Markets end November F&O series on strong note

Indian equity benchmarks ended November F&O series on strong note on Thursday, with Sensex and Nifty rallying for the fourth day. The start of day was fabulous, as traders reacted positively to a private report that the Reserve Bank of India (RBI) may have to conduct open market operations (OMOs) of another Rs 1,60,000 crore in the fourth quarter of the current fiscal to tide over the banking liquidity crisis. Domestic sentiments remained optimistic, after Commerce and Industry Minister Suresh Prabhu said that the government is taking several steps, such as reducing regulatory burden and ensuring availability of adequate funds, for budding entrepreneurs to promote startup ecosystem in the country. Some comfort also came with private report stating that the RBI won't raise interest rates until at least April, much later than thought just one month ago and rise will probably be a one-and-done.

The key indices maintained their gaining momentum throughout the session to end near their intraday high points, aided by positive cues from global markets. In late noon deals, the street took note of Niti Aayog Vice-Chairman Rajiv Kumar’s statement that India will have to undertake more reforms and try harder to grow at over 8%. He also pointed out that the government needs to invest more in the country’s statistical system. But, investors paid no heed towards reports that Former Chief Economic Advisor Arvind Subramanian called demonetisation a massive, draconian, monetary shock that slowed economic growth to average 6.8% in the seven quarters following the move as against the 8% average growth recorded in six quarters before it. Meanwhile, the RBI’s data showed that India Inc’s foreign borrowings dipped nearly 66% to $1.41 billion in October this year.

On the global front, European markets were trading in green, even though Germany's consumer confidence is set to slightly weaken at the end of the year as high inflation rates and global economic uncertainty weigh on households' sentiment. The survey results from the GfK showed that the forward-looking consumer confidence indicator is set to drop to 10.4 from 10.6 in November. The street had forecast a reading of 10.5. Asian markets ended in green, after Federal Reserve Chairman Jerome Powell said that US interest rates were just below neutral, making investors believe the Fed's three-year tightening cycle is drawing to a close. Investors also remained hopeful for de-escalation in trade tensions between the US and China at the G20 summit, though a substantive breakthrough is unlikely.

Back home, banking sector stocks ended higher, despite Fitch Ratings’ statement that the decision to restructure loans of up to Rs 25 crore for the MSME sector is a step backwards and the risks to the banking sector will manifest in the next 6-9 months. Further, healthcare and agri stocks remained in limelight, after Finance Minister Arun Jaitley made a case for developing a federal institution like GST Council in the healthcare and farm sector, while stocks related to telecom stocks remained in focused, amid reports that Telecom Regulatory Authority of India (TRAI) will initiate an in-depth discussion with the telecom service providers on general principles related to spectrum including its valuation methodology, trading, sharing and leasing in the year 2019. TRAI chairman R S Sharma has clarified that the upcoming deliberations will not have any bearing on the past recommendations of TRAI on the auction of radio-waves.

Finally, the BSE Sensex surged 453.46 points or 1.27% to 36,170.41, while the CNX Nifty was up by 129.85 points or 1.21% to 10,858.70.

The BSE Sensex touched a high and a low of 36,253.85 and 35,946.24, respectively and there were 22 stocks advancing against 9 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.62%, while Small cap index was up by 0.22%.

The top gaining sectoral indices on the BSE were Metal up by 2.01%, Bankex up by 1.75%, Energy up by 1.48%, Basic Materials up by 1.41% and Realty up by 1.40%, while IT down by 1.00%, Utilities down by 0.73%, TECK down by 0.70% and Power down by 0.53% were the top losing indices on BSE.

The top gainers on the Sensex were Bajaj Auto up by 4.68%, Kotak Mahindra Bank up by 4.24%, Mahindra & Mahindra up by 3.32%, Vedanta up by 3.19% and Indusind Bank up by 2.97%. On the flip side, Power Grid Corporation down by 1.55%, ONGC down by 1.33%, NTPC down by 1.05%, Infosys down by 1.01% and TCS down by 0.87% were the top losers.

Meanwhile, global rating agency, Fitch ratings in its latest report has said that the Reserve Bank of India (RBI) board’s decision to restructure stressed standard assets of micro, small and medium enterprises (MSME) borrowers with aggregate credit facilities of up to Rs 25 crore is a ‘step backwards’ and the risks to the banking sector will emanate in the coming 6-9 months. It noted that relaxation of lending norms to spur growth is never a good strategy, and added that the legacy problem loans will continue to be a bigger drag on the MSME sector's asset quality until March 2019.

Talking about the RBI board's decision to extend the timeline for the full implementation of Basel 3 norms by a year, the rating agency said that the move is certainly credit negative for Indian public sector banks (PSBs) as it reflects the sector's poor capitalisation, particularly that of state-owned banks, and their inability to meet minimum regulatory requirements. It also said that there was a stand-off between the RBI and the Finance Ministry over several issues, including easier funding norms for the MSME sector, implementation of the capital adequacy norms and economic capital framework of the central bank.

According to the report, non-banking finance companies (NBFCs) continue to remain a risk as a result of their aggressive lending, especially to real estate and MSME, in the past. It may see slippages from the latter sectors (real estate, SMEs) in the near-term if challenges in terms of liquidity continue. However, it said that better rated non-banks with good track record and market reputation face much lower rollover risk as compared to ones where risks are elevated although funding costs have risen across the board.

The CNX Nifty traded in a range of 10,883.05 and 10,782.35. There were 39 stocks advancing against 11 stocks declining on the index.

The top gainers on Nifty were Bajaj Finance up by 4.25%, Kotak Mahindra Bank up by 4.20%, Bajaj-Auto up by 4.16%, Hindalco up by 4.07% and Mahindra & Mahindra up by 3.63%. On the flip side, HCL Tech. down by 2.50%, Power Grid Corporation down by 2.22%, ONGC down by 1.26%, Tech Mahindra down by 1.25% and NTPC down by 0.94% were the top losers.

European markets were trading in green; UK’s FTSE 100 added 54.44 points or 0.77% to 7,058.96, France’s CAC rose 38.11 points or 0.76% to 5,021.35 and Germany’s DAX was up by 65.23 points or 0.57% to 11,364.11.

Asian markets closed mostly higher on Thursday, though markets in China and Hong Kong shares ended in the red amid anxiety ahead of crucial Trump-Xi meeting on the sidelines of the G-20 summit later this week. While a substantive breakthrough is unlikely, the two sides may agree on a communique for a de-escalation of trade tensions. Underlying sentiment remained supported across the region after Federal Reserve Chairman Jerome Powell said that current interest rate is 'just below a range of estimates of so-called neutral level'. Japanese shares ended higher despite the dollar weakening against the yen on expectations of a slowdown in the pace of rate hikes by the Federal Reserve.