Bulls make come back on Dalal Street after two days halt

Friday turned out to be a fabulous day of trade for Indian equity benchmarks with frontline gauges ending near their all-time high levels, recapturing crucial 11,350 (Nifty) and 37,500 (Sensex) marks. After a gap-up opening, there appeared not even an iota of profit booking in the session, with benchmarks fervently gaining from strength to strength to end near intraday highs, as investors continued hunt for fundamentally strong stocks. Sentiments remained up-beat since beginning with traders taking support from a private report that India’s economic growth momentum is likely to pick up further in the April-June period and the country is expected to clock GDP growth of 7.5% in this financial year. 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. Furthermore, traders took note of a report which stated that India plans to put off implementation of retaliatory import duties of $241 million against 29 products from the US by another month-and-a-half as its attempt to avoid a tariff war with the US.

Markets extended gains in second half to end near intraday high levels with 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. Traders shrugged off International Monetary Fund’s latest report where it stated that real interest rates in India may drop by more than 150 basis points over the next decade. It also said that a decline in the India’s dependent youth (those from ages 0-15 years) between 2020 and 2030 is expected to result in a reduction of long-term interest rates in the country. Investors also paid no heed towards former Reserve Bank Governor C Rangarajan’s statement the full implementation of recent hike in Minimum Support Prices (MSP) for some of the agricultural products may push financial system under stress.

Positive opening in European counters too aided sentiments, as investors digested further corporate earnings and news that Apple’s valuation hit $1 trillion. Asian markets ended mixed, as fears of an all-out trade war between China and the United States keep investors on edge.

Back home, Industry body Associated Chambers of Commerce and Industry of India (ASSOCHAM) has warned that over-reach and over-regulation of the e-commerce sector could stifle the growth of entrepreneurship. On the sectoral front, stocks related to energy sector remained in focus 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. Agri stocks remained in limelight, after Agriculture Minister Radha Mohan Singh asked MPs to urge states to promote location specific Integrated Farming System (IFS) for achieving the goal of doubling farmers’ income by 2022.

Finally, the BSE Sensex soared 391.00 points or 1.05% to 37,556.16, while the CNX Nifty was up by 116.10 points or 1.03% to 11,360.80.

The BSE Sensex touched a high and a low of 37,582.27 and 37,319.61, respectively and there were 24 stocks advancing against 7 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.93%, while Small cap index was up by 1.16%.

The top gaining sectoral indices on the BSE were Bankex up by 1.64%, Consumer Durables up by 1.52%, Metal up by 1.50%, Healthcare up by 1.13% and Utilities up by 0.98%, while there were no losers on the BSE sectoral front.

The top gainers on the Sensex were Axis Bank up by 5.17%, Vedanta up by 3.60%, Yes Bank up by 2.96%, ICICI Bank up by 2.33% and Kotak Mahindra Bank up by 2.20%. On the flip side, Tata Motors down by 0.84%, Tata Motors - DVR down by 0.80%, Hero MotoCorp down by 0.71%, Asian Paints down by 0.50% and HDFC Bank down by 0.39% were the top losers.

Meanwhile, maintaining expansion mode for the second straight month, the seasonally adjusted Nikkei Services Business Activity Index climbed to 54.2 in the month of July from 52.6 in June, registering its highest reading since October 2016. Improved demand conditions along with pickup in employment levels helped bolster business activity. Besides, the Nikkei India Composite PMI Output Index which measures both manufacturing and services too jumped to 54.1 in July from 53.3 in June.

As per the survey report, new business inflows rose in the reported month at fastest pace since June 2017, on the back of strong market demand. It also said that increased output requirements led to strongest job creation since April. Besides, business confidence towards the 12-month outlook picked up from June’s recent low, with improved demand conditions.

On the price front, input cost inflation in the service sector surged for the twenty third consecutive month during July month, amid higher food and fuel prices, while input cost inflation across the manufacturing sector eased from June’s near four year high and was in line with the series trend. Further, the report found that output charge inflation at services firms rose but at the slowest pace since March 2017, as firms couldn’t fully pass on greater cost burdens to price-sensitive clients.

The CNX Nifty traded in a range of 11,368.00 and 11,294.55. There were 33 stocks in green as against 16 stocks in red, while one stock remained unchanged on the index.

The top gainers on Nifty were Indiabulls Housing Finance up by 6.24%, Axis Bank up by 5.16%, Vedanta up by 4.11%, Yes Bank up by 3.11% and GAIL India up by 2.73%. On the flip side, Tech Mahindra down by 1.41%, Tata Motors down by 1.02%, Grasim Industries down by 0.91%, Asian Paints down by 0.57% and Hero MotoCorp down by 0.45% were the top losers.

European markets were trading in green; UK’s FTSE 100 rose by 57.27 points or 0.75% to 7,633.20, France’s CAC surged 17.14 points or 0.31% to 5,478.12 and Germany’s DAX was up by 59.00 points or 0.47% to 12,605.33.

Asian equity markets ended mixed on Friday, as caution prevailed amid renewed trade worries and ahead of the release of the US jobs data for July later in the day. US employment is expected to increase by 190,000 jobs in July, while the unemployment rate is expected to edge down to 3.9 percent. Chinese shares dropped after a survey from Caixin showed earlier today that China's services sector continued to expand in July, albeit at a slower pace. The PMI stood at 52.8, down from 53.9 in the previous month as new orders expanded at their weakest rate in more than two and a half years. Meanwhile, Japanese shares closed on a flat note as trade war jitters and caution ahead of key US jobs data kept investors on the sidelines.