Benchmarks start new F&O series on cautious note

Indian equity benchmarks have made a cautious start to the new F&O series and are trading flat in early deals on Friday. Traders remained on sidelines ahead of the Goods and Services Tax (GST) Council’s 30th meeting to be held on Friday to discuss multiple proposals for levying additional cess to help flood-ravaged Kerala recoup revenue losses. However, traders took some relief with CRISIL Research’s report that revenues of corporates are expected to log a robust 12.1% year-on-year growth in the second quarter of FY 2019, nearly twice the 6.4% growth in the corresponding quarter of last fiscal. Traders also took some comfort with a report that the Commerce Ministry removed the value limit for exports through post but has fixed Rs 5 lakh cap in case of overseas shipments through courier services. Exporters’ body FIEO said the move gives an edge to shipments through foreign post offices over couriers.

On the global front, Asian markets are trading mostly in green at this point of time, following gains on Wall Street overnight after news of robust US economic growth, with the chairman of the Federal Reserve saying the US does not face a large chance of near-term recession. The US markets ended higher on Thursday as investors digested the Federal Reserve’s decision to raise interest rates and looked ahead to third-quarter earnings season next month.

Back home, airlines stocks flied with report that Indian carriers are unlikely to face a significant hit from the government’s decision this week to impose a tariff on jet fuel, as imports account for less than 5% of domestic jet fuel consumption. Food processing sector stocks remained in focus with report that the government will relax foreign direct investment (FDI) regulations to give a boost to the food processing sector, which has attracted $8.7 billion of investment.

The BSE Sensex is currently trading at 36378.24, up by 54.07 points or 0.15% after trading in a range of 36219.93 and 36511.39. There were 16 stocks advancing against 15 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index declined 0.28%, while Small cap index was down by 1.33%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.04%, Energy up by 0.52%, Utilities up by 0.41%, FMCG up by 0.32% and Bankex was up by 0.21%, while Metal down by 1.49%, Basic Materials down by 1.18%, Realty down by 1.17%, Consumer Discretionary Goods & Services down by 0.84% and Consumer Durables was down by 0.81% were the top losing indices on BSE.

The top gainers on the Sensex were Asian Paints up by 1.86%, Tata Motors up by 1.46%, HDFC up by 1.46%, ITC up by 1.23% and Indusind Bank up by 1.20%. On the flip side, Yes Bank down by 6.64%, Tata Steel down by 2.71%, Bharti Airtel down by 2.53%, Mahindra & Mahindra down by 2.16% and Vedanta down by 1.96% were the top losers.

Meanwhile, the ratings agency Crisil in its latest report has said that India Inc is likely to double its revenue growth in the second quarter (Q2) of fiscal year 2018-19, mainly on the back of base effect. It said corporates are set to log in a top-line growth of 12.1% in the September quarter, up from 6.4% in the corresponding period last fiscal year, as steel makers are set to clock 80 basis points (bps) higher margins. However, it added that cost pressure is clearly rising across the board.

The report stated that aggregate operating margins would be up 5-10 bps in Q2FY19, but this would be mainly on the back of the performance of steelmakers. It also said that barring steel, the number is down by around 70 bps. The rating agency based on its reading of 365 companies, which excludes banking, financial services and insurance, and oil companies, said that if cost pressures continue to rise, the gradual ascent in operating margins seen from the fourth quarter of last fiscal can reverse. Crisil further said demand recovery is expected to be driven by discretionary, consumption-led sectors like airlines, automobiles, fast-moving consumer goods (FMCG) and retail. While automobiles are expected to see an 18% sales growth, airlines should see passenger traffic rise 16% on-year. Retail, FMCG and automobiles will benefit from the low-base effect caused by the rollout of GST in July last year and makers of steel and aluminum, and coal miners will benefit from improved sales, while cement companies will be helped by higher volumes.

The rating agency also said investment-linked sectors like housing and capital goods have also been supportive because of public spending. Higher crude prices and falling rupee are also skewing the input cost math for companies. It said higher oil and fall in rupee will impact the cost structures of most sectors. Additionally, domestic prices of coal, long steel, flat steel and aluminium are expected to rise 15, 14, 17 and 12%, respectively. That would add to the cost pressure for end-use sectors. Besides, airlines, automobiles, aluminium and cement companies will be the sectors bearing the brunt of rising cost of raw materials. However, margins for steel are expected to improve significantly due to an uptick in realisations. It also said that conversely, the rupee fall will prop revenue growth for export-linked sectors, especially IT and pharma.

The CNX Nifty is currently trading at 10962.75, down by 14.80 points or 0.13% after trading in a range of 10920.75 and 11034.10. There were 18 stocks advancing against 32 stocks declining on the index.

The top gainers on Nifty were GAIL India up by 3.24%, Bharti Infratel up by 2.67%, Asian Paints up by 1.80%, Tata Motors up by 1.64% and HDFC up by 1.50%. On the flip side, Yes Bank down by 6.67%, Indiabulls Housing down by 4.45%, Tata Steel down by 3.07%, Bharti Airtel down by 2.82% and Mahindra & Mahindra down by 2.36% were the top losers.

Asian markets are trading mostly in green; Nikkei 225 surged 292.64 points or 1.21% to 24,089.38, Straits Times increased 22.22 points or 0.68% to 3,258.48, Jakarta Composite gained 19.82 points or 0.33% to 5,949.04, Hang Seng added 171.17 points or 0.61% to 27,886.84 and Shanghai Composite was up by 25.96 points or 0.92% to 2,817.73. On the flip side, Taiwan Weighted decreased 51.65 points or 0.47% to 10,982.54 and KOSPI was down by 10.77 points or 0.46% to 2,344.66.