Late buying help markets to settle at new highs

Extending record hitting spree for fourth straight session, Indian equity benchmarks once again settled at fresh closing highs. Key gauges started on pessimistic note, as traders remained cautious with report that corporate India’s business optimism index for the July-September quarter registered an 11.7% increase over last year, while on a quarter-on-quarter basis it has declined. Some anxiety remained among the local traders with Moody’s Investors Service’s report which stated that the GST Council’s decision to lower rates on several goods and also rationalise rates on some services will impact government’s fiscal consolidation effort. Investors took note of Reserve Bank of India’s (RBI’s) data showing that India Inc raised $2.71 billion through external commercial borrowing (ECB) and rupee-denominated bonds (RDBs) in June 2018, up by 66.3% over the same month last year. As per the data, Indian companies had raised $1.63 billion from overseas sources in June 2017. The mood on the street also remained cautious ahead of the RBI’s monetary policy outcome.

However, buying which emerged in last leg of trade mainly helped markets to settle above their crucial 37,600 (Sensex) and 11,350 (Nifty) levels. Sentiments turned positive on report that the government sought Parliament’s approval for additional gross additional expenditure of Rs 11,697.92 crore for the current fiscal. Traders took note of a private report stating that GDP growth is likely to peak in April-June quarter and then moderate to 7.2% in the second half of 2018 from around 7.8% in first half. Market participants also took some support from Crisil’s report that India is much better placed than many other emerging market peers or compared to its own situation in 2013 during the taper tantrum, to tackle risks arising out of asymmetry in monetary policy of advanced economies, the rise in crude prices and the escalation of trade war tension. Adding to the optimism, Commerce Minister Suresh Prabhu has said that the government is taking legislative as well as administrative measures for an integrated strategy to reduce logistics related hurdles for boosting domestic and global trade.

Positive trade in European counters too aided sentiments, as the market absorbed a new round of corporate earnings reports, including well-received results from Swiss banking heavyweight Credit Suisse. Asian markets ended mixed, as the Bank of Japan tweaked its monetary policy in a bid to make its massive easing programme sustainable.

Back home, the Trump administration’s decision to place India in the Strategic Trade Authorisation-1 list of countries, that eases export of high-tech items, acknowledges the security as well as economic relationship between the two largest democracies of the world, and boosts the defence partnership in a big way. Meanwhile, S&P Global Ratings stated that India’s infrastructure deficit is too large and the country still has a long way to go before it can close the sizeable deficit between supply and demand. On the sectoral front, stocks related to steel sector remained on buyers’ radar after India Ratings expects the domestic steel industry's operational and financial performance to continue to improve, backed by steady sales realisations and higher margins -- supported by an improved demand-supply balance. However, logistics stocks edged lower, despite Commerce and Industry Minister Suresh Prabhu’s statement that expenditure on investment in logistics, including infrastructure, will touch $500 billion annually by 2025.

Finally, the BSE Sensex surged 112.18 points or 0.30% to 37,606.58, while the CNX Nifty was up by 36.95 points or 0.33% to 11,356.50.

The BSE Sensex touched a high and a low of 37,644.59 and 37,298.75, respectively and there were 18 stocks advancing against 13 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.33%, while Small cap index was up by 0.26%.

The top gaining sectoral indices on the BSE were Energy up by 1.89%, Realty up by 1.10%, Consumer Durables up by 1.01%, Capital Goods up by 0.95% and IT was up by 0.81%, while PSU down by 0.46%, Bankex down by 0.44% and Utilities was down by 0.04% were the few losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 3.14%, Hero MotoCorp up by 2.77%, Hindustan Unilever up by 2.52%, Adani Ports & SEZ up by 2.41% and Tata Steel up by 1.85%. On the flip side, Axis Bank down by 3.23%, Tata Motors - DVR down by 2.04%, HDFC down by 1.64%, SBI down by 1.33% and ITC down by 1.30% were the top losers.

Meanwhile, Indian companies borrowed $2.71 billion from overseas markets in the month of June 2018 through external commercial borrowing (ECB) and rupee-denominated bonds (RDBs), 66.3% more than last year. The borrowings were $1.63 billion in June last year.

According to the Reserve Bank of India (RBI) data report, of the total borrowings, ECB stood at $2,664,647,810 ($2.66 billion), while RDBs stood at $49,415,083 ($49.42 million). The report further found-out that as many as 77 firms went through the ECB route to raise $2.66 billion. Some companies which took the ECB route were HDFC ($750 million), Mangalore Refinery and Petrochemicals ($350 million), Shriram Transport Finance ($500 million) and Indiabulls Housing Finance ($240 million).

Further, RBI report noted that in June 2018, only two entities issued rupee-denominated bonds such as India Infoline Finance and Global Metal Forging. India Infoline Finance raised $47.94 million, while Global Metal Forging raised $1.47 million via RDBs.

The CNX Nifty traded in a range of 11,366.00 and 11,267.75. There were 30 stocks in green as against 20 stocks in red on the index.

The top gainers on Nifty were Tech Mahindra up by 3.75%, Dr. Reddy’s Lab up by 3.04%, Reliance Industries up by 2.84%, Hindustan Unilever up by 2.62% and Adani Ports & SEZ up by 2.60%. On the flip side, Axis Bank down by 3.77%, Indiabulls Housing Finance down by 3.34%, Eicher Motors down by 2.79%, HDFC down by 1.97% and Tata Motors was down by 1.46% were the top losers.

European markets were trading mostly in green; UK’s FTSE 100 increased by 41.81 points or 0.54% to 7,742.66 and France’s CAC gained 4.61 points or 0.08% to 5,495.83, while Germany’s DAX was down by 5.07 points or 0.04% to 12,803.27.

Asian equity markets closed mostly higher on Tuesday. Chinese shares ended higher, aided by gains in real estate and energy firms, while the market response to the country’s manufacturing data has been relatively muted. A gauge of China's manufacturing activity slid to 51.2 in July from 51.5 a month ago while analysts expected it to ease marginally to 51.3. The non-manufacturing PMI dropped to 54.0 from 55 in June. Japanese shares ended slightly higher amid economic data proving to be a mixed bag. Meanwhile, the Bank of Japan kept its monetary policy steady, as widely expected, but announced policy tweaks to make its policy framework more flexible for the long-term yield target. Meanwhile, traders also awaited cues from the Federal Reserve and Bank of England policy meetings due this week. The Federal Reserve's monetary policy announcement is due on Wednesday, with traders likely to keep a close eye on the accompanying statement for clues about the outlook for rates. The Bank of England is widely expected to increase rates by a quarter point when it concludes its policy meeting on Thursday.