Post Session: Quick Review

Indian equity benchmarks traded jubilantly throughout the day on Wednesday and ended with decent gains. Hectic buying activity which took place during last leg of trade mainly drove the markets higher with key gauges surpassing their crucial 35,100 (Sensex) and 10,650 (Nifty) bastions. Domestic indices made flat to positive start, ahead of the RBI’s bi-monthly policy meet outcome due later in the day. Markets gained traction and traded in fine fettle, taking support from a private report stating that the government has effected a major overhaul of its credit guarantee scheme to make adequate loans available to micro and small enterprises easily by more than tripling its corpus to Rs 8,000 crore and allowing non-banking financial companies (NBFCs), along with banks, to avail of official guarantees to extend credit to such units. Investors paid no heed towards India Ratings and Research’s report that a combination of elevated crude oil price and weak rupee, if sustained for more than a quarter, will have an adverse impact on India’s current account position, inflation, monetary policy stance and fiscal balance.

In the late afternoon session, key indices turned choppy after Reserve Bank of India's (RBI) monetary policy committee raised repo rate by 25 basis points to 6.25 percent from 6.00 percent. Following the larger peers, the broader markets too pared some of their gains in late noon deals. However, markets witnessed heavy buying and extended their gains in last leg of trade which helped indices reach their intra-day high levels, as traders’ sentiments remained optimistic with World Bank’s report stating that India is projected to regain its position as the world’s fastest-growing major economy advancing 7.3 per cent this fiscal year and 7.5 per cent in the next two ‘as factors holding back growth in India fade’. The markets’ mood remained up-beat with a report stating that riding high on the success of UPI-based payments system, the digital payments in India has tripled to 7% of GDP from 2.5% three years ago. The whole thrust of the government, banks, regulator on banks is actually paying off. Everything is growing, whether is debit card transactions or credit card transactions.

On the global front, Asian equity markets ended mostly higher on Wednesday, after tech sector strength lifted Wall Street shares while concerns about Italy’s debt prompted investors to move into lower-risk government debt elsewhere, pushing U.S. Treasury yields down from recent highs. The European markets were trading in green in early deals, with investors focusing on political developments in Europe and the latest chapter in the trade dispute between the U.S. and China.

Back home, select sugar stocks edged higher after the Cabinet approved a Rs 8,500 crore bailout package for the sugar industry which includes Rs 4,500 crore soft loan for building ethanol production capacity and creating a 3 million tonne stockpile to soak up excess supply. Besides, telecom stocks ended higher with a report stating that increased investments by telecom operators and better rules pertaining to the rollout of tower sites seem to be paying off when it comes to dealing with call-drops. Telecom Regulatory Authority of India released a data which showed that the rate of call drops has improved over the last two years from 0.94% in 2016 to 0.52% by March 2018.

The BSE Sensex ended at 35180.40, up by 277.19 points or 0.79% after trading in a range of 34896.37 and 35230.54. There were 26 stocks advancing against 5 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index surged 1.37%, while Small cap index was up by 1.57%. (Provisional)

The top gaining sectoral indices on the BSE were Telecom up by 3.19%, Consumer Durables up by 2.35%, Metal up by 1.83%, Realty up by 1.60% and Auto up by 1.59%, while there were no losing indices on BSE sectoral front. (Provisional)

The top gainers on the Sensex were Bharti Airtel up by 5.10%, Tata Motors up by 3.59%, Sun Pharma up by 3.27%, SBI up by 2.50% and Coal India up by 2.19%. (Provisional)

On the flip side, Asian Paints down by 0.63%, ONGC down by 0.44%, HDFC Bank down by 0.11%, Axis Bank down by 0.09% and ICICI Bank down by 0.09% were the top losers. (Provisional)

Meanwhile, the India Ratings and Research (Ind-Ra), a subsidiary of Fitch Ratings, in its latest report has said that higher crude oil prices coupled with weak rupee, if sustained for more than a quarter, will have an adverse impact on India’s current account position, inflation, monetary policy stance and fiscal balance. The report stated that the current account deficit (CAD) could widen $22 billion-31 billion in FY19, if crude basket averages $68-72.86/bbl and rupee averages 66.6-67 per dollar for FY19. It added that wholesale inflation could also increase 70-80bp from its current forecast of 3.4% and retail inflation 30-35bp from its current forecast of 4.3%.

The ratings agency also said that the value added tax imposed by the states is on ad valorem basis. Thus, with a rise in oil prices, the state governments garner higher revenue from the sale of same quantity of oil as opposed to the central government whose excise duty is fixed in terms of Rs/litre. Therefore, a surge in crude oil prices gives the state governments more headroom to rationalise the tax rate without compromising much on their fiscal arithmetic.

On the Reserve Bank of India’s (RBI’s) policy rate, Ind-Ra stated that the RBI’s Monetary Policy Committee (MPC) will keep the policy rate unchanged in its upcoming review. Although the MPC minutes from April’s policy review indicate a potential shift in the RBI’s liquidity stance to ‘withdrawal of accommodation’ from current ‘neutral’ stance, it believes the MPC will wait for the outturn of monsoon and its distribution, and further movement in crude oil prices before deciding on the rate hike.

The CNX Nifty ended at 10686.30, up by 93.15 points or 0.88% after trading in a range of 10587.50 and 10698.35. There were 41 stocks advancing against 9 stocks declining on the index. (Provisional)

The top gainers on Nifty were Bharti Airtel up by 4.42%, Titan Co up by 4.24%, Tata Motors up by 3.61%, Sun Pharma up by 3.50% and Bajaj Finance up by 3.27%. (Provisional)

On the flip side, HPCL down by 1.11%, Tech Mahindra down by 1.05%, Cipla down by 0.78%, Asian Paints down by 0.64% and GAIL India down by 0.58% were the top losers. (Provisional)

The European markets were trading in green; France’s CAC increased 11.45 points or 0.21% to 5,472.40, UK’s FTSE 100 increased 29.02 points or 0.38% to 7,715.82 and Germany’s DAX increased 72.99 points or 0.57% to 12,860.12.

Asian equity markets ended mostly higher on Wednesday as higher commodity prices lifted resource stocks and the Japanese yen weakened on solid US non-manufacturing activity data released overnight. But overall market gains were limited as investors remained wary about global trade tensions and geopolitical risks, and as the market awaited the US Federal Reserve’s policy meeting next week where it is expected to raise interest rates. Japanese shares ended higher, as technology stocks edged up after their US peers rallied. Chinese shares ended almost flat, as gains in transport and material firms were offset by losses in banking and real estate shares. Meanwhile, the markets in South Korea are closed on Wednesday for the Memorial Day holiday.