Markets start January F&O series on optimistic note

Key Indian equity benchmarks gathered pace to close the session on strong note, on the first day of January F&O series. The start of the Friday’s session remained jubilant, with Ministry of Commerce & Industry’s report showing that the growth of manufacturing sector as measured by the Index of Industrial Production (IIP) with base year 2011-12, has been consistently increasing over the past three years and the current year. As per data report, manufacturing sector grew at the rate of 5.6% during April-October period (Provisional), while in 2017-18, the growth rate was 4.6% as against 4.4% in 2016-17. Traders took encouragement with a private report stating that India has been getting more foreign investment than China. In 2018, India saw more than $38 billion of inbound deals compared with China’s $32 billion, buoyed by stable fundamentals. Domestic sentiments also remained firm with the new foreign direct investment (FDI) policy in the e-commerce sector may not impact jobs immediately. The new FDI policy released by the government on December 26 aims to protect the interests of local businessmen, who had accused the online marketplaces of butchering their revenue.

The markets remained in the grip of the bulls throughout the session, tracking positive global cues. The trade remained positive amid reports that under attack for the agrarian crisis, the government is contemplating several incentives, including a big financial package, to woo farmers ahead of the 2019 Lok Sabha elections. The government is looking at a sort of income support scheme for farmers, along with tweaking some existing programmes, to make them more beneficial and improve their acceptability among growers. The markets participants paid no heed towards report that India’s fiscal deficit exceeded to Rs 7.17 lakh crore and touched 114.8% of the Budget Estimate (BE) of Rs 6.24 lakh crore at the end of November on account of lower revenue collections. At the end of November 2017, it was 112% of the BE. Besides, the government has budgeted to cut the fiscal deficit to 3.3% of Gross Domestic Product (GDP) in 2018-19, from 3.53% in the previous financial year. Investors even overlooked the Reserve Bank of India’s report that Indian companies borrowed $1.99 billion from overseas markets in the month of November 2018 through external commercial borrowing (ECB), 34% lower than a year ago. The borrowings though ECBs were $3.02 billion in November last year.

On the global front, European markets were trading in green, tracking overnight gains on Wall Street and a recovery in crude oil prices. Asian markets ended in green. Buying interest was a bit subdued in some of the markets in the region, with investors staying a bit cautious due to concerns about global growth and doubts about US and China agreeing on a long term trade deal anytime soon.

Back home, healthcare stocks ended higher, aided by CII’s statement that National Medical Devices Promotion Council, set up under the Department of Industrial Promotion and Policy, will help promote growth of the sector and pave way for affordable access to good quality pharma instruments to people, while metal stocks gained, despite Ministry of Steel’s report that India’s exports declined by 23.1 percent to 0.598 million tonnes during October 2018 over last year. Further, automobile sector stocks also ended in green with the government’s statement that the country’s automobile sector, which attracted $16.5 billion in FDI between April 2000 and December 2016, is expected to attract $8-10 billion more in local and foreign investments by 2023. Besides, banking stock remained in focus, amid reports that the government may infuse Rs 28,615 crore into seven PSBs through recapitalisation bonds by the end of December 2018, with an aim to help public sector banks (PSBs) to come out of the Reserve Bank of India’s Prompt Corrective Action (PCA) framework and enhancing the lending capacity of the bank.

Finally, the BSE Sensex surged by 269.44 points or 0.75% to 36,076.72, while the CNX Nifty was up by 80.10 points or 0.74% to 10,859.90.

The BSE Sensex touched a high and a low of 36,194.78 and 35,911.99, respectively and there were 25 stocks advancing against 6 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.93%, while Small cap index was up by 0.86%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 2.15%, Healthcare up by 1.28%, Basic Materials up by 1.15%, Industrials up by 1.12% and Capital Goods up by 1.05%, while Telecom down by 0.08% was the lone losing index on BSE.

The top gainers on the Sensex were Sun Pharma up by 2.98%, Bajaj Finance up by 2.13%, Vedanta up by 1.76%, HDFC up by 1.72% and Yes Bank up by 1.68%. On the flip side, Coal India down by 2.92%, TCS down by 0.71%, Bajaj Auto down by 0.47%, Asian Paints down by 0.12% and Bharti Airtel down by 0.05% were the top losers.

Meanwhile, the rating agency ICRA in its latest report has said that Indian IT services companies may register 9-12 percent compounded annual growth rate (CAGR) between FY2018-21, as compared to CAGR of 17.1 percent experienced during 2013-17. It attributed the likely lower growth rates to the lower deal sizes in digital technologies, cloud adoption and high competitive intensity from local as well as international players.

ICRA has noted that Indian IT companies’ credit profile remains stable, supported by the ability to sustain free cash flows despite pressure on revenue growth and margins. It also expected that most large IT services companies to maintain high dividend pay outs and share buybacks as there are limited avenues for fund deployment.

According to the report, while companies have increased spending on digital technologies and awarding new contracts, the overall IT budgets have moderated leading to lower incremental spends. It also said that Indian IT services companies are re-orienting their business models, focusing more on high-end services such as IT consulting and emerging technologies (digital) and have made considerable progress so far, though they currently lag international peers.

The CNX Nifty traded in a range of 10,893.60 and 10,817.15. There were 38 stocks advancing against 12 stocks declining on the index.

The top gainers on Nifty were Titan up by 4.11%, Sun Pharma up by 3.37%, Indian Oil Corporation up by 3.21%, Zee Entertainment up by 2.17% and Bajaj Finance up by 2.08%. On the flip side, Bharti Infratel down by 1.56%, BPCL down by 0.93%, TCS down by 0.63%, Bajaj Auto down by 0.62% and Asian Paints down by 0.55% were the top losers.

European markets were trading in green; UK’s FTSE 100 soared 103.02 points or 1.56% to 6,687.70, France’s CAC rose 69.15 points or 1.5% to 4,667.76 and Germany’s DAX was up by 163.44 points or 1.57% to 10,544.95.

Asian markets ended mostly higher on Friday, tracking overnight gains on Wall Street. Buying interest was a bit subdued in some of the markets in the region, with investors staying a bit cautious due to concerns about global growth and doubts about US and China agreeing on a long term trade deal anytime soon. The Japanese market ended weak, with investors taking profits after recent strong gains. Some disappointing economic data too contributed to the weakness in the market. On the economic front, the Ministry of Internal Affairs and Communications said that the jobless rate in Japan came in at a seasonally adjusted 2.5 percent in November. That was above expectations for 2.4 percent, which would have been unchanged from the October reading.