding to downbeat data that make a Bank of England rate rise this week unlikely. In a latest sign of slow growth in 2018, retail spending contracted by 3.1 percent year-on-year in April after a 2.3 percent rise in March.

Back home, aviation stock InterGlobe Aviation, Jet Airways and SpiceJet closed in red with oil prices hitting 3-1/2-year highs after US President Trump abandoned a nuclear deal with Iran and announced the highest level of sanctions against the OPEC member.

The BSE Sensex ended at 35324.87, up by 108.55 points or 0.31% after trading in a range of 35134.20 and 35404.83. There were 16 stocks advancing against 15

stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index was down by 0.67%, while Small cap index was down by 0.15%. (Provisional)

The top gaining sectoral indices on the BSE were IT up by 0.77%, TECK up by 0.59%, Consumer Durables up by 0.54%, Capital Goods up by 0.36% and Energy up by 0.28%, while Power down by 0.57%, Utilities down by 0.46%, Healthcare down by 0.42%, Basic Materials down by 0.38% and FMCG down by 0.33% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Tata Motors - DVR up by 4.03%, Tata Motors up by 2.68%, Asian Paints up by 1.68%, TCS up by 1.36% and Yes Bank up by 1.34%. (Provisional)

On the flip side, Sun Pharma down by 1.07%, Wipro down by 0.83%, NTPC down by 0.73%, ICICI Bank down by 0.68% and Maruti Suzuki down by 0.65% were the

top losers. (Provisional)

Meanwhile, credit ratings agency, Crisil Ratings in its latest report has said that India’s fast moving consumer goods (FMCG) sector is likely to post a net revenue growth of 11-12 percent in fiscal 2019, up 300-400 basis points compared with 8 percent in fiscal 2018, on the back of a revival in rural demand and new product launches. It noted that this will lead to a significant improvement in the operating performance of FMCG companies and benefit their credit profiles.

The ratings agency has stated that the rural economy may get a leg-up from the government’s decision of increasing the minimum support price (MSP) for pulses, oil seeds and paddy for the upcoming kharif season. Besides, a favourable monsoon rainfalls and a more non-agriculture rural employment, will increase the disposable income of the farmers and consumption demand. From the marketers’ side, it said that continuing product launches and greater acceptance of ayurvedic and herbal products will also help. Therefore, it pointed out that revenue growth from the rural segment which contributes 40-45 percent of the total income of the sector, will improve to 15-16 percent in fiscal 2019 compared to 10 percent estimated for fiscal 2018.

According to the report, growth had recovered partially from the 5-percentage point range during fiscals 2016 and 2017, a period that saw sluggish rural demand resulting from weak monsoons, intense competition and demonetisation. On the other hand, it noted that revenue growth from the urban segment is likely to stay steady at 8 percent in FY19. It also said that while mid-sized and medium-sized firms will have an edge because of better operating efficiencies in the GST regime and may clip at 15-17 percent, large firms are seen growing topline by 300-400 bps to 11-12 percent.

The CNX Nifty ended at 10747.55, up by 29.75 points or 0.28% after trading in a range of 10689.85 and 10766.25. There were 23 stocks advancing against 27 stocks declining on the index. (Provisional)

The top gainers on Nifty were Tata Motors up by 2.91%, Titan Co up by 1.91%, UPL up by 1.39%, TCS up by 1.37% and Yes Bank up by 1.35%. (Provisional)

On the flip side, Ultratech Cement down by 2.41%, BPCL down by 2.04%, Lupin down by 1.53%, Bajaj Finance down by 1.09% and Sun Pharma down by 0.97% were the top losers. (Provisional)

The European markets were trading in green; UK’s FTSE 100 increased 43.37 points or 0.57% to 7,609.12, Germany’s DAX increased 44.4 points or 0.34% to 12,956.61 and France’s CAC increased 5.89 points or 0.11% to 5,527.82.

Asian equity markets closed mixed on Wednesday as investors kept an eye on movements in the oil and forex markets following US President Donald Trump's decision to formally withdraw from Iran's nuclear deal. Japanese stocks fell as global tensions flared after President Donald Trump pulled the United States out of an international nuclear deal with Iran, but Toyota rose after releasing earnings and announcing a share buyback. Meanwhile, Seoul stocks fell amid selling by foreign investors as Trump's decision to withdraw from the Iran nuclear deal raised the risk of conflict in the Middle East. Though, Hong Kong shares rose led by energy stocks after US President Donald Trump pulled out of the Iran nuclear deal, sparking fears about global oil supplies, and pushing oil prices higher. Malaysian markets remained closed on account of Election Day holiday.

Asian Indices	Last Trade	Change in Points	Change in %
Shanghai Composite	3,159.15	-2.35	-0.07
Hang Seng	30,536.14	133.33	0.44
Jakarta Composite	5,907.94	133.22	2.31
KLSE Composite	-		-
Nikkei 225	22,408.88	-99.81	-0.44
Straits Times	3,548.54	5.37	0.15
KOSPI Composite	2,443.98	-5.83	-0.24
Taiwan Weighted	10,703.35	11.97	0.11

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Post Session: Quick Review

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