Markets end near day’s high on MSP hike

Extending previous session’s northward journey, Indian equity benchmarks ended the Wednesday’s trade in green terrain with frontline gauges recapturing their crucial 35,600 (Sensex) and 10,750 (Nifty) levels, as sentiments remained up-beat on kharif crop MSP hike and Services PMI bounces back. However, markets made cautious start as sentiments remained downbeat with the rating agency ICRA’s report that Reserve Bank of India’s (RBI) plan to change disbursement norms of working capital would exert pressure on the liquidity profile of borrowers, specifically those having a high dependence on cash credit or overdraft facilities while lacking alternative sources of liquidity. Some cautiousness also crept in with a report that the five-pronged strategy recommended by the panel of bankers for resolution of bad loans is a useful long-term concept, but tighter deadlines and near-term funding challenges remain. Meanwhile, Moody’s Investors Service’s latest report highlighted that higher crude price is a key risk to India’s growth, but subsidy reform in petrol and diesel has diminished the risk to sovereign credit profile.

However, markets took U-turn and entered into green terrain in second half of the trade, as traders turned optimistic with private report showing that activity in India’s service industry rebounded in June from a mild contraction last month, expanding at its quickest pace in a year on the back of a surge in new business orders. The Nikkei/IHS Markit Services Purchasing Managers’ Index (PMI) climbed to 52.6 last month, its highest since June 2017, from 49.6 in May. Buying got intensified in last leg of trade to take markets near intraday highs, after Union Cabinet approved the proposal to hike the Minimum Support Price (MSP) for Kharif crops, which was made in the Budget 2018 by Finance Minister Arun Jaitley. The MSP for paddy has been raised by around Rs 250 per quintal. The hike in MSP is one of the measures taken by the Narendra Modi government to end farmers woes in the country. Some support also came with NITI Aayog Vice Chairman Rajiv Kumar’s statement that the Indian economy is on the cusp of a major sustained and ongoing recovery and poised to grow above 8% from the next year, thanks to a slew of measures taken by the government in the last few years.

On the global front, European markets were trading mostly in red in early deals on Wednesday, amid elevated tensions between the US and China over looming trade tariffs and investment restrictions. Asian markets ended mostly in red, on heightened anxieties about Sino-US trade tensions ahead of Washington’s end-of-week deadline to impose tariffs on Chinese imports.

Back home, sentiments remained buoyed on a report that SEBI has enhanced the overseas investment limit of alternative investment funds (AIF) and venture capital funds (VCF) to $750 million from the current $500 million. On the sectoral front, PSU Bank sector was in focus with a report stating that India’s public-sector financial institutions control about 70% of all banking assets in the country, but they have the highest exposure to soured loans amounting to as much as $150 billion. In fact, the 21 state-owned banks had stressed loans of about Rs 8.26 trillion ($120 billion) as of December 31. Metal stocks shined, amid reports that aluminium exports from the country increased by 36% in 2017-18, aided by global demand, which outstripped supply.

Finally, the BSE Sensex rose 266.80 points or 0.75% to 35,645.40, while the CNX Nifty was up by 70.00 points or 0.65% to 10,769.90.

The BSE Sensex touched a high and a low of 35,667.31 and 35,309.67, respectively and there were 17 stocks advancing against 14 stocks declining on the index.

The broader indices ended mixed; the BSE Mid cap index declined 0.17%, while Small cap index was up by 0.38%.

The top gaining sectoral indices on the BSE were Auto up by 1.31%, Energy up by 1.03%, Healthcare up by 0.80%, Consumer Discretionary Goods & Services up by 0.77% and Bankex was up by 0.69%, while IT down by 0.60%, TECK down by 0.55%, Power down by 0.54%, PSU down by 0.53% and Consumer Durables was down by 0.51% were the top losing indices on BSE.

The top gainers on the Sensex were Bajaj Auto up by 3.95%, Maruti Suzuki up by 2.69%, HDFC up by 2.09%, Hindustan Unilever up by 2.03% and Reliance Industries up by 1.90%. On the flip side, NTPC down by 1.64%, Vedanta down by 1.21%, ONGC down by 1.20%, Bharti Airtel down by 1.01% and Tata Motors down by 0.93% were the top losers.

Meanwhile, with an aim to match hardening interest rates in the banking sector, the Finance Ministry has kept the interest rates on small savings schemes like Public Provident Fund (PPF), National Savings Scheme (NSC), unchanged for the Q2 (July-September) of FY2019. The interest rates for small savings schemes are to be notified on a quarterly basis.

According to the Ministry, interest rate for the five-year Senior Citizens Savings Scheme has been retained at 8.3 percent. The interest on the senior citizens’ scheme is paid quarterly. Interest on savings deposits has been retained at 4 percent annually. PPF and NSC will fetch annual interest rate of 7.6 percent, while Kisan Vikas Patra (KVP) will yield 7.3 percent and mature in 11 months. The girl child savings scheme Sukanya Samriddhi Account will offer 8.1 percent rate.

It further stated that term deposits of 1-5 years will fetch interest rate of 6.6-7.4 percent, to be paid quarterly, while the five-year recurring deposit is pegged at 6.9 per cent. In 2016, it had said that rates of small savings schemes would be linked to government bond yields. It added that the move is expected to see banks lowering their deposit rates in line with the small savings rate offered by the government.

The CNX Nifty traded in a range of 10,777.15 and 10,677.75. There were 26 stocks in green as against 24 stocks in red on the index.

The top gainers on Nifty were Bajaj Auto up by 4.42%, Lupin up by 3.86%, Maruti Suzuki up by 2.78%, Bajaj Finserv up by 2.55% and HDFC up by 2.30%. On the flip side, HPCL down by 2.59%, Grasim Industries down by 2.01%, Cipla down by 1.98%, NTPC down by 1.58% and Vedanta down by 1.32% were the top losers.

European markets were trading mostly in red; UK’s FTSE 100 declined 19.88 points or 0.26% to 7,573.41 and Germany’s DAX was down by 9.68 points or 0.08% to 12,339.46, while France’s CAC was up by 14.39 points or 0.27% to 5,331.16.

Asian equity markets ended mixed on Wednesday as trade jitters continued to simmer ahead of the July 6 deadline, when US tariffs on Chinese goods are due to take effect. The yen rose against the dollar and the euro advanced amid fading political risks in Germany, while oil prices remained supported by data showing a larger-than-expected fall in US stockpiles. Chinese shares ended lower despite the yuan rising sharply against the US dollar following verbal intervention by the People's Bank of China. Meanwhile, Japanese shares retreated as technology stocks followed their US peers lower and index heavyweight Fast Retailing reported a 4 percent fall in same-store sales at its Uniqlo clothing outlets in June.