Markets end at fresh closing highs; Nifty conquers 11,550 mark

Bulls took full control over Dalal Street on Monday and frontline gauges settled at their fresh closing high levels, conquering their crucial 11,550 (Nifty) and 38,200 (Sensex) levels for the first time ever. After a gap-up opening, markets traded with traction and 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 jubilant with traders taking encouragement from former chief economic advisor Arvind Virmani’s statement that India’s economic growth seems to be back on a recovery path and the country will be on a firm 7.5% plus growth track this fiscal. He also said the US-China tariff war provides an opportunity to increase India’s exports to the US. Adding to the optimism, the Central Board of Direct Taxes (CBDT) said that income Tax collection in the country stood at a record Rs 10.03 lakh crore during 2017-18. It also said during 2017-18, a record number of 6.92 crore I-T returns were filed, which was 1.31 crore more than 5.61 crore returns filed in 2016-17.

Markets extended rally in second half of trade to settle near intraday highs with Fitch Ratings in its latest report stating that the impact of currency weakness on India’s sovereign credit profile is likely to be limited on the back of relatively strong external finances, especially the low level of external debt. It also said currency depreciation could nevertheless add to existing pressures in the corporate and banking sectors. Meanwhile, market participants took note of report that the International Labour Organisation said India needs strong wage policies to promote inclusive growth as inequality, informality and gender wage gap still persists in India. Traders shrugged off report that India’s current account deficit (CAD) will widen to 2.5 per cent of the GDP in the current fiscal due to higher oil prices that has been accentuated by rupee depreciation.

Firm opening in European counters too aided sentiments, with investors awaiting the outcome of trade talks between the world’s two largest economies later this week. Asian markets ended mostly in green following advances on Wall Street after reports that the US and China are drawing a road map to resolve their trade dispute that may culminate in a meeting between President Donald Trump and President Xi Jinping in November.

Back home, the Indian rupee spiked about 0.55 per cent to the dollar, recovering from a record low hit last week. Lower oil prices benefited the currency, particularly because India imports about 80 per cent of its crude oil needs. Aviation related stocks ended higher with the Airports Council International in its latest study released this month showing that India led the Asia Pacific region in posting the highest growth in air passenger traffic in May at 13.3%. Insurance sector stocks were in focus with report that public sector general insurance firms are losing market share because of delayed merger plans and appointments.

Finally, the BSE Sensex surged 330.87 points or 0.87% to 38,278.75, while the CNX Nifty was up by 81.00 points or 0.71% to 11,551.75.

The BSE Sensex touched a high and a low of 38,340.69 and 38,050.69, 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 1.05%, while Small cap index was up by 0.14%.

The top gaining sectoral indices on the BSE were Capital Goods up by 3.74%, Industrials up by 2.60%, Metal up by 2.58%, Energy up by 2.15% and Oil & Gas was up by 1.30%, while IT down by 1.25%, TECK down by 1.00% and Consumer Durables was down by 0.58% were the few losing indices on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 6.74%, Tata Motors - DVR up by 5.74%, Tata Motors up by 4.74%, ONGC up by 3.34% and Tata Steel up by 3.24%. On the flip side, Infosys down by 3.22%, Maruti Suzuki down by 0.79%, ICICI Bank down by 0.50%, Axis Bank down by 0.46% and Hindustan Unilever down by 0.30% were the top losers.

Meanwhile, amid depreciation in Indian rupee, global ratings agency, Fitch Ratings in its latest report has said that the impact of currency weakness on India’s sovereign credit profile is likely to be limited on the back of relatively strong external finances, especially the low level of external debt. It also said currency depreciation could nevertheless add to existing pressures in the corporate and banking sectors. It noted that a recent sharp sell-off in the rupee illustrates the country’s sensitivity to shifts in market sentiment towards emerging markets, and suggests there could be further bouts of pressure as global monetary tightening progresses.

The report showed that rupee depreciated by around 9% against the US dollar since the start of 2018, making it the worst-performing major currency in Asia. Idiosyncratic factors have also contributed, such as the widening of the trade deficit in July 2018 to its largest gap since May 2013. Net portfolio outflows through mid-August have totalled $5.5 billion for the year, mostly in bonds, compared with inflows of $27.9 billion over the same period in 2017. Foreign direct investment inflows have also weakened and no longer cover the current account deficit - in other words, India’s basic balance has turned negative.

However, the report stated that India’s vulnerability to currency risk and capital outflows is unlikely to translate into significant pressure on the sovereign credit profile or pose external financing risks. The current account deficit (CAD) has widened as global oil prices have risen, but at 1.9% of GDP in 1Q18, up from 1.6% in 2017, was still well below the 5% of GDP recorded around the time of the 2013 Taper Tantrum. The rating agency said it expects the full-year CAD to remain below 3.0% of GDP in the fiscal year ending March 2019.

Fitch Ratings further said India also has relatively low foreign-currency debt. Only around 7% of government debt is denominated in foreign currency (BBB median: 38%), while total foreign-currency external debt, including the private sector, is equivalent to just 13% of GDP, which is one of the lowest among major emerging markets. Meanwhile, the risk of currency pressures triggering a sudden spike in domestic borrowing costs is mitigated by the RBI’s relatively narrow focus on its inflation objective, as opposed to countering external pressures.

The CNX Nifty traded in a range of 11,565.30 and 11,499.65. There were 32 stocks in green as against 18 stocks in red on the index.

The top gainers on Nifty were Larsen & Toubro up by 6.68%, Tata Motors up by 4.76%, ONGC up by 3.65%, Tata Steel up by 3.46% and Hindalco up by 3.14%. On the flip side, Infosys down by 2.95%, GAIL India down by 2.36%, Titan Company down by 1.97%, HCL Tech down by 1.40% and Lupin down by 1.23% were the top losers.

European markets were trading in green; UK’s FTSE 100 surged 40.93 points or 0.54% to 7,599.52, France’s CAC rose 37.32 points or 0.69% to 5,382.25 and Germany’s DAX added 123.59 points or 1.00% to 12,334.14.

Asian equity markets ended mostly in green on Monday as news of the US-China trade talks raised hopes for de-escalation in trade tensions. China and the United States will hold lower-level trade talks this week, just before new US tariffs on $16 billion of Chinese goods take effect. Chinese shares recovered from a 2-1/2-year low to close higher after a report that China’s securities regulators summoned brokerage analysts for views on the market improved investors’ sentiments. Though, Japanese shares ended lower as investors awaited developments from trade talks expected between the United States and China this week.