Markets pare gains but continue to trade in positive terrain

Indian stock markets continued to trade in the positive terrain in the early noon session after CPI-based inflation came in at a 10-month low of 3.69% for August and positive global cues. Domestic sentiments were also buoyed as the rupee recovered from its lows against the dollar as the government had on Wednesday assured that all steps would be taken to ensure the domestic currency does not depreciate to unreasonable levels. Besides, broader indices too were trading in green. Amongst the Mid cap stocks, Mahindra & Mahindra Financial Services and Piramal Enterprises stocks were gaining the most and amongst the Small cap stocks Indiabulls Ventures and Edelweiss Financial Services stocks were gaining. The market breadth on the BSE was favoring positive trend; there were 1690 shares on the gaining side against 625 shares on the losing side, while 130 shares remained unchanged. However, indices pared some of their gains with Sensex trading below its crucial level of 37,900. Traders started reacting negatively to report which highlighted that factory output for the month of July 2018 came at 6.6% as compared to 7% in last month. Market participants were also a little concerned with private report stating that even though retail inflation in August dipped to a 10-month low of 3.69%, weaker rupee and rising crude oil prices may exert pressure on CPI inflation going forward.

On the global front, all the Asian counters were trading in green on expectations that the United States and China could launch a fresh round of trade talks. Back home, in scrip specific developments, Alembic Pharma rose on getting USFDA’s nod for Alogliptin, Metformin Hydrochloride Tablets and Maruti Suzuki gained on boosting Baleno production to cut down waiting, delight customers.

The BSE Sensex is currently trading at 37887.79, up by 169.83 points or 0.45% 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 rose 1.29%, while Small cap index up by 1.29%.

The top gaining sectoral indices on the BSE were Realty up by 2.37%, Basic Materials up by 2.06%, Power up by 2.04%, Metal up by 1.92% and Healthcare up by 1.75%, while IT down by 0.46% and TECK down by 0.38% were the only losing indices on BSE.

The top gainers on the Sensex were Power Grid up by 3.36%, Vedanta up by 3.35%, Yes Bank up by 2.97%, Asian Paints up by 1.92% and Sun Pharma Inds. up by 1.91%. On the flip side, Infosys down by 0.93%, Hindustan Unilever down by 0.55%, TCS down by 0.48%, Coal India down by 0.46% and Wipro down by 0.44% were the top losers.

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 is currently trading at 11447.15, up by 77.25 points or 0.68% after trading in a range of 11430.55 and 11484.80. There were 38 stocks advancing against 12 stocks declining on the index.

The top gainers on Nifty were Indiabulls Housing up by 4.70%, UPL up by 4.27%, BPCL up by 4.10%, Power Grid up by 3.30% and Vedanta up by 3.29%. On the flip side, Infosys down by 0.91%, HCL Tech down by 0.82%, Bharti Airtel down by 0.54%, Coal India down by 0.52% and Hindustan Unilever down by 0.48% were the top losers.

All the Asian markets were trading in green; Hang Seng increased 242.69 points or 0.89% to 27,257.18, KOSPI advanced 31.21 points or 1.35% to 2,317.44, Taiwan Weighted surged 140.91 points or 1.3% to 10,868.14, Nikkei 225 jumped 273.35 points or 1.18% to 23,094.67, Straits Times soared 26.49 points or 0.84% to 3,158.26, Shanghai Composite increased 1.94 points or 0.07% to 2,688.52 and Jakarta Composite was up 29.84 points or 0.51% to 5,888.11.