Benchmarks trade jubilantly in early deals

Indian equity benchmarks made a gap-up opening and are trading jubilantly in early deals on Thursday, with frontline gauges surpassing their crucial 35,400 (Sensex) and 10,750 (Nifty) levels amid firm global cues. Sentiments remained up-beat with World Bank’s statement that India will retain the tag as the world’s fastest growing major emerging economy for the next three years. The bank’s June 2018 edition of the Global Economic Prospect report pegged India’s GDP growth at 7.3 percent in FY 2018-19 and 7.5 percent in FY 2019-20, reflecting robust private consumption and strengthening investment. Some support also came with RBI Governor Urjit Patel’s statement that there are no implications on non-performing assets (NPAs) of banks because of farm loan waivers provided by various states.

On the global front, Asian markets are trading mostly in green at this point of time ahead of a meeting of major industrialized economies overshadowed by tension over U.S. steel tariffs. The US markets ended higher on Wednesday amid a pullback by U.S. treasuries after European Central Bank chief economist Peter Praet indicated the ECB will discuss ending its bond purchasing program at a meeting next week.

Back home, traders paid no heed towards report that foreign direct investment (FDI) to India declined to $40 billion in 2017 from $44 billion in the previous year. FDI inflows to South Asia contracted by 4 per cent to $52 billion, owing to a drop in inflows to India. In scrip specific developments, Sadbhav Infrastructure gained on getting nod to raise Rs 190 crore via NCDs and Lemon Tree Hotels soared on signing license agreement for property at Gwalior.

The BSE Sensex is currently trading at 35417.93, up by 239.05 points or 0.68% after trading in a range of 35278.38 and 35469.21. There were 27 stocks advancing against 4 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained by 0.88%, while Small cap index was up by 1.35%.

The top gaining sectoral indices on the BSE were Realty up by 1.65%, Basic Materials up by 1.47%, Metal up by 1.38%, Industrials up by 1.14% and Capital Goods was up by 1.09%

The top gainers on the Sensex were Tata Steel up by 1.67%, ICICI Bank up by 1.62%, Axis Bank up by 1.56%, Infosys up by 1.38% and ONGC up by 1.23%. On the flip side, Bharti Airtel down by 1.01%, Power Grid Corporation down by 0.64%, Coal India down by 0.55% and SBI down by 0.15% were the top losers.

Meanwhile, with sharp spike in retail inflation which rose to 4.6% in April and recent rise in crude prices, the Reserve Bank of India (RBI), in its second bi-monthly monetary policy review of 2018-19, has decided to hike the key policy rates for the first time in more than four years. It has increased the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points (bps) to 6.25%, the first increase since January 2014. Consequently, the reverse repo rate under the LAF stands adjusted to 6.0%, and the marginal standing facility (MSF) rate and the Bank Rate stood at 6.50%.

The decision of the monetary policy committee (MPC) is consistent with the neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%, while supporting growth. Taking into account muted food inflation over the past few months, the RBI’s six-member MPC, headed by Governor Urjit Patel, has revised CPI inflation forecast for 2018-19 to 4.8-4.9% in H1 and 4.7% in H2, including the HRA impact for central government employees, with risks tilted to the upside. Excluding the impact of HRA revisions, CPI inflation is projected at 4.6% in H1 and 4.7% in H2.

The policy statement cited several factors that could stoke inflation, including an increase in crude oil prices, rise in household inflation expectations, hardening of wages and input costs, and the impact of higher house rent allowance for employees of various state governments. The committee warned that the impact of a revision in minimum support prices (MSP) is uncertain due to lack of adequate details. It also said that as forecast by the IMD, if the monsoon is normal and well-distributed temporally and spatially, it may help keep food inflation benign.

On the economic front, the Central Bank has retained its Gross Domestic Product (GDP) growth forecast at 7.4% for FY19. It projected that in H1, GDP growth will be in the range of 7.5-7.6% and 7.3-7.4% in H2, with risks evenly balanced. According to the early results of the RBI’s industrial outlook survey (IOS), activity in the manufacturing sector is expected to moderate marginally in Q2FY19, on account of deterioration in the overall business situation and order book. However, it said that the sharp rise in petroleum product prices is likely to impact disposable incomes. It added that consumption, both rural and urban, remains healthy and is expected to strengthen further. Besides, it noted that domestic economic activity has exhibited sustained revival in recent quarters and the output gap has almost closed.

The CNX Nifty is currently trading at 10753.60, up by 68.95 points or 0.65% after trading in a range of 10722.60 and 10769.85. There were 41 stocks advancing against 9 stocks declining on the index.

The top gainers on Nifty were Vedanta up by 2.03%, Axis Bank up by 1.71%, Tata Steel up by 1.65%, ICICI Bank up by 1.51% and Hindalco up by 1.33%. On the flip side, Titan Company down by 0.83%, Bharti Airtel down by 0.71%, SBI down by 0.44%, Coal India down by 0.36% and Bharti Infratel down by 0.36% were the top losers.

Asian markets are trading mostly in green; Shanghai Composite rose 1.84 points or 0.06% to 3,117.02, KOSPI Index increased 16.87 points or 0.69% to 2,470.63, FTSE Bursa Malaysia KLCI surged 17.67 points or 0.99% to 1,794.80, Jakarta Composite added 23.41 points or 0.39% to 6,093.12, Hang Seng jumped 173.27 points or 0.55% to 31,432.37 and Nikkei 225 was up by 192.24 points or 0.85% to 22,817.97.

On the flip side, Taiwan Weighted was down by 4.26 points or 0.04% to 11,197.57.