Bulls tighten grip on Dalal Street; Nifty zooms past 10,750 mark

Extending their previous session’s rally, Indian equity benchmarks ended the Thursday’s trade with a gain of around a percent with Sensex and Nifty recapturing their crucial 35,400 and 10,750 levels respectively. Sentiments remained buoyant throughout the session, despite some profit booking in last leg of trade. Sentiments remained up-beat since beginning 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% in FY 2018-19 and 7.5% in FY 2019-20, reflecting robust private consumption and strengthening investment. Traders also took some encouragement with Moody’s Investors Service in its latest report expecting India to stick to the estimated fiscal deficit of 3.3% of GDP and even cut capital expenditure to offset any slippage from the budgeted target.

Some support also came with finance ministry stating that it feels that most impact of the repo rate hike by the Reserve Bank of India (RBI) has already been discounted by banks and also sees the changes in non-performing assets (NPA) norms for Ministry of Micro, Small and Medium Enterprises (MSMEs) as a huge positive. The RBI gave MSMEs a temporary breather, allowing them to delay their loan repayments by 180 days without being classified as non-performing. Adding to the optimism, RBI Governor Urjit Patel said that there are no implications on non-performing assets (NPAs) of banks because of farm loan waivers provided by various states. However, market participants booked small amount of their profit in last leg of trade on 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% to $52 billion, owing to a drop in inflows to India. Some concern also came on report that the RBI’s decision to increase the key lending rate by 25 basis points will hurt India’s growth prospects and hit business sentiment.

Firm opening in European counters too aided sentiments even as the euro held near two-week high, supported by expectations that the European Central Bank could start to wind down its stimulus when it meets next week in Latvia. Asian markets ended mostly in green terrain on Thursday, as receding worries about a full-blown global trade war also boosted investors’ sentiments.

Back home, banking and financial stocks edged higher after the RBI on Wednesday announced a slew of changes pertaining to banks and NBFCs such as changes in the method for valuation of state government securities, revision in housing loan limits for PSL eligibility, aligning objectives with PMAY and increase in Liquidity Coverage Ratio (LCR) carve out from Statutory Liquidity Ratio (SLR). Select sugar stocks edged higher with report stating that the Centre announced a Rs 8,500 crore package to boost farmers' income by creating a buffer stock for sugar, enhancing ethanol production capacity and fixing a minimum selling price to cut mill losses. The Cabinet approved Rs 4,440 crore soft loan for building ethanol production capacity to absorb the cane and a buffer stock of 3 million tonnes, besides for the first time fixing Rs 29 per kg as the minimum price below which mills cannot sell sweetener.

Finally, the BSE Sensex surged 284.20 points or 0.81% to 35,463.08, while the CNX Nifty was up by 83.70 points or 0.78% to 10,768.35.

The BSE Sensex touched a high and a low of 35,628.49 and 35,278.38, respectively and there were 22 stocks on gaining side as against 9 stocks on losing side on the index.

The broader indices ended in green; the BSE Mid cap index surged 1.40%, while Small cap index was up by 1.96%.

The top gaining sectoral indices on the BSE were Realty up by 2.77%, Basic Materials up by 1.61%, Industrials up by 1.51%, Energy up by 1.45% and Metal was up by 1.44%, while Consumer Durables down by 0.23% was the lone losing index on BSE.

The top gainers on the Sensex were Tata Steel up by 3.73%, Tata Motors up by 3.32%, Tata Motors - DVR up by 2.80%, ICICI Bank up by 2.52% and Axis Bank up by 2.48%. On the flip side, Coal India down by 0.69%, Indusind Bank down by 0.58%, Kotak Mahindra Bank down by 0.57%, SBI down by 0.24% and NTPC down by 0.15% were the top losers.

Meanwhile, after the RBI hiked its repo rate by 25 basis points to 6.25% to combat inflationary pressures arising from higher international oil prices, Chairman of the EEPC India, Ravi Sehgal has said that the decision of interest rate hike would increase input cost pressures only for the exporters.

Sehgal pointed that the note of various headwinds being faced by the Indian exporters has been taken by the central bank itself but the remedy is not forthcoming and further termed this situation as the paradox for exporters. Besides, he noted that raising interest rate would also add to the cost of engineering exporters, most of which are in the SME segments, adding that in any case, they were reeling under the increase in steel prices and also pending refunds of the Goods and Services Tax (GST) hit their liquidity.

The RBI, in its second bi-monthly monetary policy review of 2018-19, has raised the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points (bps) to 6.25%, the first increase since January 2014. The reverse repo rate under the LAF also increased to 6.0%.

The CNX Nifty traded in a range of 10,818.00 and 10,722.60. There were 37 stocks in green as against 13 stocks in red on the index.

The top gainers on Nifty were Tata Steel up by 3.82%, Tata Motors up by 3.08%, Indiabulls Housing Finance up by 2.83%, ICICI Bank up by 2.52% and Axis Bank up by 2.14%. On the flip side, Titan Company down by 1.38%, Eicher Motors down by 1.08%, Indusind Bank down by 0.93%, Coal India down by 0.64% and Lupin down by 0.45% were the top losers.

The European markets were trading mostly in green; France’s CAC rose 14.95 points or 0.27% to 5,472.51 and Germany’s DAX was up by 16.38 points or 0.13% to 12,846.45, while UK’s FTSE 100 was down by 13.04 points or 0.17% to 7,699.33.

Asian equity markets ended mostly higher on Thursday as fears over trade disputes abated and remarks by a European Central Bank board member eased worries about the new Italian government's spending plans. China’s Commerce Ministry said that the country does not want an escalation of trade frictions with the United States, and that some specific progress was made in the latest round of talks that concluded over the weekend. The euro rose against the dollar after the European Central Bank indicated it will discuss ending its bond purchasing program at a meeting next week. However, Chinese stocks ended lower as consumer and healthcare firms took a breather after recent gains.