Post Session: Quick Review

Reversing previous session’s losses, Indian equity indices showcased courageous performance on last trading day of the week by gaining more than half a percent in the session, with Nifty ending at record closing high, while Sensex ending just shy of 38,000 mark. Markets traded with full traction throughout the session, as sentiments remained up-beat with private report stating 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 took some encouragement from Niti Aayog vice chairman Rajiv Kumar’s statement that the falling rupee is not a cause of worry as it is getting back to its natural value. The rupee rose by about 17% during the last three years. Since the beginning of this year, rupee has declined by only 9.8%. So, it has recovered.

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.

On the global front, Asian markets ended mostly in green, following the positive cues overnight from Wall Street with investors’ sentiments bolstered by upbeat corporate earnings results and optimism about U.S.-China trade talks. European markets were trading in red in early deals on Friday. Back home, banking sector stocks ended 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 ended at 37926.22, up by 262.66 points or 0.70% after trading in a range of 37840.16 and 38022.32. There were 21 stocks advancing against 9 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index rose 0.92%, while Small cap index was up by 0.88%. (Provisional)

The top gaining sectoral indices on the BSE were Basic Materials up by 1.93%, FMCG up by 1.74%, Metal up by 1.54%, Bankex up by 1.26% and Healthcare up by 1.18%, while Oil & Gas down by 0.22% and Energy down by 0.05% were the few losing indices on BSE. (Provisional)

The top gainers on the Sensex were Yes Bank up by 3.86%, SBI up by 3.16%, Vedanta up by 2.66%, Hindustan Unilever up by 2.54% and Tata Motors up by 2.39%. (Provisional)

On the flip side, Hero MotoCorp down by 1.14%, ONGC down by 0.55%, Coal India down by 0.48%, Maruti Suzuki down by 0.46% and Bajaj Auto down by 0.31% were the top losers. (Provisional)

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 ended at 11466.10, up by 81.05 points or 0.71% after trading in a range of 11431.80 and 11486.45. There were 35 stocks advancing against 15 stocks declining on the index. (Provisional)

The top gainers on Nifty were Grasim Industries up by 4.40%, Yes Bank up by 4.14%, Lupin up by 3.76%, SBI up by 3.23% and Tech Mahindra up by 3.07%. (Provisional)

On the flip side, Hero MotoCorp down by 1.27%, GAIL India down by 1.24%, Eicher Motors down by 1.02%, ONGC down by 0.88% and Maruti Suzuki down by 0.50% were the top losers. (Provisional)

European markets were trading in red; UK’s FTSE 100 shed 12.17 points or 0.16% to 7,544.21, France’s CAC was down by 6.15 points or 0.12% to 5,342.87 and Germany’s DAX dipped 45.52 points or 0.37% to 12,191.65.

Asian markets ended the Friday’s session on an optimistic note with most of the major indices ended in green terrain, as fresh talks between China and the United States underpinning investor sentiment. Traders also took some support with the Turkish lira recovered sharply from Monday’s meltdown when it hit a record low below 7.23 to the dollar following U.S. imposed sanctions relating to the trial of an American pastor. Japanese Nikkei edged higher tracking a slightly weaker yen. On the economic front, Japan will see July figures for department store sales later in the day. However, Chinese shares hit 31-month low as healthcare firms retreated amid concerns over a widening vaccine scandal. The Indonesian market was closed for the Independence Day holiday.