Local equities trade in green

Local equity benchmarks continued to hold their heads in green, with Sensex and Nifty garnering gains of over quarter a percent. The BSE Mid cap is trading almost half a percent higher on the back of hefty buying. Metal, Oil & Gas and PSU counters were on the priority list of the buyers. Among heavy-weights Tata Steel, ONGC and Axis Bank exhibited a smart performance. The Indian rupee recovered from its record lows and opened higher against the US dollar. Traders were taking note of a private report that India has deferred its plan for a second time to impose retaliatory tariff worth close to $235 million on 29 American products by 45 days to November 2. Beside, Finance Minister Arun Jaitley made a case for blending subsidy with investment to augment farm sector growth and make it sustainable and self-sufficient. Investors ignored a private report that India's central bank will need to raise interest rates at least two more times this year to shore up the battered rupee after previous efforts to defend the currency failed to sway markets.

On the global front, Asian markets were trading mostly in green as tit-for-tat tariffs by China and the United States were considered lighter than feared, while there are hopes the two sides can eventually hammer out a deal to avert an all-out trade war. Back on domestic turf, in scrip specific development, RITES soars on securing additional Turnkey contract worth Rs 436 crore. Besides, ONGC shines with arm planning to exit Kazakhstan's Satpayev oil block.

The BSE Sensex is currently trading at 37381.10, up by 90.43 points or 0.25% after trading in a range of 37295.57 and 37530.63. There were 24 stocks advancing against 7 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.47%, while Small cap index was up by 0.12%.

The top gaining sectoral indices on the BSE were Metal up by 1.85%, Oil & Gas up by 1.39%, PSU up by 1.12%, Basic Materials up by 0.82% and Capital Goods was up by 0.71%, while Consumer Durables down by 0.79% and FMCG was down by 0.09% were the only losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 2.45%, ONGC up by 2.42%, Axis Bank up by 2.00%, Coal India up by 1.88% and Asian Paints was up by 1.73%. On the flip side, HDFC Bank down by 0.98%, Maruti Suzuki down by 0.88%, HDFC down by 0.80%, Wipro down by 0.75% and Hindustan Unilever was down by 0.61% were the top losers.

Meanwhile, the India Ratings and Research (Ind-Ra), a subsidiary of Fitch Ratings, has warmed that the states are likely to miss the 20% debt-to-GDP ratio target by fiscal year 2022-23 (FY23) as most of them have not budgeted so far. However it said that the Centre may manage to achieve the debt-to-GDP ratio target of 40% by FY23. The NK Singh committee, which is reviewing the Fiscal Responsibility and Budget Management Act of 2003, has suggested that the fiscal policy try to reduce the debt-to-GDP ratio to 60% by FY23, with the Centre’s at 40% and the states’ combined at 20%, instead of improving the revenue to fiscal deficit ratio.

The rating agency noted that the states’ aggregate debt-to-GDP ratio for FY19 has been budgeted at 24.3% and according to their FY19 budgets, only 10 of the 20 states will have debt-to-GSDP ratio of under 25% in FY19. It highlighted that eight states namely Himachal, Jammu & Kashmir, Kerala, Manipur, Meghalaya, Nagaland, Punjab and Rajasthan had debt-to-GSDP ratios in excess of 30% in FY18, suggesting that the aggregate debt-to-GDP ratio needs to be corrected by 8.92 percentage points between FY18 and FY23.

Although there have been instances of debt-to-GDP ratio declining by over three percentage points in a single year and by over 11% for six years at a go, all these periods were characterised by an average minimum nominal GDP growth of about 14% per annum and average aggregate revenue receipt-to-GDP ratio of around 20%. It said achieving a nominal GDP growth of about 14% looks difficult, though the aggregate revenue receipt-to-GDP ratio has been budgeted at 22% for FY19. Sustainability of debt-to-GDP ratio relies on the primary balance-to-GDP and the rate spread (excess of nominal growth over average interest rate on debt).

According to Ind-Ra, while the median value of the consolidated debt-to-GDP 'BBB' countries was 37.8% in 2017, for India it was a high 69%. But European countries like Italy had a higher ratio at 131.8% and Portugal's stood at 125.7%. It attributed the low revenue base as the major factor for India having the highest debt-to-revenue ratio of 327.1% amongst the median of the 'BBB' countries in 2017 at 165.4%. Higher debt and low revenue levels make India an outlier even in terms of interest-to-revenue ratio, which was 23.7% as against 'BBB' median of 6.3% in 2017. Thus, the way forward is to expand revenue base, and GST is a big step in this direction.

The CNX Nifty is currently trading at 11316.75, up by 37.85 points or 0.34% after trading in a range of 11280.25 and 11329.45. There were 36 stocks advancing against 13 stocks declining, while 1 stock remain unchanged on the index.

The top gainers on Nifty were Tata Steel up by 2.60%, BPCL up by 2.30%, GAIL India up by 2.28%, ONGC up by 2.21% and Axis Bank was up by 2.05%. On the flip side, Zee Entertainment down by 1.59%, Titan Co down by 1.17%, Bajaj Finserv down by 0.93%, HDFC down by 0.79% and Maruti Suzuki was down by 0.79% were the top losers.

Asian markets were trading mostly in green, Taiwan Weighted gained 89.98 points or 0.83% to 10,850.19, Straits Times surged 18.91 points or 0.6% to 3,158.25, Shanghai Composite soared 26.32 points or 0.97% to 2,726.27, Jakarta Composite strengthened 57.72 points or 0.98% to 5,869.51, Hang Seng advanced 303.03 points or 1.11% to 27,387.69 and Nikkei 225 was up by 315.13 points or 1.33% to 23,735.67.

On the other side, KOSPI was down by 0.25 points or 0.01% to 2,308.73.