Key gauges trade at fresh all-time high; Sensex conquers 38,300 mark

Indian equity benchmarks continued to trade with jubilation and are trading at their intraday high levels, conquering their crucial 38,300 (Sensex) and 11,550 (Nifty) marks. Sentiments remained positive with the report that India's economic growth seems to be back on a recovery path and the country will be on a firm 7.5 per cent plus growth track this fiscal. Traders took encouragement 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. 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.

Positive 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 are trading mostly in green at this point of time.

Back home, 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. Also, upside was led by gains in frontline blue chip stocks such as LT, Tata Motors, ONGC and Bajaj Auto. On scrip specific development Reliance Industries jumped over 2.5% on a report that Alibaba Group Holding is in preliminary discussion with Reliance Retail, a subsidiary of Reliance Industries (RIL), to form a retail joint venture (JV) in India, with an investment of $5 billion.

The BSE Sensex is currently trading at 38315.11, up by 367.23 points or 0.97% after trading in a range of 38050.69 and 38340.69. There were 25 stocks advancing against 5 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index surged 1.01%, while Small cap index was up by 0.20%.

The top gaining sectoral indices on the BSE were Capital Goods up by 3.91%, Industrials up by 2.65%, Energy up by 2.11%, Metal up by 2.07% and Oil & Gas up by 1.26%, while IT down by 1.04%, TECK down by 0.80% and Consumer Durables was down by 0.37% were the top losing indices on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 6.83%, Tata Motors - DVR up by 5.18%, Tata Motors up by 4.70%, ONGC up by 3.16% and Vedanta up by 2.86%. On the flip side, Infosys down by 2.85%, Maruti Suzuki down by 0.55%, Axis Bank down by 0.46%, ICICI Bank down by 0.37% and Hindustan Unilever down by 0.06% 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 is currently trading at 11556.30, up by 85.55 points or 0.75% after trading in a range of 11499.65 and 11565.30. There were 35 stocks advancing against 15 stocks declining on the index.

The top gainers on Nifty were Larsen & Toubro up by 6.80%, Tata Motors up by 4.36%, ONGC up by 3.10%, Tata Steel up by 2.75% and Vedanta up by 2.72%. On the flip side, GAIL India down by 3.07%, Infosys down by 3.00%, Titan Company down by 2.14%, HCL Tech down by 1.56% and Lupin down by 1.45% were the top losers.

Asian markets are trading mostly in green; Jakarta Composite soared 108.39 points or 1.84% to 5,892.19, Hang Seng surged 384.61 points or 1.39% to 27,598.02, KOSPI added 0.83 points or 0.04% to 2,247.88, Shanghai Composite jumped 29.50 points or 1.09% to 2,698.47 and Taiwan Weighted was up by 8.09 points or 0.08% to 10,699.05. On the flip side, Nikkei 225 decreased 71.38 points or 0.32% to 22,199.00 and Straits Times was down by 5.44 points or 0.17% to 3,204.00.

European markets are trading in green; UK’s FTSE 100 surged 43.57 points or 0.57% to 7,602.16, France’s CAC increased 32.73 points or 0.61% to 5,377.66 and Germany’s DAX was up by 112.05 points or 0.91% to 12,322.60.