Sensex, Nifty end flat ahead of Q2 GDP data

Indian equity benchmarks ended flat on Friday ahead of key economic growth (GDP) data to be release later in the day. The markets made an optimistic start, aided by economic policy think-tank the National Council of Applied Economic Research’s (NCAER) report stating that Indian economy is projected to grow at 7-7.4 per cent in the current fiscal. It added that the real agriculture Gross Value Added (GVA) is envisaged to grow at 3 per cent and real industry GVA at 7 per cent in 2018-19. As per the report, the forecast for Gross Value Added (GVA) at basic prices is 7.0-7.4 per cent. These forecasts at constant (2011-12) prices are based on NCAER's annual GDP macro model. Sentiments were also upbeat during first half of the session, with a private report that Prime Minister Narendra Modi has plans to unveil a long-awaited industrial policy soon to boost domestic manufacturing and accelerate economic growth before federal polls next year.

However, the key indices turned volatile during the second half of the session, amid private report stating that India’s Gross Domestic Product (GDP) growth is expected to slow down to 7.4% in the July-September quarter of the current financial year, down by 0.8 percentage points from the previous quarter. Weak opening in European markets also dented the domestic sentiments. But, at the end of the day, the markets managed to keep their heads above neutral lines, as some relief spread among the market participants with Chairman of the Economic Advisory Council to Prime Minister (EAC-PM) Bibek Debroy’s statement that the government is looking to reform tax structures such that there is no deviation from fiscal consolidation. Some support also came with a survey report that India's small and medium businesses are using their advantages such as size, agility and innovation as their top three strategies for driving revenue growth in 2018.

On the global front, European markets were trading in red, as Eurozone's economic sentiment weakened for an eleventh straight month in November, but the pace of decline was less than expected, helped by an improvement in morale in the industrial sector. The survey data from the European Commission showed that the economic sentiment indicator fell to 109.5, which was the weakest reading since May 2017, when the score was 109. Asian markets ended mixed, as China's manufacturing activity continued to worsen in November. The manufacturing PMI stood at 50.0 in November, missing expectations for a score of 50.2, which would have been unchanged from the October reading. The non-manufacturing PMI came in with a score of 53.4 - also shy of expectations for 53.8 and down from 53.9 in the previous month.

Back home, airlines stocks remained in focused, as rating agency ICRA indicated that domestic carriers, which are grappling with high jet fuel cost and falling rupee coupled with cut-throat competition, are estimated to require a massive capital infusion of around Rs 350 billion over the next 3-4 years. These funds would help bring down the high debt-levels in the airline industry. Banking stocks also remained in focus with the RBI’s statement that Net Stable Funding Ratio (NSFR) norms that mandate banks to maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities will be operational from April 2020. Further, stocks related to NBFC industry remained in limelight with a private report stating that RBI has relaxed rules for non-banking financial companies (NBFCs) to sell or securitise their loan books, in a bid to ease persistent stress in the sector. NBFCs can now securitise loans of more than five-year maturity after holding those for six months on their books.

Finally, the BSE Sensex rose 23.89 points or 0.07% to 36,194.30, while the CNX Nifty was up by 18.05 points or 0.17% to 10,876.75.

The BSE Sensex touched a high and a low of 36,389.22 and 36,082.97, respectively and there were 13 stocks advancing against 18 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index surged 0.56%, while Small cap index was up by 0.52%.

The top gaining sectoral indices on the BSE were Realty up by 1.96%, Healthcare up by 1.78%, IT up by 1.03%, Consumer Disc up by 0.83% and Auto up by 0.73%, while Telecom down by 1.51%, Oil & Gas down by 0.96%, PSU down by 0.96%, Energy down by 0.64% and Metal down by 0.51% were the top losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 5.73%, Wipro up by 3.14%, Mahindra & Mahindra up by 2.21%, Sun Pharma up by 1.84% and Kotak Mahindra Bank up by 1.83%. On the flip side, Tata Motors down by 3.02%, Tata Motors - DVR down by 2.24%, ICICI Bank down by 2.00%, Indusind Bank down by 1.70% and Vedanta down by 1.66% were the top losers.

Meanwhile, Niti Aayog Vice-Chairman Rajiv Kumar has said that India needs more economic reforms, low interest rates and greater availability of funds to achieve its potential Gross domestic product (GDP) growth rate of over 8 percent. He indicated that the country’s economy grew by 7.1 percent in 2016-17 and 6.7 percent in 2017-18. He said “breaching the 8 percent growth ceiling is not easy, we have to try much harder and undertake the reforms at the level where it matters.”

Kumar has pointed out that the two major constraints being faced by the investors are less availability of finance and high interest rates. He observed that while the inflation is hovering around 4 percent, the marginal credit rate of banks is over 7 percent. He said “the cost of capital can not be equal to rate of returns, it (rate of returns) must be higher than cost of capital in the long run. So, this is where I think we need to have a very good look.”

The vice-chairman also pointed out that the government needs to invest more in the country’s statistical system. He stressed that the allocations to statistical systems must increase many folds. Noting that invest climate and capacity utilisations are improving, he said domestic investments is going to drive the Indian economy. He also stressed on need of improving competitiveness of India’s production units by the government and industry working together.

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 10,922.45 and 10,835.10. There were 24 stocks advancing against 25 stocks declining, while 1 remained unchanged on the index.
The top gainers on Nifty were Yes Bank up by 6.26%, Wipro up by 3.14%, Cipla up by 3.03%, Dr. Reddy’s Lab up by 2.81% and Tech Mahindra up by 2.81%. On the flip side, HPCL down by 4.41%, Bharti Infratel down by 3.58%, Tata Motors down by 2.88%, UPL down by 2.55% and NTPC down by 2.50% were the top losers.

European markets were trading in red; UK’s FTSE 100 decreased 52.57 points or 0.75% to 6,986.38, France’s CAC fell 23.70 points or 0.48% to 4,982.55 and Germany’s DAX shed 72.04 points or 0.64% to 11,226.19.

Asian markets ended mixed on Friday as minutes from the most recent Fed meeting added weight to expectations for a rate hike in December and caution set in ahead of the highly-anticipated meeting between US President Donald Trump and his Chinese counterpart Xi Jinping at the G-20 summit in Argentina this weekend. Chinese shares ended higher, despite some disappointing data, suggesting that China's manufacturing activity continued to worsen in November. The manufacturing PMI stood at 50.0 in November, missing expectations for a score of 50.2, which would have been unchanged from the October reading. The non-manufacturing PMI came in with a score of 53.4 - also shy of expectations for 53.8 and down from 53.9 in the previous month. The composite index posted a score of 52.8, down from 53.1 a month earlier. Meanwhile, Japanese shares hit a three-week high in cautious trade as investors awaited the outcome of the weekend meeting between the US and Chinese presidents.