Benchmarks end higher on Friday

Friday turned out to be a fabulous day of trade for Indian equity benchmarks, with frontline gauges re-conquering their crucial 11,550 (Nifty) and 38,300 (Nifty) levels. Key gauges started the session on a pessimistic note, as traders remained concerned with NITI Aayog CEO Amitabh Kant’s statement that India needs to cut down on oil imports and switch towards electric mobility, and stressed on the Centre’s focus towards urban mobility. However, traders turned optimistic and markets gained momentum to enter into green terrain with Union Minister for Commerce and Industry Suresh Prabhu’s statement that with phenomenal changes in social and economic sector reforms, India will become a five-trillion-dollar economy in seven years from the present 2.6 trillion dollars. Traders also took some support with report that India and the US on September 6, pledged to expand their bilateral trade and economic partnership with a view to promoting investment and job creation.

Markets extended gains in last leg of trade to end near intraday highs, as credit rating agency, ICRA in its latest report revealed that aggregate revenues of Indian corporate sector witnessed rise of 17.1% during the first quarter of the current fiscal year (Q1FY19), on a lower base in the year-ago period due to impact of GST implementation. Traders took some encouragement with reports that the newly notified annual GST return forms will go a long way in checking tax evasion by providing the entire financial transactions logged by an assessee to the revenue department. Some support also came with report that the Centre is planning to slash the number of GST rate slabs from the present five to two in the near future. Besides, the market participants took note of Federation of Indian Export Organisations’ statement that the commerce ministry should direct the Export Credit Guarantee Corporation (ECGC) to provide liberal insurance coverage to consignments with a view to promote overseas shipments.

On the global front, European markets were trading in red in early deals, as Germany's factory orders dropped unexpectedly in July amid trade disputes with the United States. The data from Destatis showed that new orders in manufacturing fell 0.9% in July from June, confounding expectations for an increase of 1.8%. Asian markets ended in red terrain, as the US and China move closer to imposing tariffs on billions of dollars of each other's goods.

Back home, select power stocks ended lower after the Reserve Bank of India (RBI) refused the Power Ministry's request to give certain concessions for setting up of an Asset Reconstruction Company (ARC) for warehousing stressed assets to prevent distress sale of these plants. Public sector banks (PSBs) stocks remained in focus with report that a parliamentary committee has urged the RBI to relax the capital-adequacy norms for at least nine out of 21 PSBs that may free up capital up to Rs 5.34 trillion, helping the expansion of lenders. Tyre sector stocks remained buzzing with ICRA’s report that expected decline in the Indian natural rubber (NR) output by 18 to 20% this fiscal year will adversely impact the tyre industry. It has cited the flood in Kerala due to unusually high rainfall as the cause for the sharp fall in NR which accounts for 35% of the overall input costs in the manufacture of tyres.

Finally, the BSE Sensex surged 147.01 points or 0.38% to 38,389.82, while the CNX Nifty was up by 52.20 points or 0.45% to 11,589.10.

The BSE Sensex touched a high and a low of 38,421.56 and 38,067.22, respectively and there were 20 stocks advancing against 11 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index surged 1.15%, while Small cap index was up by 0.55%.

The top gaining sectoral indices on the BSE were Telecom up by 3.35%, Auto up by 2.07%, Metal up by 1.96%, Basic Materials up by 1.36% and Consumer Discretionary Goods & Services was up by 1.28%, while Power down by 0.08% and Bankex was down by 0.04% were the only losing indices on BSE.

The top gainers on the Sensex were Hero MotoCorp up by 5.27%, Bajaj Auto up by 5.06%, Bharti Airtel up by 4.98%, Mahindra & Mahindra up by 4.12% and Tata Steel up by 3.09%. On the flip side, Yes Bank down by 4.59%, Adani Ports & SEZ down by 1.89%, Sun Pharma down by 1.84%, Power Grid Corporation down by 1.83% and SBI down by 1.62% were the top losers.

Meanwhile, the Reserve Bank of India (RBI) has refused the Power Ministry's request to give certain concessions for setting up of an Asset Reconstruction Company (ARC) for warehousing stressed assets to prevent distress sale of these plants. The RBI framework provided for strict timeline for resolution of these bad loans where debt is Rs 2,000 crore or more. It mandates insolvency proceedings to start in case no resolution plan is provided by lenders within 180 days of default. Setting up an ARC is a legal option available to avoid insolvency proceedings for these stressed power assets.

Power Secretary A K Bhalla said ‘an upfront valuation is required for taking assets into ARC. We have sought exemption from that. The ARC is required to make 15 per cent upfront payment to lenders. We were asking for exemption from that. These type of concession are not in the scheme of RBI.’ About setting up of the ARC by state-run lender Rural Electrification Corporation (REC) with other lenders to power projects, he said that the REC and lenders together will set up this ARC.

After setting up of the ARC, the stressed assets would be taken over by it to avoid insolvency proceedings under the Insolvency and Bankruptcy Code in the National Company Law Tribunal (NCLT) for five years to avoid any distress sale of these projects. Besides, the assets already moved to the NCLT under the code can also be resolved by the ARC. The REC had proposed to bring about 25,000 MW of stressed power projects under this ARC.

The CNX Nifty traded in a range of 11,603.00 and 11,484.40. There were 32 stocks in green as against 18 stocks in red on the index.

The top gainers on Nifty were Hero MotoCorp up by 5.50%, Bajaj Auto up by 5.13%, Lupin up by 4.68%, Bharti Airtel up by 4.57% and Mahindra & Mahindra up by 4.12%. On the flip side, Yes Bank down by 4.58%, Adani Ports & SEZ down by 2.08%, Power Grid Corporation down by 1.91%, Sun Pharma down by 1.86% and State Bank of India down by 1.80% were the top losers.

European markets were trading in red; UK’s FTSE 100 decreased 65.79 points or 0.91% to 7,253.17, France’s CAC declined 7.92 points or 0.15% to 5,235.92 and Germany’s DAX was down by 33.55 points or 0.28% to 11,921.70.

Asian markets ended mostly lower on Friday as another round of US tariffs on China loomed and investors looked ahead to the US Labor Department's August jobs report for clues to central bank rate hikes. US employment is likely to increase by about 191,000 jobs in August after an increase of 157,000 jobs in July. The unemployment rate is expected to dip to 3.8 percent from 3.9 percent. Chinese shares closed modestly higher in cautious trade, as a deadline for public comments on fresh US tariffs expired. Further, Japanese shares closed lower and the yen strengthened against the dollar as investors awaited the US tariff decision and the outcome of US-Canada talks. Sentiment was also dented after US President Trump reportedly told a columnist for The Wall Street Journal that he was ‘still bothered by the terms of US trade with Japan’.