Bulls tighten grip on Dalal Street; Nifty re-conquers 11,500 mark

Friday turned out to be a fabulous day of trade for Indian equity benchmarks with frontline gauges recapturing their crucial 11,500 (Nifty) and 38,000 (Sensex) levels, as traders gave thumbs up to the strong macro-economic data. Sentiments remained up-beat since beginning with key gauges making gap-up opening with retail inflation of India cooling to an 10-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. 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.

Markets extended their gains in second half of the session, as India’s Wholesale price index (WPI) inflation eased for the second straight month in August 2018, supported by declining minerals prices. According to the latest data released by the government, WPI slowed down to 4.53% in August from 5.09% in July and 3.24% during the corresponding month of the previous year. Traders also took note of the prime minister's economic advisory panel member’s statement that India needs to be extremely vigilant to check weakness in the rupee and the task was to minimise volatility and avoid contagion to other macro policies. Meanwhile, the government has notified October 1 as the date for implementing the tax deducted at source (TDS) and tax collected at source (TCS) provisions under GST law. As per the Central GST (CGST) Act, the notified entities are required to collect TDS at 1% on payments to goods or services suppliers in excess of Rs 2.5 lakh. Also, states will levy 1% TDS under state laws.

Firm opening in European counters too aided sentiments even though France's consumer prices grew at a steady pace in August. The final data from the statistical office Insee showed that consumer price inflation came in at 2.3%, the same rate as registered in July. Asian counters ended mostly in green with news of a possible new round of US-China trade talks in coming days and easing concerns about the state of emerging markets helping underpin investor sentiment.

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. Besides, stocks related to sugar sector ended higher after the government raised ethanol price for blending in petrol by 25%.

Finally, the BSE Sensex surged 372.68 points or 0.99% to 38,090.64, while the CNX Nifty was up by 145.30 points or 1.28% to 11,515.20.

The BSE Sensex touched a high and a low of 38,125.62 and 37,859.52, respectively and there were 29 stocks advancing against 2 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index surged 1.62%, while Small cap index was up by 1.38%.

The top gaining sectoral indices on the BSE were Realty up by 3.29%, Basic Materials up by 2.66%, Power up by 2.55%, Utilities up by 2.26% and Metal was up by 2.26%, while there were no losers on the BSE sectoral front.

The top gainers on the Sensex were Vedanta up by 5.25%, Power Grid Corporation up by 3.31%, Asian Paints up by 3.04%, NTPC up by 3.00% and Yes Bank up by 2.75%. On the flip side, Coal India down by 1.42% and Infosys down by 1.01% were the few losers.

Meanwhile, with non-performing assets (NPAs) worth over Rs 50,000 crore under the RBI’s independent credit evaluation (ICE) framework, a joint study carried out by industry body Associated Chambers of Commerce and Industry of India (ASSOCHAM) and rating agency Crisil has revealed that banks may need to take a haircut in the range of 40-60 percent to get a rating of RP4 for implementation of any resolution plan. It also said that the average sustainable debt for these assets is around 50 percent.

According to the report, as on June 30, the National Company Law Tribunal (NCLT) had approved resolution of 32 stressed assets under the corporate insolvency resolution process, aggregating Rs 50,000 crore against total claims of Rs 89,400 crore admitted by financial and operational creditors. It noted that the average resolution timeline for these accounts was 260 days, as against the stipulated 270 days. It also believed that an improvement in the recovery rate and reduction in timeline for resolution will increase investor confidence in the domestic corporate bond market.

The ASSOCHAM- Crisil study further stated that the IBC is expected to promote a market for unsecured financing and that is because the distribution waterfall of recoveries following liquidation gives unsecured financial creditors (apart from all secured creditors) precedence over government dues. Adding further, it said that some of the challenges in effective implementation of IBC are infrastructure issues, adherence to resolution timelines, liquidation impact, criticality of the role of the committee of creditors (CoC), and limited development of the secondary market. It added that these would need to be addressed systematically and soon for successful implementation of the IBC over the medium term and achieve the intended outcome.

The CNX Nifty traded in a range of 11,523.25 and 11,430.55. There were 45 stocks in green as against 4 stocks in red, while one stock remain unchanged on the index.

The top gainers on Nifty were Indiabulls Housing Finance up by 6.98%, BPCL up by 6.31%, Bajaj Finserv up by 5.65%, HPCL up by 5.59% and Vedanta up by 5.10%. On the flip side, HCL Tech down by 1.49%, Coal India down by 1.48%, Infosys down by 1.24% and GAIL India down by 0.04% were the few losers.

European markets were trading in green; UK’s FTSE 100 increased 24.54 points or 0.34% to 7,306.11, France’s CAC gained 16.60 points or 0.31% to 5,344.72 and Germany’s DAX was up by 32.38 points or 0.27% to 12,087.93.

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.