Markets manage to end above water

Indian equity benchmarks somehow managed to end the lackluster day of trade marginally in green on Thursday, as traders remained optimistic with the SBI’s latest research report ‘Ecowrap’ stating that the country’s GDP is expected to grow by 7.7 percent in the April-June quarter on the back of pick up in leading indicators like cement production, sale of vehicles and bank credit. Some support also came with Moody’s Investors Service’s report that the Indian economy is expected to grow by around 7.5 per cent in 2018 and 2019 as it is largely resilient to external pressures like those from higher oil prices. In its Global Macro Outlook for 2018-19, Moody's said the run-up in energy prices over the last few months will raise headline inflation temporarily but the growth story remains intact as it is supported by strong urban and rural demand and improved industrial activity. Some support also came with the finance ministry’s statement that the government will meet the fiscal deficit target for the current fiscal although there could be some slippages in the current account deficit (CAD) because of high crude oil prices.

However, gains remain capped on report that government has imposed standard conditions for as many as 25 sectors like steel, coal and oil, seeking environment clearance (EC) for expansion of existing projects or new projects. Traders also took note of report that Securities and Exchange Board of India (SEBI) has extended the deadline by two months till December for providing a list of beneficial owners, and assured them that issues raised will be looked into by an expert panel, giving relief to foreign portfolio investors. Traders remained little cautious with NITI Aayog Vice-Chairman Rajiv Kumar’s statement that he was more concerned about the rising trade deficit than the falling rupee, and called for efforts to push exports. Meanwhile, the US has announced hefty preliminary anti-dumping duties on metal pipes imported from India, China and four other countries, in an aggressive tactic by the Trump administration to protect the American industry and lower the trade deficit.

On the global front, European markets are trading in green after the latest round of US-China tariffs kicked in, hurting trade-sensitive autos stocks but boosting demand for sectors seen as more insulated from an escalating trade dispute. Asian counters pared all of their initial losses to end mostly in green, as traders opted to buy beaten down but fundamentally strong stocks.

Back home, shares of pharmaceutical companies extended their upward journey with the Nifty Pharma index hitting its 52-week high on the National Stock Exchange (NSE), on positive corporate announcements from Strides Pharma Science and Lupin. Sugar stocks remained in sweet sport after the food ministry today extended the deadline for exporting 2 million tonne of sugar by three months to December as only a fourth of it has been shipped so far. In March, the government had allowed sugar export in view of record domestic output of 32 MT. Mill-wise, Minimum Indicative Export Quotas (MIEQ) were allocated by the ministry in May. However, banking sector stocks edged lower despite Moody’s Investors Service’s statement that the government’s plan to provide more capital support to public sector banks in current fiscal will restore capital adequacy and improve loan-loss coverage at many loss-making banks, but stress will persist.

Finally, the BSE Sensex gained 51.01 points or 0.13% to 38,336.76, while the CNX Nifty was up by 11.85 points or 0.10% to 11,582.75.

The BSE Sensex touched a high and a low of 38,487.63 and 38,227.36, respectively and there were 14 stocks advancing against 17 stocks declining on the index.

The broader indices ended mixed; the BSE Mid cap index gained 0.20%, while Small cap index was down by 0.14%.

The top gaining sectoral indices on the BSE were IT up by 1.16%, FMCG up by 1.12%, Capital Goods up by 1.01%, TECK up by 0.91% and Energy was up by 0.88%, while Metal down by 1.54%, Bankex down by 0.83%, Basic Materials down by 0.72%, PSU down by 0.53% and Telecom was down by 0.30% were the top losing indices on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 2.30%, NTPC up by 2.05%, Reliance Industries up by 1.86%, Adani Ports & SEZ up by 1.68% and Power Grid Corporation up by 1.47%. On the flip side, Tata Motors down by 4.33%, Tata Motors - DVR down by 2.97%, Vedanta down by 2.01%, Tata Steel down by 1.85% and Bajaj Auto down by 1.52% were the top losers.

Meanwhile, global rating agency, Moody’s Investors Service in its latest report has said that the government’s plan to provide Rs 65,000 crore of new capital to public sector banks (PSBs) in the year ending March 2019, will restore capital adequacy and improve loan-loss coverage at many loss making banks, however stress will persist. It noted that of the Rs 65,000 crore, the government has already allocated Rs 11,300 crore to five lenders in July. It added that this capital infusion comes after the capital support of Rs 90,000 crore in the prior year.

According to the report, a large-scale bank recapitalisation plan, which was meant to improve capital buffers and loan-loss reserves and also support sufficiently strong loan growth, will now be just enough to shore up capital ratios above regulatory requirements because the banks' capital shortfalls have grown larger than the government's initial projection. It noted that the PSBs' external capital needs will not grow much further after fiscal 2019 because the banks' profitability will gradually improve as credit costs moderate in tandem with progress in an ongoing balance-sheet cleanup.

The rating agency further said that the capital injections would only help the lenders achieve Common Equity Tier 1 (CET1) ratios of 8 percent by March 2019, satisfying the 2.5 percent conservation buffer on top of the 5.5 percent minimum under Basel III norms in India. It noted that this would give the banks a capitalisation profile comparable to those of their similarly rated peers globally. It added that this means the government has little choice but to increase capital support if it seeks faster loan growth to support economic expansion.

The CNX Nifty traded in a range of 11,620.70 and 11,546.70. There were 23 stocks in green as against 27 stocks in red on the index.

The top gainers on Nifty were Tech Mahindra up by 2.75%, Dr. Reddy’s Lab up by 2.36%, NTPC up by 2.27%, HCL Tech up by 2.13% and Larsen & Toubro up by 2.07%. On the flip side, Tata Motors down by 4.56%, BPCL down by 2.78%, Indian Oil Corporation down by 2.57%, HPCL down by 2.53% and Hindalco down by 2.32% were the top losers.

European markets were trading mostly in green; France’s CAC rose 3.11 points or 0.04% to 7,577.35 and Germany’s DAX added 7.92 points or 0.15% to 5,428.53, while UK’s FTSE 100 was down by 12.46 points or 0.10% to 12,373.24.

Asian equity markets ended mostly in green on Thursday. Japanese shares ended higher after a weak yen supported overall sentiment. Activity in Japan’s manufacturing sector continued to expand in August, and at a faster rate, the latest survey from Nikkei revealed with a manufacturing PMI score of 52.5, up from 52.3 in July. However, the market sentiments improved despite the US imposed a second round of tariffs on $16 billion worth of Chinese goods and the Asian nation vowed to retaliate, in an escalation of their trade war. After the US imposed an additional 25 percent in duties on Chinese imports ranging from motorcycles to steam turbines and railway cars, China’s Ministry of Commerce said it would lodge a complaint against the measure under the World Trade Organization’s dispute settlement mechanism. Meanwhile, markets were also tracking political developments in Washington after Michael Cohen, US President Donald Trump's former personal lawyer, pleaded guilty to campaign finance violations and other charges and Paul Manafort, Trump's former campaign chairman was found guilty on five counts of tax fraud.