Bourses continue to trade higher on easing WPI inflation

Key benchmark indices continued to trade higher in afternoon session, 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. Investor sentiment was also boosted as the industrial production grew at 6.6 percent in July and retail inflation cooled to a 10-month low. Additional support came in 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. Moreover, the rupee’s recovery by 52 paise to 71.66 against the dollar in early trade on the government’s assurance that all steps would be taken to ensure the domestic currency does not depreciate to unreasonable levels also added to the momentum. On the sectoral front, stocks related to sugar sector edged higher after the government raised ethanol price for blending in petrol by 25 percent.

On the global front, Asian markets were trading mostly in green, 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, the BSE Sensex is currently trading at 37932.35, up by 214.39 points or 0.57%. There were 23 stocks advancing against 8 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 1.31%, while Small cap index was up by 1.18%.

The top gaining sectoral indices on the BSE were Realty up by 2.32%, Power up by 2.06%, Basic Materials up by 1.99%, Consumer Durables up by 1.91% and Metal up by 1.87%, while IT down by 0.40% and TECK down by 0.33% were the top losing indices on BSE.

The top gainers on the Sensex were Power Grid up by 3.60%, Vedanta up by 3.20%, Yes Bank up by 3.08%, Asian Paints up by 2.53% and Indusind Bank up by 2.24%. On the flip side, Coal India down by 0.96%, Infosys down by 0.87%, Hindustan Unilever down by 0.55%, Wipro down by 0.41% and TCS down by 0.38% were the top losers.

Meanwhile, the India Ratings and Research (Ind-Ra) in its latest report has maintained a stable outlook on the cotton and synthetic textiles sector for the remaining period of financial year 2019. It expects that the domestic demand for textiles is likely to remain robust from end-user, buoyed by a strong rise in private consumption during the rest of FY19. Besides, it expects textile exports to rise, which will result in apparel exporters benefitting due to the rupee's depreciation against the US dollar.

According to the report, the rupee has depreciated at a higher rate against the US dollar during the April to August period than the currencies of key apparel-exporting nations. It also said that the sector profitability is likely to improve gradually with players passing on increased raw material prices to end-users following healthy demand, a depreciating rupee and waning impact of the structural issues. However, it said that the positive impact of improved demand and profitability will be partly affected by working capital requirements on the back of cost inflation leading to steady reliance on debt.

The ratings agency has stated that a lower-than-expected cotton production in 2017-2018 (October-September) and a further decline in production in 2018-2019 due to a low acreage, along with high domestic consumption demand and high export demand from China, would further erode the domestic stock levels. It also said that an expected decline in the stock levels, along with a likely rise in minimum support price for the cotton season 2018-2019, would keep cotton prices elevated. It noted that this is likely to result in volume growth of synthetic textiles and support the profitability of the synthetic value chain. Adding further, it said that the government's decision to allow input credit on man-made fabric to 7% of fabric price would lead to a decline in input prices for apparel manufacturers and further support their volume growth.

The CNX Nifty is currently trading at 11458.30, up by 88.40 points or 0.78% after trading in a range of 11430.55 and 11484.80. There were 41 stocks advancing against 9 stocks declining on the index.

The top gainers on Nifty were Indiabulls Housing Finance up by 4.79%, BPCL up by 4.37%, UPL up by 4.28%, HPCL up by 3.45% and Vedanta up by 3.33%. On the flip side, HCL Tech. down by 1.31%, Infosys down by 1.00%, Coal India down by 0.94%, Hindustan Unilever down by 0.53% and TCS down by 0.44% were the top losers.

Asian markets were trading mostly in green, Straits Times increased 27.84 points or 0.88% to 3,159.61, Hang Seng rose 304.22 points or 1.11% to 27,318.71, Jakarta Composite added 29.84 points or 0.51% to 5,888.11, KOSPI surged 32.02 points or 1.38% to 2,318.25, Taiwan Weighted increased 140.91 points or 1.3% to 10,868.14 and Nikkei 225 soared 273.35 points or 1.18% to 23,094.67. On the flip side, Shanghai Composite was down by 6.27 points or 0.23% to 2,680.31.