Post Session: Quick Review

Indian equity benchmarks have ended significantly higher on Wednesday, as investors piled into beaten-down stocks amid expectations of robust corporate earnings for the second quarter ended September. Markets traded with full traction throughout the session, as traders took some encouragement with report stating that Reserve Bank of India (RBI) will inject Rs 12,000 crore liquidity into the system through purchase of government bonds on October 11 to meet the festival season demand for funds. It added that the government will purchase bonds with maturity ranging between 2020 to 2030.  Market participants also got some boost with another report stating that the US government’s development finance institution Overseas Private Investment Corporation (OPIC) is keen to invest in the development of India’s infrastructure, port and solar energy sectors.

Key indices continued jubilation in the last leg of trade, taking support from IMF Director of Fiscal Affairs Department’s statement that India's debt is lower than the best or emerging market economies in the world. He cautioned that the global debt has reached a new record high of $182 trillion in 2017. Besides, appreciation in Indian rupee too aided sentiments. The rupee firmed up by 22 paise to 74.17 against the dollar at the time of equity markets closing on increased selling of the US currency by exporters and banks. Traders paid no heed towards Moody’s Investors Service’s report that the excise duty cut on petrol and diesel is credit negative for India as it will reduce government revenue and increase fiscal deficit by 0.1 per cent to 3.4 per cent of Gross Domestic Product (GDP) in the year ending March 2019. Traders also overlooked a private report stating that India's retail inflation likely sped up in September on higher food and fuel costs, pushed up by a battered rupee and suggesting further policy tightening from the RBI.

On the global front, Asian markets ended mixed on Wednesday. European markets were trading in red as German exports declined for a second straight month in August, defying expectations for an increase. The preliminary data from the statistical office Destatis showed that merchandise exports fell a calendar and seasonally-adjusted 0.1% from July, when they decreased 0.8%. Street had expected a 0.4% increase. Back home, Aviation stocks ended higher after media reports suggested that the government may announce a duty cut on aviation turbine fuel (ATF).  Sugar related stocks were in focus with Nitin Gadkari stating that sugar mills will now make ethanol directly from sugarcane to serve as safe fuel and this, in turn, will strengthen the economy of the country.

The BSE Sensex ended at 34757.54, up by 458.07 points or 1.34% after trading in a range of 34346.50 and 34858.35. There were 26 stocks advancing against 5 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index rose 4.27%, while Small cap index was up by 3.68%. (Provisional)

The top gaining sectoral indices on the BSE were Realty up by 4.55%, Consumer Durables up by 3.67%, Industrials up by 3.52%, Bankex up by 3.49% and Capital Goods up by 3.35%, while IT down by 1.46% and TECK down by 0.98% were the only losing indices on BSE. (Provisional)

The top gainers on the Sensex were Axis Bank up by 6.65%, SBI up by 6.03%, Maruti Suzuki up by 4.83%, Yes Bank up by 4.57% and Adani Ports & SEZ up by 4.09%. (Provisional)

On the flip side, TCS down by 2.32%, Infosys down by 2.31%, Sun Pharma down by 1.21%, Wipro down by 1.16% and Coal India down by 0.16% were the top losers. (Provisional)

Meanwhile, terming government’s decision to cut excise duty on petrol and diesel as credit negative for the India, global rating agency Moody’s Investors Service has stated that this will reduce government revenue and increase fiscal deficit by 0.1% to 3.4% of Gross Domestic Product (GDP) in the year ending March 2019. It also said that the earning of public sector oil marketing companies (OMCs) would be negatively affected as they also absorbed Rs 1 per litre cut in their pricing. It added that these measures create downside risks to the central government's fiscal deficit target of 3.3% of GDP for financial year 2018.

The rating agency said as the government had already met 94.7% of the budgeted annual deficit by August 2018, to achieve its deficit target it will likely need to compress capital expenditure. Consequently, it expects the central government deficit target to slip modestly to 3.4% of GDP, while the combined general government deficit (central and state) should remain at about 6.3% of GDP. It said that the government revenue from excise duties on petroleum products has more than doubled since financial year 2014. State governments charge value added tax (VAT) on fuel as a percentage of prices and have therefore benefited from rising oil prices. On OMCs, Moody's said even as the government so far has been committed to market-based pricing, going ahead there are risks to going back on deregulation. However, with important state elections at the end of this year and the general election next year, the risk of backsliding on these commitments will increase if oil prices remain elevated. India deregulated petrol and diesel prices in 2010 and 2014, respectively, and moved to daily revision in fuel prices in June 2017.

On the economic growth, the US-based agency said the fuel excise cut is expected to have a limited effect on GDP growth. Although lower excise taxes will help offset some of the negative effect on household consumption from higher oil prices, a depreciating rupee and potential curtailment of government spending will likely mute the benefits. It expects real GDP growth of about 7.3% in fiscal 2018 and 7.5% in fiscal 2019. However, it noted that there are some downside risks to its forecast with intensifying external headwinds (tightening global financial conditions, high oil prices and trade tensions) and tightening domestic credit conditions.

The CNX Nifty ended at 10460.30, up by 159.25 points or 1.55% after trading in a range of 10318.25 and 10482.35. There were 42 stocks advancing against 8 stocks declining on the index. (Provisional)

The top gainers on Nifty were Bajaj Finance up by 10.11%, Bajaj Finserv up by 9.96%, Eicher Motors up by 6.75%, Zee Entertainment up by 6.72% and Axis Bank up by 6.71%. (Provisional)

On the flip side, Bharti Infratel down by 3.17%, TCS down by 2.44%, Infosys down by 2.35%, Wipro down by 1.90% and HCL Tech. down by 1.55% were the top losers. (Provisional)

European markets were trading in red; UK’s FTSE 100 was down by 10.12 points or 0.14% to 7,227.47, France’s CAC fell 31.21 points or 0.59% to 5,287.34 and Germany’s DAX dropped 67.55 points or 0.57% to 11,909.67.

Asian markets ended mixed on Wednesday as growth worries persisted and investors awaited more clarity on the future path of Treasury yields. Underlying sentiment remained supported somewhat amid receding worries over Italy's budget. The dollar dipped after US President Donald Trump criticized the Federal Reserve once again, saying he believes the central bank was moving too quickly with the rate hikes. Trump also repeated a threat to impose tariffs on $267 billion worth of additional Chinese imports if Beijing retaliates for the recent levies and other measures. Chinese shares ended a tad higher on expectations that policymakers will take further steps to ease a funding crunch and lift growth amid a protracted trade war with the United States. Besides, Japanese shares ended higher in choppy trade as investors picked up defensive stocks on the dips, while index-heavyweight SoftBank dived on news it was to buy a majority stake in US shared office space provider WeWork. Meanwhile, the markets in Taiwan are closed for the National Day holiday.