Markets hold gains in early afternoon deals

Indian equity benchmarks held their gains of more than half a percent each in early afternoon session, despite weak Asian cues. Sentiments on the street remained positive with the India meteorological department (IMD) stating that India is set to receive average rainfall during the last two months of the crucial monsoon season that stretches between June and September. It also added that the rainfall for the country as a whole during the second half of the season is likely to be 95 percent of a long period average. The sentiments were also supported by a report that India’s services sector activity remained in the growth territory for the second consecutive month in July, as business activity witnessed the strongest growth since October 2016 amid improved demand conditions. The seasonally adjusted Nikkei India Services Business Activity Index rose from 52.6 in June to 54.2 in July. Besides, bouts of buying in Metal, Healthcare and Banking sector stocks, too supported the market. The broader markets were too broadly in line with the firm benchmark indices. On the sectoral front, energy sector remained in limelight after the commerce and industry ministry said Invest India has joined hands with energy companies to offer its three-month programme for startups in the sector.

On the global front, Asian markets were trading mostly in red, after another painful week as fears of an all-out trade war between China and the United States keep investors on edge. Back home, the BSE Sensex is currently trading at 37421.50, up by 256.34 points or 0.69% after trading in a range of 37319.61 and 37462.58. There were 25 stocks advancing against 6 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.99%, while Small cap index was up by 1.11%.

The top gaining sectoral indices on the BSE were Metal up by 1.69%, Healthcare up by 1.21%, Bankex up by 1.10%, Realty up by 1.05% and Utilities up by 0.98%, while there were no losers on the BSE sectoral front.

The top gainers on the Sensex were Vedanta up by 3.74%, Coal India up by 2.95%, Yes Bank up by 2.63%, ICICI Bank up by 2.28% and Kotak Mahindra Bank up by 1.60%. On the flip side, Hero MotoCorp down by 0.91%, Asian Paints down by 0.55%, Indusind Bank down by 0.22%, Bharti Airtel down by 0.15% and HDFC Bank down by 0.11% were the top losers.

Meanwhile, domestic rating agency, ICRA in its latest report has stated that the increasing natural gas prices in recent times are likely to adversely affect domestic urea production in the financial year 2018-19. It also said that domestic gas price for the second half of FY19 is also expected to rise due to increase in global gas prices, which will result in further upward movement in pooled prices.

According to the report, with the rising share of high cost R-LNG in the gas consumption mix for the fertiliser sector, firm international spot gas prices and higher term LNG prices given the high crude oil prices; pooled price for the fertiliser sector is expected to remain elevated in the near term. It also said that rising gas prices will lead to higher subsidy receivables for the urea players, leading to higher working capital borrowings and associated interest costs leading to negative impact on profitability. However, it noted that the impact will be largely offset by the energy savings for units which are energy efficient vis-a-vis their pre-set norms as energy savings will be reimbursed at higher energy costs.

Rating agency further said that with rising gas prices and subdued international urea prices, the production beyond re-assessed capacity (RAC) for high energy consumption domestic urea units is expected to remain unviable. It also said that while the contribution margin for the energy efficient players is expected to decline, leading to lower profitability from production beyond RAC.  It pointed out that as a result, urea production may decline in FY19 unless the department of fertiliser undertakes measures to keep production beyond RAC viable. It added that the delay in fixed cost reimbursement by the government is expected to weaken the profitability of urea units.

The CNX Nifty is currently trading at 11324.80, up by 80.10 points or 0.71% after trading in a range of 11294.55 and 11336.15. There were 37 stocks advancing against 13 stocks declining on the index.

The top gainers on Nifty were Indiabulls Housing Finance up by 5.79%, Vedanta up by 3.85%, Coal India up by 2.91%, Yes Bank up by 2.64% and Lupin up by 2.61%. On the flip side, Tech Mahindra down by 1.72%, Hero MotoCorp down by 0.93%, Asian Paints down by 0.53%, Grasim Industries down by 0.39% and Bharti Infratel down by 0.33% were the top losers.

Asian markets were trading mostly in red; Straits Times decreased 6.98 points or 0.21% to 3,279.34, Jakarta Composite dipped 12.88 points or 0.21% to 5,998.84, Hang Seng dropped 28.65 points or 0.1% to 27,685.91 and Shanghai Composite was down by 12.28 points or 0.45% to 2,755.74.

On the flip side, Taiwan Weighted increased 82.66 points or 0.75% to 11,012.43, KOSPI rose 17.48 points or 0.76% to 2,287.68 and Nikkei 225 was up by 12.65 points or 0.06% to 22,525.18.