Benchmarks hit fresh record high; Nifty conquers 11,450 mark

Bulls made come back on Dalal Street after a day’s break on Wednesday, with frontline gauges ending at fresh record high levels. Markets started in green but traders remained concerned with ICRA’s latest report that in spite of corporates witnessing a healthy 22% revenue growth in the June quarter, most have seen flat margins, with airline and cement companies seeing declining margins due to rising input costs and crude prices. Key gauges traded almost flat in morning deals, as sentiments remained dampened with Care Ratings’ report that there has been a marginal decline of 1% in employment growth at 6.6%, mainly due to a larger number of companies having witnessed lower or negative hiring growth. It added that the employment growth in 2016-17, was at 7.7%. Adding to the pessimism, the Ministry of Corporate Affairs issued ‘preliminary notices’ to 272 companies for alleged non-compliance with CSR provisions under the companies law.

However, markets gained momentum in noon deals and traded firmly afterwards, as traders took encouragement with International Monetary Fund’s (IMF) statement that India is on track to hold its position as one of the world’s fastest-growing economies as reforms start to pay off. Indian economy was described by Ranil Salgado, the IMF’s mission chief for India, as an elephant starting to run, with growth forecast at 7.3% in the fiscal year. However, IMF in its latest report also said that the Reserve Bank of India (RBI) will need to gradually tighten monetary policy further, in order to keep inflation in check. Traders took note of report that the Lok Sabha has approved the first batch of supplementary demands for grants envisaging a gross additional outgo of Rs 11,697.92 crore for the current fiscal.

On the global front, European markets were trading mostly in red, on account of disappointing microeconomic data. Germany’s exports remained flat amid trade wars and industrial production declined more-than-expected in June. Meanwhile, France’s foreign trade gap widened in June, as imports grew faster than exports. The figures from the Customs Office showed that the trade deficit rose to EUR 6.25 billion in June from EUR 6.02 billion in the previous month. Asian markets exhibited mixed trend, with investors largely staying on the sidelines and refraining from making significant moves due to lack of triggers.

Back home, banking sector stocks edged higher despite report that Indian banks reported a total loss of about Rs 70,000 crore due to frauds during the last three fiscals up to March 2018. The extent of loss in fraud cases reported by scheduled commercial banks (SCBs) for 2015-16, 2016-17 and 2017-18 was Rs 16,409 crore, Rs 16,652 crore and Rs 36,694 crore, respectively. Consumer Discretionary Goods & Services and Auto stocks remained in focus after a private report stated that large consumer goods makers and auto companies have forecast growth of about 10% in the next six months in the approach to the upcoming general election in 2019 that will see substantially increased liquidity in the market. Select textile stocks ended in green on report that the government has doubled import duty on as many as 328 textile products to 20% to provide a boost to manufacturing of these items in the country. However, stocks related to power sector ended lower, even after the number of power plants facing coal shortages has reduced in the last four months as state-owned CIL and the railways worked jointly to augment the supplies.

Finally, the BSE Sensex soared 221.76 points or 0.59% to 37,887.56, while the CNX Nifty was up by 60.55 points or 0.53% to 11,450.00.

The BSE Sensex touched a high and a low of 37,931.42 and 37,641.40, respectively and there were 23 stocks advancing against 8 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.16%, while Small cap index was up by 0.03%.

The top gaining sectoral indices on the BSE were Energy up by 1.86%, Telecom up by 1.71%, Consumer Durables up by 1.25%, Bankex up by 0.78% and Oil & Gas up by 0.72%, while Healthcare down by 0.33%, Power down by 0.28%, Auto down by 0.27%, Consumer Discretionary Goods & Services down by 0.22% and IT was down by 0.12% were the top losing indices on BSE.

The top gainers on the Sensex were ONGC up by 2.87%, Reliance Industries up by 2.85%, ICICI Bank up by 1.63%, Tata Motors - DVR up by 1.60% and SBI up by 1.53%. On the flip side, Maruti Suzuki down by 1.99%, Bajaj Auto down by 0.96%, Vedanta down by 0.90%, NTPC down by 0.57% and Infosys down by 0.47% were the top losers.

Meanwhile, the International Monetary Fund (IMF) has said that India is a source of growth for the global economy for the next few decades and it could be what China was for the world economy. It noted that the country now contributes, in purchasing power parity measures, 15% of the growth in the global economy, which is substantial. It added that spillovers from India are not that big because it is not a very open economy. The IMF views India as a ‘long run source of global growth’. Besides, the Fund suggested the country to take steps towards more structural reforms. It stated that steps to structural reforms have to continue and, in some ways, have to even take a step further up, and identified some key areas for continued reforms like labour reforms, improving the business climate and enhancing infrastructure.

The IMF said India has three decades before it hits the point where the working age population starts to decline. So that's a long time. This is India’s window of opportunity in Asia. It's somewhat only a few other Asian countries have this. It also said that the Indian economy is recovering from the two shocks that started from late 2016: demonetisation and then the kind of implementation issues related to the Goods and Services Tax (GST). Generally, India is benefiting from good macroeconomic policies; stability-oriented policies as well as some important reforms that have been done in recent years.

The IMF Executive Board in its report of annual consultations with India has forecasted the country’s growth to rise to 7.3% in FY2018/19 and 7.5% in FY2019/20, on strengthening investment and robust private consumption. Although there are short term issues, the IMF views that as a long-term major gain for India by implementing a national GST. It said in India it’s much more complex because the country has 29 states and union territories and it need agreement. It added that this was a great achievement.

The report stated that Insolvency and the bankruptcy code is the other big achievement. It said ‘We are seeing certain positive steps there and we hope that can continue’. The third big achievement is the inflation targeting framework that India now has in the Reserve Bank of India, formally adopted in 2016 but informally even earlier. It added that they have seen the benefits of that have lower inflation and inflation expectations. And then there are some of the key smaller steps like things to improve the business climate, steps to further liberalised FDI.

The CNX Nifty traded in a range of 11,459.95 and 11,379.30. There were 34 stocks in green as against 16 stocks in red on the index.

The top gainers on Nifty were ONGC up by 3.13%, Reliance Industries up by 3.09%, Cipla up by 2.33%, Bharti Infratel up by 2.31% and Bajaj Finance up by 2.28%. On the flip side, Lupin down by 5.13%, Maruti Suzuki down by 2.14%, HPCL down by 1.63%, BPCL down by 1.31% and Grasim Industries down by 0.87% were the top losers.

European markets were trading mostly in red; France’s CAC decreased 7.32 points or 0.13% to 5,513.99 and Germany’s DAX was down by 16.93 points or 0.13% to 12,631.26, while UK’s FTSE 100 was up by 40.65 points or 0.52% to 7,759.13.

Asian equity markets ended mixed on Wednesday, with investors largely staying on the sidelines and refraining from making significant moves due to lack of triggers. The overnight positive close on Wall Street set up a higher opening for the markets, but lack of support at higher levels resulted in some of these settling down in negative territory. Chinese shares ended lower, weighed down by losses in technology and retail stocks. The mood was a bearish on reports the US would start collecting 25 percent tariffs on an additional $16 billion worth of Chinese goods this month. The world's largest economy is targeting tariffs on Chinese goods worth $50 billion. In economic news, China's exports growth exceeded expectations in July, despite the US tariffs on Chinese goods. Further, Japanese shares ended lower as the market braced for the start of US-Japan trade talks the next day, offsetting gains in companies which posted strong results such as Nikon and Daikin.