Benchmarks trade with traction; Sensex reclaims 35,500 level

Indian equity benchmarks made an optimistic start and are trading with traction with frontline gauges recapturing their crucial 35,500 (Sensex) and 10,650 (Nifty) levels, as traders took encouragement with report that India’s exports rose by 17.86% to $26.98 billion in October 2018 as compared to $22.89 Billion in October 2017. Exports bounced back in October to high double-digit figures after the mild contraction in September as engineering goods, pharmaceutical and chemical shipments picked up the pace. During the April-October period of the current financial year, exports grew by 13.27% to $191 billion. Traders shrugged off report that the trade deficit for the month of October 2018 widened to $17.13 billion v/s $13.98 billion in September on account of import growth again picked up. The deficit widened despite a decline of 42.9% in gold imports to $1.68 billion. Imports during the month also rose by 17.62% to $44.11 billion, leading to widening of trade deficit.

Global cues too remained supportive with most of the Asian counters trading in green at this point of time, as investors gauge whether China and the US can de-escalate their trade spat before the G-20 summit later this month. The US markets ended higher on Thursday on report that the US and China may step up efforts to resolve their trade conflict, starting with postponing higher tariffs and allowing working level negotiators to iron out a deal.

Back home, the Tourism sector stocks remained in action as tourism sector has pledge Rs 6.25 billion of fresh investments during the biennial investors’ conclave- Make in Odisha 2018. The pharmaceutical sector too will be in action as Minister of State for Chemicals and Fertilisers Mansukh Mandaviya said after the implementation of GST, the pharmaceutical sector grew 6% to Rs 1.31 trillion on a year-on-year basis till May 31. Sugar stocks remained in sweet spot on report that Indian sugar mills have produced 10.80 lakh tonne sugar till November 13 as against 19 lakh tonnes they had produced during same period of previous year. The country is expected to produce 324 lakh tonnes of sugar during 2018-19.

The BSE Sensex is currently trading at 35,511.98, up by 251.44 points or 0.71% after trading in a range of 35324.37 and 35529.04. There were 27 stocks advancing against 4 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.40%, while Small cap index was up by 0.22%.

The top gaining sectoral indices on the BSE were Telecom up by 1.36%, Healthcare up by 1.06%, Auto up by 0.81%, Energy up by 0.81% and FMCG was up by 0.72%, while Oil & Gas down by 0.67%, PSU down by 0.21%, Metal down by 0.09% and Realty was down by 0.04% were the few losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 2.01%, Reliance Industries up by 1.92%, Sun Pharma up by 1.51%, HDFC up by 1.39% and Hero MotoCorp up by 1.37%. On the flip side, Yes Bank down by 5.73%, ONGC down by 2.71%, Infosys down by 1.11% and Tata Steel down by 0.50% were the top losers.

Meanwhile, citing weak fiscal position continues to constrain the ratings and there were significant risks to macroeconomic outlook, Fitch Ratings has refused to upgrade India’s credit rating for the 12th year in a row and affirmed the country’s long-term foreign-currency issuer default rating (IDR) at 'BBB-' with a Stable Outlook. The rating agency had last upgraded India's sovereign rating from BB+ to BBB- with a stable outlook on August 1, 2006. It also said that the rating balances a strong medium-term growth outlook and favourable external balances relative to peers with weak fiscal finances, a fragile financial sector and some lagging structural factors.

As per the rating agency, risks to the macroeconomic outlook are significant, and include a drop in credit growth, resulting from further problems in the banking or shadow-banking sector. It added that a weak fiscal position continues to constrain India's sovereign ratings. It also expressed caution that as government debt at close to 70% of Gross Domestic Product (GDP), the government may find it tough to meet its fiscal deficit target of 3.3% of GDP in the current financial year (2018-19) due to lower revenues including from GST in first half, and expenditures being difficult to control in the run-up to general elections were main reasons for the weak fiscal position. It noted that the Indian economy continues to exhibit some structural weaknesses relative to peers and is less developed on a number of metrics.

On the economic growth front, Fitch stated that its strong growth outlook continues to stand out among peers and upgraded it real GDP growth forecast at 7.8% for the current financial year ending March 2019 (2018-19) from 7.3% forecasted earlier in April this year, while it is also up from 6.7% in the previous FY2017-18. However, this forecast is subject to downside risks from tightening financial conditions, weak financial-sector balance sheets and high international oil prices. It also forecasts growth to decelerate to a still-strong 7.3% in both FY2019-20 and FY2020-21 for the same reasons. Besides, it expected current-account deficit to widen to 3% in FY2018-19 and 3.1% in FY2019-20 from 1.9% in FY2017-18.

Listing recent defaults by Infrastructure Leasing & Financial Services and some public-sector banks, the rating agency highlighted risks in a sector that in recent years supplied around a third of total credit growth. It said banks do not seem in a position to significantly spur credit growth, as they still have weak core capital positions and added that non-performing loan (NPL) ratio could in near future rise from 11.6% in FY2017-18 due to residual stress. It further said while India jumping 53 positions in just two years to 77th out of 190 countries on the World Bank's Ease of Doing Business ranking was remarkable, lingering difficulties in doing business in India remain, including in starting a business and enforcing contracts, and FDI is lagging.

The CNX Nifty is currently trading at 10679.05, up by 62.35 points or 0.59% after trading in a range of 10633.80 and 10689.10. There were 37 stocks advancing against 13 stocks declining on the index.

The top gainers on Nifty were Eicher Motors up by 2.65%, Reliance Industries up by 1.98%, HCL Tech up by 1.97%, Bharti Airtel up by 1.84% and Cipla up by 1.77%. On the flip side, Yes Bank down by 5.51%, Indiabulls Housing down by 3.56%, Indian Oil Corporation down by 2.66%, ONGC down by 2.64% and JSW Steel down by 1.60% were the top losers.

Asian markets are trading mostly in green; Straits Times increased 27.62 points or 0.9% to 3,082.15, Jakarta Composite surged 85.52 points or 1.42% to 6,041.26, Hang Seng gained 86.99 points or 0.33% to 26,190.33, KOSPI rose 9.13 points or 0.44% to 2,097.19 and Shanghai Composite was up by 18.87 points or 0.7% to 2,687.04.

On the flip side, Nikkei 225 decreased 53.20 points or 0.24% to 21,750.42 and Taiwan Weighted was down by 38.33 points or 0.39% to 9,788.13.