Benchmarks trade jubilantly in early deals on firm global cues

Buoyed by firm global cues, Indian equity benchmarks made a gap-up opening and are trading jubilantly in early deals on Friday, with frontline gauges re-conquering their crucial 37,900 (Sensex) and 11,450 (Nifty) levels. Sentiments remained upbeat on private report that India's economy is expected to grow at a healthy 7.5% in the first quarter (Q1) of 2018-19 (FY19), lower than a seven-quarter high of 7.7% in the fourth quarter (Q4) of 2017-18 (FY18). Traders shrugged off India Ratings & Research’s report which revised down its growth estimate for Indian economy to 7.2% from its earlier projection of 7.4% for 2018-19. The downward revision comes as the rating agency expects Indian economy to face headwinds from high crude oil prices, increase in minimum support prices of kharif crops, rising trade protectionism, depreciating currency. Traders also paid no heed towards report that investments through participatory notes into Indian capital markets plunged to over nine-year low of Rs 80,341 crore till July-end amid stringent norms put in place by the watchdog Sebi to check misuse of these instruments.

Global cues provided much need support to the domestic markets with Asian markets trading mostly in green at this point of time after China and the United States agreed to hold their first trade talks since June next week and as the Turkish lira extended gains from its record low earlier this week. The US markets ended higher on Thursday on renewed hope that a resolution to a trade dispute with China could be on the horizon.

Back home, banking sector stocks edged higher with the RBI’s latest data showing that bank credit grew 12.70% to Rs 86,79,741 crore in the fortnight to August 3, while in the year-ago fortnight, bank advances was at Rs 77,01,926 crore. Steel sector stocks gained despite report that the falling rupee will adversely impact the domestic steel sector as import of various raw materials will become expensive and the cost of servicing debt would also go up.

The BSE Sensex is currently trading at 37926.98, up by 263.42 points or 0.70% after trading in a range of 37840.16 and 37945.75. There were 26 stocks advancing against 4 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.79%, while Small cap index was up by 0.80%.

The top gaining sectoral indices on the BSE were Healthcare up by 1.38%, Metal up by 1.33%, FMCG up by 1.17%, Basic Materials up by 1.14% and Industrials was up by 0.97%, while Telecom down by 0.01% was the lone losing index on BSE.

The top gainers on the Sensex were ITC up by 2.38%, Tata Steel up by 1.99%, Vedanta up by 1.97%, Tata Motors - DVR up by 1.75% and Adani Ports up by 1.50%. On the flip side, Bajaj Auto down by 0.46%, Bharti Airtel down by 0.43%, ONGC down by 0.27% and Power Grid Corporation down by 0.05% were the top losers.

Meanwhile, citing headwinds emanating from elevated global crude oil prices and the government’s decision to fix the minimum support prices of all kharif crops at 1.5 times the production cost (A2+FL), the India Ratings and Research (Ind-Ra), a subsidiary of Fitch Ratings, in its latest report has revised its Indian economic growth forecast to 7.2% for current fiscal year (FY19) from 7.4% forecasted earlier. It also pointed to other headwinds lurking on the horizon such as the rising trade protectionism, depreciating rupee and, no visible signs of the abatement of the non-performing assets of the banking sector.

The report titled ‘Mid-year FY19 Outlook’ stated that it is taking a tad longer than expected to resolve cases under the Insolvency and Bankruptcy Code. This simply means ‘bringing the stuck capital back into the production process to enhance the productivity of capital’ will be a long drawn-out affair. The report also expects private final consumption expenditure to grow 7.6% in 2018-19 compared to 6.6% in 2017-18. It pointed out that government capex alone will be insufficient to revive the capex cycle, as its share in the total capex of the economy was only 11.1% during 2012-17.

The rating agency observed that the share of private corporations was 40.9%. As private corporations in combination with the household sector command 77.5% of the total investment in the economy, their capex revival is a must for a broad-based recovery in the investment cycle. Noting that India will face continued headwinds on the exports front, it said although it expects the annual value of exports to touch $345 billion in the current fiscal, crossing the peak of $318 billion attained in 2013-14.

On the inflation front, it expects average retail and wholesale inflation in 2018-19 to come in at 4.6% and 4.1%, respectively, as against 4.3% and 3.4% forecasted earlier. It also expects current account deficit (CAD) to widen to $71.1 billion in 2018-19 from $48.7 billion in 2017-18. On rupee, it said that in 2018, rupee has already depreciated 7.7% till July in response to elevated global turbulence, worsening of current account, rising inflation and concerns related to fiscal deficit. Besides, Ind-Ra has maintained a stable outlook on the finances of Indian states for 2018-19 and expects the aggregate fiscal deficit of the states to moderate to 2.8% of GDP.

The CNX Nifty is currently trading at 11458.00, up by 72.95 points or 0.64% after trading in a range of 11431.80 and 11464.05. There were 41 stocks advancing against 9 stocks declining on the index.

The top gainers on Nifty were Indiabulls Housing up by 2.31%, ITC up by 2.24%, Dr. Reddys Lab up by 2.03%, Tata Steel up by 2.01% and Grasim Industries up by 1.98%. On the flip side, GAIL India down by 1.02%, Bharti Airtel down by 0.66%, ONGC down by 0.61%, Bajaj Auto down by 0.53% and Power Grid Corporation down by 0.43% were the top losers.

Asia markets are trading mostly in green; Nikkei 225 gained 97.60 points or 0.44% to 22,289.64, Taiwan Weighted rose 44.51 points or 0.41% to 10,728.41, Straits Times jumped 16.46 points or 0.51% to 3,228.39, Hang Seng surged 156.61 points or 0.57% to 27,256.67 and KOSPI was up by 7.68 points or 0.34% to 2,248.48. On the flip side, Shanghai Composite down by 10.67 points or 0.4% to 2,694.52.