Benchmarks trade jubilantly in early deals

Indian equity benchmarks made an optimistic start and are trading in green in early deals, as traders took some encouragement with report that the 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 are also getting 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. 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.

On the global front, Asian markets are trading mostly in red at this point of time, following a volatile session for US equities and as yields on Treasuries retreated from a seven-year peak. The US markets ended mostly lower on Tuesday as traders kept an eye on treasuries amid renewed concerns about the outlook for interest rates.

Back home, 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. In scrip specific developments, Dr. Reddy’s Lab soared on launching Colesevelam HCI Tablets and Tata Motors surged on reporting 6% growth in global wholesales in September.

The BSE Sensex is currently trading at 34613.32, up by 313.85 points or 0.92% after trading in a range of 34346.50 and 34664.34. There were 26 stocks advancing against 5 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index surged 2.18%, while Small cap index was up by 1.90%.

The top gaining sectoral indices on the BSE were Auto up by 2.10%, Consumer Discretionary Goods & Services up by 1.96%, Capital Goods up by 1.88%, Industrials up by 1.85% and Healthcare was up by 1.82%, while IT down by 0.14% was the lone losing index on BSE.

The top gainers on the Sensex were Maruti Suzuki up by 3.47%, Tata Motors - DVR up by 3.31%, Hero MotoCorp up by 2.81%, Vedanta up by 2.67% and Axis Bank up by 2.39%. On the flip side, Infosys down by 1.02%, Yes Bank down by 0.96%, Hindustan Unilever down by 0.28%, Bharti Airtel down by 0.21% and Wipro down by 0.08% were the top losers.

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 is currently trading at 10403.40, up by 102.35 points or 0.99% after trading in a range of 10318.25 and 10419.70. There were 42 stocks advancing against 8 stocks declining on the index.

The top gainers on Nifty were Bajaj Finance up by 8.12%, Bajaj Finserv up by 5.05%, Maruti Suzuki up by 3.39%, Titan Company up by 3.11% and Zee Entertainment up by 3.10%. On the flip side, Infosys down by 1.16%, HCL Tech down by 0.97%, Yes Bank down by 0.78%, Ultratech Cement down by 0.69% and Wipro down by 0.51% were the top losers.

Asian markets are trading mostly in red; Nikkei 225 slipped 2.32 points or 0.01% to 23,467.07, Straits Times decreased 24.10 points or 0.77% to 3,142.50, KOSPI declined 23.22 points or 1.04% to 2,230.61 and Shanghai Composite was down by 4.89 points or 0.18% to 2,716.12. On the flip side, Jakarta Composite gained 5.80 points or 0.1% to 5,802.59 and Hang Seng was up by 113.38 points or 0.43% to 26,286.29.