Benchmarks trade in fine fettle on strong macroeconomic data

Indian equity benchmarks made a gap-up opening and are trading in fine fettle in early deals on Friday, with frontline gauges recapturing their crucial 37,900 (Sensex) and 11,400 (Nifty) levels on strong macroeconomic data. Sentiments remained up-beat with retail inflation of India cooling to an 11-month low of 3.69% in August mainly due to a fall in prices of kitchen items, including fruits and vegetables, while industrial production grew at 6.6% in July, slightly faster than the expected 6.5% expansion, on the back of good performance by the manufacturing sector and higher offtake of capital goods and consumer durables. Some support also came with a private report that private equity (PE) and venture capital (VC) investments stood at $1.6 billion across 50 deals in August, with buyout deals recording two times increase in value compared to the year-ago period.

Global cues too remained supportive with most of the Asian counters are trading in green at this point of time, as moves by the United States and China to resolve a bitter trade dispute and a sharp interest rate hike in crisis-hit Turkey supported global risk appetite. The US markets ended higher on Thursday following recent reports that the US is proposing a new round of trade talks with China in the near future.

Back home, banking sector stocks remained in focus with report that banks need to take a haircut of 40-60% to have a rating of RP4 for implementation of any resolution plan, with bad loans worth over Rs 50,000 crore under RBI’s independent credit evaluation (ICE) framework. Stocks related to textiles sector remained on buyers’ radar, as India Ratings and Research maintained a stable outlook on the cotton and synthetic textiles sector for the remaining period of this financial year. It expects the domestic demand for textiles to remain robust from end-users, supported by a strong rise in private consumption during the rest of FY19.

The BSE Sensex is currently trading at 37925.00, up by 207.04 points or 0.55% after trading in a range of 37874.33 and 38058.92. There were 23 stocks advancing against 8 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index surged 1.22%, while Small cap index was up by 1.13%.

The top gaining sectoral indices on the BSE were Realty up by 2.30%, Power up by 2.01%, PSU up by 1.69%, Utilities up by 1.68% and Metal up by 1.65%, while IT down by 0.60% and TECK was down by 0.49% were the only losing indices on BSE.

The top gainers on the Sensex were Power Grid Corporation up by 3.93%, Yes Bank up by 2.18%, Maruti Suzuki up by 1.90%, Sun Pharma up by 1.76% and Vedanta up by 1.74%. On the flip side, Wipro down by 0.79%, Infosys down by 0.77%, TCS down by 0.50%, Mahindra & Mahindra down by 0.33% and Hindustan Unilever down by 0.18% were the top losers.

Meanwhile, with good performance by the manufacturing sector and higher offtake of capital goods and consumer durables, India’s industrial production measured by Index of Industrial Production (IIP) grew at 6.6% in the month of July 2018. Factory output had expanded by just 1% in July last year. Though, it was slightly lower than 7% growth in June 2018. Besides, The IIP growth for June revised downwards to 6.8% from the provisional estimate of 7% released last month.

As per the data released by the Central Statistics Office of the Ministry of Statistics and Programme Implementation, IIP with base 2011-12 for the month of July 2018, stood at 125.8, which was 6.6% higher as compared to the level in the month of July 2017. The cumulative growth for the period April-July 2018 over the corresponding period of the previous year stands at 5.4%.

On the sectoral basis, the manufacturing sector, which constitutes around 77.63% of the Index, recorded a 7% growth in July as against a contraction of 0.1% in the same month year ago. Growth in electricity generation was at 6.6%, slightly higher than 6.6% in July 2017. On the other hand, growth in mining output halved to 3.7% in July, down from 4.5 in the same month of previous year. The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of July 2018 stand at 95.8, 127.6 and 162.1 respectively. The cumulative growth in these three sectors during April-July 2018 over the corresponding period of 2017 has been 5.0%, 5.6% and 5.3% respectively.

The consumer durables sector recorded an impressive growth of 14.4% in July against a dip of 2.4% year ago. Capital goods production grew by 3% in July as against decline of 1.1% year ago. As per Use-based classification, the growth rates in July 2018 over July 2017 were 6.9% in Primary goods, 1.2% in Intermediate goods and 8.4% in Infrastructure/ Construction Goods. The Consumer non-durables have recorded growth of 5.6%.

In terms of industries, 20 out of the 23 industry groups in the manufacturing sector have shown positive growth during the month of July 2018 as compared to the corresponding month of the previous year. The industry group ‘Manufacture of furniture’ has shown the highest positive growth of 42.7% followed by 30.8% in ‘Manufacture of computer, electronic and optical products’ and 28.4% in ‘Manufacture of tobacco products’. On the other hand, the industry group ‘Manufacture of paper and paper products’ and ‘Printing and reproduction of recorded media’ have shown the highest negative growth of (-) 2.7% followed by (-) 0.9% in ‘Manufacture of machinery and equipment n.e.c.’.

The CNX Nifty is currently trading at 11443.20, up by 73.30 points or 0.64% after trading in a range of 11430.55 and 11484.80. There were 40 stocks advancing against 10 stocks declining on the index.

The top gainers on Nifty were Indiabulls Housing up by 3.87%, HPCL up by 3.68%, Power Grid Corporation up by 3.33%, BPCL up by 3.25% and Indian Oil Corporation up by 2.52%. On the flip side, Tech Mahindra down by 1.45%, HCL Tech down by 1.18%, Bharti Airtel down by 0.84%, Infosys down by 0.65% and Wipro down by 0.61% were the top losers.

Asian markets are trading mostly in green; Nikkei 225 gained 198.24 points or 0.86% to 23,019.56, Taiwan Weighted surged 112.88 points or 1.04% to 10,840.11, Straits Times increased 22.14 points or 0.7% to 3,153.91, Jakarta Composite jumped 25.15 points or 0.43% to 5,883.42, Hang Seng added 218.05 points or 0.8% to 27,232.54 and KOSPI was up by 27.54 points or 1.19% to 2,313.77. On the flip side, Shanghai Composite down by 3.55 points or 0.13% to 2,683.03.