Markets make smart recovery on Monday

Key equity benchmarks made a smart recovery to close Monday’s session in green terrain, with Sensex and Nifty logging gains of 97.39 and 31.60 points, respectively. After a negative start, the markets remained volatile throughout the day, as exporters’ body Federation of Indian Export Organisations’ (FIEO) said the rupee depreciation is increasing the cost of imported capital goods, inputs and various services used by exporters paid in foreign currency, particularly the freight charges. Domestic sentiments also got hurt with a private report that foreign investors have pulled out over Rs 9,300 crore ($1.3 billion) from the Indian capital markets in the last four trading sessions on unabated fall in rupee and rise in crude oil price. The domestic sentiments remained downbeat even if the Reserve Bank of India (RBI) retained the GDP growth projection for FY19 at 7.4%, with risks broadly balanced, in the fourth Bi-monthly Monetary Policy Statement and revised the inflation projection to 3.9-4.5% for the second half of FY19, down from 4.8% earlier.

In afternoon deals, the indices witnessed sharp selling, tracking weak global markets. Anxiety also spread among the investors with reports that Indian companies raised Rs 12,470 crore through initial public offerings (IPOs) in April-September this fiscal, a plunge of 53% from the year-ago period, mainly due to volatile equity markets and uncertainties in macro environment. The market participants took note of a private report that the RBI is expected to increase policy rates by 25 basis points in the first quarter of the next year, primarily led by inflationary pressures and depreciation of the rupee. However, the markets managed to erase all of their losses in the last hour of the trade, supported by the World Bank’s latest report stating that growth in India is firming up and projected to accelerate to 7.3% in the 2018-19 fiscal and 7.5% in the next two years. Some support also came with a report that investments in the Indian capital market through participatory notes climbed to Rs 84,647 crore till August-end, making it the first rise in such fund infusion in 10 months.

On the global front, European markets were trading in red, as Germany's producer prices increased at the fastest pace in 11 months in August. As per figures from Destatis, producer prices advanced 3.1% year-on-year in August, following a 2.9% increase logged in July. Asian markets ended lower, amid anxiety about rising US interest rates and cooling growth in top consumer China. China's private sector logged a moderate growth in September as improved services activity was offset by softer manufacturing growth. The survey data from IHS Markit showed that the Caixin composite output index rose marginally to 52.1 from 52.0 in August.

Back home, on the sectoral front, oil companies stocks ended higher, despite rating agency Moody's report indicating that the recent cut in petrol and diesel prices by Rs 2.50 by the Centre is estimated to reduce the combined EBITDA (earnings before interest, tax, depreciation and amortization) margins of IOCL, HPCL and BPCL by Rs 6500 crore during current fiscal, while stocks related to infra sector remained in focused with a Crisil Infrastructure Advisory report stating that the share of private investments in the infrastructure sector has fallen to a decadal low of around 25% in FY18, sharply down from a high of 37% cent in FY08.

Finally, the BSE Sensex gained 97.39 points or 0.28% to 34,474.38, while the CNX Nifty was up by 31.60 points or 0.31% to 10,348.05.

The BSE Sensex touched a high and a low of 34,636.43 and 33,974.66, respectively and there were 16 stocks advancing against 15 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index lost 1.99%, while Small cap index was down by 2.01%.

The top gaining sectoral indices on the BSE were Energy up by 4.38%, Oil & Gas up by 3.30%, Bankex up by 1.16%, PSU up by 1.13% and Auto was up by 0.73%, while Metal down by 3.18%, Realty down by 3.13%, Basic Materials down by 1.99%, Capital Goods down by 1.56% and Industrials was down by 1.46% were the top losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 7.08%, Reliance Industries up by 5.53%, Hero MotoCorp up by 5.14%, Kotak Mahindra Bank up by 4.62% and SBI up by 3.18%. On the flip side, Vedanta down by 10.78%, HDFC down by 2.62%, Wipro down by 2.14%, Axis Bank down by 2.10% and Tata Motors down by 1.75% were the top losers.

Meanwhile, asserting the government’s commitment to meet fiscal deficit target of 3.3% for the current fiscal, Finance Minister Arun Jaitley has said that there are some more steps on the anvil to narrow the current account deficit (CAD) and bolster foreign exchange inflows. He also said that India will continue to be the leading destination of foreign direct investment (FDI) despite the adverse global situation. However, he pointed out that there could be some transient problem in foreign portfolio investment but these would not continue depending on the global situation.

The minister has stated that maintaining fiscal prudence is one of the top priorities of the government. He said ‘gradually on fiscal deficit we had glide down from 4.6% we are now targeting 3.3% (of GDP) this year and I am quite certain with the kind of revenue coming particulary from the direct taxes, we will achieve that.’ As far as CAD is concerned, he said it is linked to global oil prices because foreign exchange is mostly spent on crude oil. He also said ‘some more steps are likely but there are two factors... external one is the oil prices and second is the policy with the United States which is leading to hardening of the dollar itself therefore adversely impacting all currencies of the world.’

Citing some of the steps to bridge CAD and bolster flows in the recent past, Jaitley said that the sovereign borrowing target was reduced by Rs 700 billion for the current fiscal and withholding tax on masala bonds has been withdrawn for the moment. Besides, he said that the government recently allowed state-owned oil marketing companies to raise $10 billion through external commercial borrowing (ECB). On Indian economy, he said that the ability of the country to maintain the present growth rate for a decade or two is reasonably certain.

The CNX Nifty traded in a range of 10,398.35 and 10,198.40. There were 25 stocks in green as against 25 stocks in red on the index.

The top gainers on Nifty were HPCL up by 8.54%, Yes Bank up by 7.65%, Indian Oil Corporation up by 5.89%, Reliance Industries up by 5.83% and Hero MotoCorp up by 4.83%. On the flip side, Vedanta down by 10.51%, Hindalco down by 6.68%, Tech Mahindra down by 3.43%, Bajaj Finance down by 3.03% and Wipro down by 2.40% were the top losers.

European markets were trading in red; UK’s FTSE 100 decreased 28.22 points or 0.39% to 7,290.32, France’s CAC fell 34.73 points or 0.65% to 5,324.63 and Germany’s DAX dropped 68.84 points or 0.57% to 12,043.06.

Asian markets ended mostly in red on Monday as strong US jobs data for September added to worries about rising interest rates and investors brushed aside central bank policy loosening in China. Chinese shares ended lower, as investors back from a long holiday dumped shares across the board despite Beijing’s weekend move to spur more lending at a time of growing fears the economic impact of the Sino-US trade war will deepen. Meanwhile, China's private sector logged a moderate growth in September as improved services activity was offset by softer manufacturing growth, survey data from IHS Markit showed. The Caixin composite output index rose marginally to 52.1 from 52.0 in August. The services PMI signaled the strongest increase in activity for three months, while manufacturing production showed a marginal pace of expansion that was the weakest since October 2017. The Japanese market was closed for the Health-Sports day holiday.