Post Session: Quick Review

Indian equity indices showcased an enthusiastic performance on Friday by strongly rallying close to a percentage point in the session, on the back of widespread buying by participants tracking positive leads from Asian markets. Hectic buying activity which took place during the last leg of trade mainly helped markets to end the session at intraday high levels, with Nifty settling above crucial 11,500 mark. This was the second consecutive day of rise for the domestic markets. The markets made a gap-up opening and traded in fine fettle, as traders took some encouragement 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. Local sentiments also got buttressed 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.

Domestic indices extended their upside in last hour of trade and were trading at intraday high points, on the back of easing wholesale price index (WPI) inflation data. Inflation based on wholesale prices eased to a four-month low of 4.53 percent in August on softening of prices of food articles, especially vegetables. The mood remained upbeat on strengthening of rupee against the dollar. Traders also took note of a report that the government is determined to keep fiscal deficit within the budgeted level of 3.3% of GDP as the country cannot afford to have a twin deficit problem.

On the global front, Asian markets ended mostly in green on Friday, while European markets were trading in green in early deals, 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.  Back home, banking sector stocks were 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. Besides, stocks related to sugar sector ended higher after the government raised ethanol price for blending in petrol by 25 percent.

The BSE Sensex ended at 38088.63, up by 370.67 points or 0.98% after trading in a range of 37859.52 and 38125.62. There were 28 stocks advancing against 3 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index rose by 1.61%, while Small cap index was up by 1.39%. (Provisional)

The top gaining sectoral indices on the BSE were Realty up by 3.77%, Basic Materials up by 2.69%, Power up by 2.58%, Consumer Durables up by 2.35% and Utilities up by 2.26%. (Provisional)

The top gainers on the Sensex were Vedanta up by 5.36%, Power Grid up by 3.39%, Bharti Airtel up by 3.28%, NTPC up by 2.97% and Asian Paints up by 2.97%. (Provisional)

On the flip side, Coal India down by 1.42%, Infosys down by 0.88% and Reliance Industries down by 0.03% were the few losers. (Provisional)

Meanwhile, amid depreciating rupee and high crude prices, the government is determined to keep fiscal deficit within the budgeted level of 3.3% of Gross Domestic Product (GDP) as the country cannot afford to have a twin deficit problem. A depreciating rupee and high crude import bill will definitely put pressure on the country's current account deficit (CAD), and a fiscal slippage at this juncture will lead to a twin deficit. 

Further, the dependence on oil as a source of tax revenue has to be brought down and this can only happen when the share of non-oil tax to GDP goes up. Besides, income tax revenues are moving in right direction, Goods and Services Tax (GST) mop up is also recovering and if government keeps expenditure within control, then it will definitely maintain the fiscal deficit situation.

Additionally, the government's finances have shown improvement in July 2018 with fiscal deficit at 86.5% of the Budget Estimate (BE), mainly on account of higher revenue collection. The deficit was at 92.4% of BE at July-end of the last financial year.  The CAD, which is the difference between inflow and outflow of foreign exchange, rose to $18 billion or 2.4% of GDP in April-June quarter on account widening trade deficit.

The CNX Nifty ended at 11518.35, up by 148.45 points or 1.31% after trading in a range of 11430.55 and 11523.25. There were 46 stocks advancing against 4 stocks declining on the index. (Provisional)

The top gainers on Nifty were Indiabulls Housing Finance up by 7.36%, BPCL up by 6.51%, Vedanta up by 5.55%, HPCL up by 5.45% and Bajaj Finserv up by 5.41%. (Provisional)

On the flip side, Coal India down by 1.53%, HCL Tech down by 1.47%, Infosys down by 1.08% and GAIL India down by 0.11% were the top losers. (Provisional)

European markets were trading in green; UK’s FTSE 100 increased 13.82 points or 0.19% to 7,295.39, France’s CAC was up by 18.18 points or 0.34% to 5,346.30 and Germany’s DAX rose 39.64 points or 0.33% to 12,095.19.

Asian markets ended mostly in green on Friday after reports that the US and China might hold a fresh round of trade talks, a development that could help resolve the trade dispute between the world's two largest economies. Concerns around emerging market risks also eased somewhat after Turkey's central bank raised its key interest rate sharply in a dramatic bid to control rocketing inflation and prevent a currency crisis. Japanese shares rallied to hit their highest level in more than seven months as the yen dipped on expectations of a new round of US-China trade talks in coming days and easing concerns about the state of emerging markets. Though, Chinese shares ended lower after the release of mixed economic readings. Chinese industrial output and retail sales figures for August topped forecasts, but real estate investment cooled and growth in fixed asset investment dipped to a historic low, raising risks to China's economic outlook as the trade conflict with the US escalates.