Markets stage strong comeback; Sensex rallies over 450 points

The strong bounce back witnessed on the street on Wednesday, as both Sensex and Nifty rallied over 450 and 150 points, respectively to end the session in green terrain. The Reserve Bank of India’s (RBI) decision to inject Rs 12,000 crore liquidity into the system through purchase of government bonds on October 11 to meet festive season demand for funds boosted the domestic sentiments. The government will purchase bonds with maturity ranging between 2020 to 2030. Some optimism also came with a 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. Separately, another private report stated that as a worsening current account deficit stokes fresh concerns, the government is considering strengthening priority-sector lending for exports to enable greater flow of credit to the sector.

Gaining momentum continued in the second half of the session, aided by 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. The market participants 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. Traders even paid no heed towards Moody’s Investors Service’s latest report indicating 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% to 3.4% of Gross Domestic Product (GDP) in the year ending March 2019.

On the global front, European markets were trading lower, 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%. Imports dropped 2.7% after a 2.8% rise in July. Street were looking for a 0.1% gain. However, Asian markets ended in green, even though the International Monetary Fund cut global economic growth forecasts for 2018 and 2019, saying the US and China would feel the brunt of the impact of their trade war next year. Elsewhere, China stepped up its war of words with the US and said it had not initiated the trade war, but only responded in self-defence.

Back home, on the sectoral front, stocks related to sugar companies ended higher, amid reports that Indian sugar mills signed deals to export raw sugar for the first time in three years as a rally in New York prices to seven-month highs along with government subsidies made exports lucrative, while Power sector stocks also ended in green with Crisil Ratings in its latest report stating that a 40-60% haircut coupled with a few financial safeguards may help in resolving as much as Rs 1 trillion of debt stuck in coal-based power projects and enhance their viability on a sustained basis. Further, telecom sector stocks remained in focus with a private report that rising bond yields and a weakening rupee are inflating telecom firms’ cost of borrowing and could force them to increase mobile tariffs.

Finally, the BSE Sensex surged 461.42 points or 1.35% to 34,760.89, while the CNX Nifty was up by 159.05 points or 1.54% to 10,460.10.

The BSE Sensex touched a high and a low of 34,858.35 and 34,346.50, respectively and there were 26 stocks advancing against 5 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index gained 4.23%, while Small cap index was up by 3.67%.

The top gaining sectoral indices on the BSE were Realty up by 4.44%, Consumer Durables up by 3.77%, Bankex up by 3.53%, Industrials up by 3.44% and Capital Goods up by 3.40%, while IT down by 1.52% and TECK down by 1.07% were the only losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 6.62%, SBI up by 5.88%, Maruti Suzuki up by 4.77%, Yes Bank up by 4.44% and ICICI Bank up by 4.18%. On the flip side, Infosys down by 2.38%, TCS down by 2.27%, Sun Pharma down by 1.12%, Wipro down by 1.05% and Coal India down by 0.48% were the top losers.

Meanwhile, with a view to guard domestic players from cheap imports, the government has imposed anti-dumping duty in the range of $719.44 - $128.06 per tonne on import of nylon filament yarn from the European Union (EU) and Vietnam for five years. The duty has been imposed following recommendations by the Directorate General of Trade Remedies (DGTR), the investigation arm of the commerce ministry.

DGTR in its probe stated that nylon filament yarn (multi filament) has been exported to India from these two regions below normal values and the domestic industry has suffered material injury on account of such dumped imports. JCT, Gujarat Polyfilms, Gujarat State Fertilizers and Chemicals, Prafful Overseas and AYM Syntex had jointly filed for initiation of the investigations and imposition of the duty.

The major uses of this yarn are in home furnishing and industrial application such as curtains, sewing and embroidery thread and fishnets. Import of this yarn from the EU and Vietnam has increased to 13,799 tonnes during October 2015 March 2017 (which was the period of investigation) from 7,201 tonnes in 2013-14. Imposing such a duty is permissible under the World Trade Organisation (WTO) regime. Both India and China are members of the Geneva-based body.

The CNX Nifty traded in a range of 10,482.35 and 10,318.25. There were 42 stocks in green as against 8 stocks in red on the index.

The top gainers on Nifty were Bajaj Finserv up by 10.15%, Bajaj Finance up by 9.52%, Zee Entertainment up by 7.44%, Eicher Motors up by 7.37% and Axis Bank up by 6.50%. On the flip side, Bharti Infratel down by 2.93%, Infosys down by 2.42%, TCS down by 2.29%, HCL Tech down by 1.64% and Wipro down by 1.48% were the top losers.

European markets were trading in red; UK’s FTSE 100 lost 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 was down by 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.