Benchmarks extend winning streak for third straight session

Extending winning streak for third straight day, Indian equity benchmarks ended the Wednesday’s trade with a gain of over quarter a percent. Markets started the session on pessimistic note with report that India slipped to the 6th position globally in the business optimism index for the first quarter of this year. Business optimism is however at an all-time high globally with the index at net 61%, the highest figure recorded in 15 years of research. Sentiments also remained dampened with a private report stating that India missed out on a synchronized global recovery in 2017 even as the economy recovers from the structural shocks of Goods and Services Tax (GST) and demonetization. Some cautiousness also prevailed on a survey showing that touching a four-year low, 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%. The composite CFO Optimism Index declined 17.8%, on a quarter-on-quarter basis, to 96.2 for the second quarter of 2018.

However, markets gained momentum and entered into green terrain with traders turning optimistic on International Monetary Fund’s (IMF) report reaffirming 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 GST and the recovery is expected to be underpinned by a rebound from transitory shocks as well as robust private consumption. Sentiment on the street remained positive with a report stating that India’s economy is forecast to grow at 7.2% in 2018 and private investment in India is expected to revive as the corporate sector adjusts to GST, infrastructure spending increases and corporate and bank balance sheets improve with government support.

Markets extended gains after European markets made a firm opening despite 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. Asian markets exhibited mixed trend as investors weighed the Trump administration’s decision to withdraw from a 2015 nuclear deal with Iran and reinstate sanctions on the country.

Back home, select tea stocks remained 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. FMCG stocks exhibited mixed reaction on CRISIL report 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. However, stocks related to power companies remained 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.

Finally, the BSE Sensex surged 103.03 points or 0.29% to 35,319.35, while the CNX Nifty was up by 23.90 points or 0.22% to 10,741.70.

The BSE Sensex touched a high and a low of 35,404.83 and 35,134.20, respectively and there were 16 stocks on gaining side as against 15 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index shed 0.63%, while Small cap index was down by 0.13%.

The top gaining sectoral indices on the BSE were IT up by 0.74%, TECK up by 0.56%, Consumer Durables up by 0.46%, Capital Goods up by 0.40% and Energy was up by 0.32%, while Power down by 0.57%, Utilities down by 0.49%, Healthcare down by 0.47%, PSU down by 0.36% and Basic Materials was down by 0.31% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors - DVR up by 3.82%, Tata Motors up by 2.79%, Asian Paints up by 1.69%, TCS up by 1.39% and Axis Bank up by 1.36%. On the flip side, Sun Pharma down by 1.02%, Maruti Suzuki down by 0.70%, ICICI Bank down by 0.70%, Wipro down by 0.66% and Mahindra & Mahindra down by 0.64% were the top losers.

Meanwhile, with India’s medium-term prospects remaining positive, the International Monetary Fund (IMF) in its latest Asia and Pacific Regional Economic Outlook report has restated that the country will be the fastest growing major economy in 2018, with a growth rate of 7.4%, and will grow further to 7.8% in 2019. It also said that the nation was recovering from the effects of demonetisation and the introduction of the Goods and Services Tax, and this recovery is expected to be supported by a rebound from transitory shocks as well as robust private consumption.

According to the report, medium-term consumer price index inflation is forecasted to remain within but closer to the upper bound of the Reserve Bank of India’s inflation-targeting band of 4% with a (+/-) 2% change. But, it also expresses caution that with increased inflation pressure in India, monetary policy should maintain a tightening bias. It added that the consumer price increase in 2017 was 3.6% and projected it to be 5% in 2018 and 2019. Besides, the current account deficit in FY18 is expected to widen somewhat but should remain modest, financed by robust foreign direct investment inflows.

The report also showed that Bangladesh will be the fastest-growing economy in South Asia, after India, with growth rates of 7% for 2018 and 2019; Sri Lanka is projected to grow at 4% in 2018 and 4.5% in 2019, and Nepal 5% in 2018 and 4% in 2019, while Pakistan, which is grouped with the Middle East, is not covered in the Asia report. Besides, China is expected to grow 6.6% in 2018 and 6.4% in 2019. Overall, Asia continues to be both the fastest-growing region in the world and the main engine of the world’s economy.

IMF has said that US President Donald Trump’s fiscal stimulus is expected to support Asia’s exports and investment, while the Asian region’s growth rate was expected to be 5.6% for 2018 and 2019. However, in the medium term, it said that downside risks dominate for the region and these include a tightening of global financial conditions, a shift toward protectionist policies, and an increase in geopolitical tensions. With these uncertainties the IMF urged the countries in the region to follow conservative policies aimed at building buffers and increasing resilience and push ahead with structural reforms.

The CNX Nifty traded in a range of 10,766.25 and 10,689.85. There were 25 stocks in green as against 25 stocks in red on the index.

The top gainers on Nifty were Tata Motors up by 2.80%, Titan Company up by 1.82%, Yes Bank up by 1.41%, Tata Steel up by 1.41% and UPL up by 1.39%. On the flip side, Ultratech Cement down by 2.41%, BPCL down by 1.94%, Lupin down by 1.41%, Bajaj Finance down by 1.09% and HPCL down by 1.07% were the top losers.

The European markets were trading in green; France’s CAC rose 2.72 points or 0.05% to 5,524.65, Germany’s DAX increased 19.14 points or 0.15% to 12,931.35 and UK’s FTSE 100 was up by 45.07 points or 0.6% to 7,610.82.

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.