Markets cheer positive macroeconomic data; Sensex gains 150 points

Positive macroeconomic data gave enough support to the Indian equity benchmarks on Thursday, as Sensex and Nifty settled higher over 150 and 50 points, respectively. The markets made an awesome start, after India’s industrial production measured by Index of Industrial Production (IIP) surged to 11-month high of 8.1% in the month of October 2018 as against 4.5% in September 2018 and 1.8 percent in October 2017. The trade also remained strong, on the back of easing inflation data. India’s retail inflation based on Consumer Price Index (CPI) cooled down to a 17-month low of 2.33% in the month of November 2018, as compared to 4.88% in the same month of previous year. The inflation softened mainly on account of decline in prices of kitchen essentials like vegetables, eggs and pulses. Meanwhile, Federation of Indian Export Organisations (FIEO) President Ganesh Kumar Gupta urged newly-appointed the Reserve Bank of India (RBI) Governor Shaktikanta Das to ensure smooth flow of credit to exports sector which is falling sharply on year on year basis, affecting the liquidity of exporters particularly the micro, small, and medium enterprises (MSMEs).

However, in the last hours of the trading session, the markets trim some of their losses to come off their day’s high points. The street got cautious with World Economic Forum (WEF) founder and executive chairman Klaus Schwab’s statement that India is still in the ‘middle class’ in ease of doing business and the country should work towards creating the necessary ecosystem to boost entrepreneurship. Adding some anxiety among investors, as many as 358 infrastructure projects worth Rs 150 or above, entailing a total investment of Rs 3.53 lakh crore, reported cost overruns as on August 1, 2018. The street took note of DIPP Secretary Ramesh Abhishek’s statement that the government has no proposal to change the existing foreign direct investment (FDI) policy in the multi-brand retail trading sector. But, the indices again rallied to end the day with the notable gains, with taking support from S&P Global’s statement that India’s rapid economic growth will be enough to offset worries about the independence of its central bank and keep its credit rating in the coveted investment grade bracket.

On the global front, European markets were trading in red, ahead of the European Central Bank (ECB) meeting. Domestic sentiments were downbeat, despite Eurozone's industrial production grew in October after a slump in the previous month, suggesting that economic growth may gain some steam towards the end of the year, yet remain sluggish. The figures from Eurostat showed that industrial production rose 0.2 percent from September, when it declined 0.6 percent, which was revised from 0.3 percent. The growth was in line with the street expectations. Asian markets ended in green, following the positive lead overnight from Wall Street. Optimism about US-China trade relations and news that British Prime Minister Theresa May survived a no-confidence vote by the Conservative Party boosted investor sentiments.

Back home, sugar sector stocks ended in red, amid private reports that India’s sugar production could fall in 2019/20 as farmers are struggling to plant cane because of a drought in two of the country’s top producing states, while stocks related to oil industry ended higher, supported by former Reserve Bank of India (RBI) Governor, Raghuram Rajan’s statement that India needs to have a good oil hedging policy as the volatility will continue to rise, with geo-political factors impacting crude prices. Further, agri stocks were in limelight, as President of the Federation of Indian Chambers of Commerce & Industry (FICCI), Rashesh Shah said the government needs to remove pressure from rural and agriculture sectors, while coal sector stocks remained buzzing with report that India’s coal imports rose by 38.2% to Rs 1,38,477 crore in monetary terms last fiscal. In quantity terms, the coal imports increased 9.1% to 208.27 MT from 190.95 MT.

Finally, the BSE Sensex surged 150.57 points or 0.42% to 35,929.64, while the CNX Nifty was up by 53.95 points or 0.50% to 10,791.55.

The BSE Sensex touched a high and a low of 36,095.56 and 35,794.51, respectively and there were 18 stocks advancing against 13 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.82%, while Small cap index was up by 0.65%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.40%, Capital Goods up by 1.27%, Realty up by 1.19%, Industrials up by 0.90% and FMCG up by 0.86%, while Metal down by 0.66%, Telecom down by 0.44% and Energy down by 0.01% were the few losing indices on BSE.

The top gainers on the Sensex were Wipro up by 2.64%, Infosys up by 2.62%, Kotak Mahindra Bank up by 2.56%, Maruti Suzuki up by 2.18% and Larsen & Toubro up by 1.77%. On the flip side, Yes Bank down by 6.48%, Sun Pharma down by 2.12%, TCS down by 1.74%, Tata Steel down by 1.57% and Adani Ports & SEZ down by 1.01% were the top losers.

Meanwhile, the rating agency ICRA in its latest report has said that the government may keep recapitalisation target for public sector banks (PSBs) unchanged at Rs 65,000 crore for the financial year 2019, as lenders under RBI’s prompt corrective action (PCA) framework will not maintain capital conservation buffers (CCB). It also said that most PSBs under the PCA framework are likely to get an exit only after FY20.

According to the report, the recent softening in bond yields and consequent reversal of mark-to-market (MTM) losses on bond portfolios, coupled with significant reduction in risk weighted assets by state-run lenders, is also expected to lower the capital requirements of PSBs despite sizeable losses estimated for FY19. It expects that these recent events can potentially reduce the government’s capital support to PSBs by up to Rs 45,000 crore. Adding further, it said that the recent relaxation in CCB framework and large capital requirements of one of the PSBs - IDBI Bank - will now be met by Life Insurance Corporation of India (LIC) and obviate the need of capital support for the government.

As part of overall recapitalisation programme of Rs 2.11 trillion for PSBs, government has budgeted a capital infusion of Rs 65,000 crore for PSBs during FY19. Of the total sum, it has already infused Rs 22,900 crore in seven PSBs till November 2018. The balance capital of Rs 42,100 crore is expected to be allocated equally into PCA and non-PCA banks. Out of the 21 state-owned banks, 11 are under the PCA framework, which imposes lending and other restrictions on weak lenders.

The CNX Nifty traded in a range of 10,838.60 and 10,749.50. There were 29 stocks advancing against 20 stocks declining, while 1 remain unchanged on the index.

The top gainers on Nifty were Indiabulls Housing Finance up by 5.41%, Grasim up by 3.24%, Bajaj Finserv up by 3.18%, Wipro up by 2.71% and Maruti Suzuki up by 2.61%. On the flip side, Yes Bank down by 6.32%, Sun Pharma down by 2.19%, UPL down by 2.16%, Tata Steel down by 1.75% and TCS down by 1.73% were the top losers.

All European markets were trading in red; UK’s FTSE 100 decreased 10.57 points or 0.15% to 6,869.62, France’s CAC dipped 16.26 points or 0.33% to 4,893.19 and Germany’s DAX was down by 31.54 points or 0.29% to 10,897.89.

Asian markets ended in green on Thursday, following the positive lead overnight from Wall Street. Optimism about US-China trade relations and reports that British Prime Minister Theresa May survived a no-confidence vote by the Conservative Party boosted investor sentiment. Japanese shares ended higher, lifted by signs of reduced Sino-US trade tensions, and technology firms got a boost from a rally for US peers. Further, Chinese stocks rallied as expectations of further policy measures to aid the economy led to gains across the board.