Markets greet New Year with an optimistic start

Indian equity benchmarks greeted New Year with optimistic approach where the Sensex and Nifty reclaiming their crucial psychological levels of 36,200 and 10,900, respectively. After cautious start of the Tuesday’s trading session, the key indices remained lackluster for most part of the day, as the growth of eight core industries slowed to sixteenth-month low of 3.5% in November 2018, as compared to 4.8% in October 2018, due to fall in output of crude oil and fertilisers. The market participants got worried with policy advocacy body US-India Strategic Partnership Forum (USISPF) saying that India’s recent changes in e-commerce foreign direct investment (FDI) rules show a lack of predictability in the regulatory environment and could add to the long list of trade issues that the country is trying to resolve with the United States. Some concerns also came with Ministry of Commerce & Industry’s report that some industry associations including those relating to steel have expressed concerns on imports under bilateral free trade agreements with Japan, Korea and ASEAN. However, steel imports from these countries include high grade steel, which are not manufactured domestically.

However, in the last leg of the trade, the markets managed to erase all of their losses and ended the session on positive note, aided by the Finance Ministry’s statement that in order to ensure that the fiscal deficit remains within the target of 3.3% of the Gross Domestic Product (GDP) for 2018-19, the government is closely monitoring the macroeconomic conditions. The Ministry has directed ministries and departments to meet their additional requirements of funds from savings and keep their expenditure within the amount earmarked in the Budget for 2018-19. Trade turned positive, also because of reports that India remained ahead of China to retain the tag world's fastest growing large economy withstanding several ups and downs, spike in oil prices and global trade war like situation during 2018. Some relief also came with Sebi’s data report showing that Indian companies raised over Rs 29,300 crore by issuing non-convertible debentures (NCDs) to retail investors in 2018 to meet their business requirements, representing a three-fold surge compare to the preceding year. Investors took a note of a report stating that the country's external debt fell by $19.3 billion, or 3.6 per cent, to $510.4 billion during the six-month period ended September, due to a decrease in commercial borrowings, non-resident Indian (NRI) deposits and valuation effect.

On the global front, most of the Asian and European markets remain shut on account of the New Year holiday.

Back home, metal stocks ended lower, despite ICRA’s report showing that the domestic steel consumption growth is expected to grow by 7% during this fiscal and the trend is likely to continue in the next financial year as well, largely driven by the government’s focus on the infrastructure sector, while healthcare stocks remained in focus, after the Indian government has decided to set up a National Medical Devices Promotion Council under the Department of Industrial Policy and Promotion (DIPP) to boost domestic manufacturing and exports. Further, stocks related to agri sector remained buzzing, buoyed by Agriculture Minister Radha Mohan Singh’s statement that in its last four and half years, the NDA government under Prime Minister Narendra Modi has taken several measures to boost farmers’ income and will take more steps in the coming days, while banking sector stocks gained, with  the Governor Shaktikanta Das’ statement that the banking sector is on course to recovery as the afflicting non-performing assets recede, but state-run lenders need reforms in governance. He pointed out that the period till September has seen a decline in gross NPA ratios - the first such dip in three years - and also pointed out at improving provision coverage ratio, which is the ability of a bank to withstand stress, as a positive.

Finally, the BSE Sensex gained 186.24 points or 0.52% to 36,254.57, while the CNX Nifty was up by 47.55 points or 0.44% to 10,910.10.

The BSE Sensex touched a high and a low of 36,284.04 and 35,888.62, respectively and there were 21 stocks advancing against 10 stocks declining on the index.

The broader indices ended mixed; the BSE Mid cap index lost 0.08%, while Small cap index was up by 0.41%.

The top gaining sectoral indices on the BSE were Realty up by 2.21%, Telecom up by 1.46%, Bankex up by 0.79%, PSU up by 0.54% and TECK up by 0.48%, while Metal down by 0.74%, Auto down by 0.52%, Basic Materials down by 0.30%, FMCG down by 0.27% and Consumer Disc down by 0.20% were the top losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 2.76%, HDFC up by 2.01%, Yes Bank up by 1.38%, HDFC Bank up by 1.30% and SBI up by 1.25%. On the flip side, Mahindra & Mahindra down by 3.75%, Tata Steel down by 1.21%, ONGC down by 0.83%, Hindustan Unilever down by 0.82% and Indusind Bank down by 0.29% were the top losers.

The top gainers on the Sensex were Tata Steel up by 1.59%, Vedanta up by 1.48%, Tata Motors - DVR up by 1.47%, Sun Pharma up by 1.42% and Tata Motors up by 1.05%. On the flip side, Bharti Airtel down by 1.04%, Axis Bank down by 0.87%, Hero MotoCorp down by 0.78%, NTPC down by 0.77% and Coal India down by 0.66% were the top losers.

Meanwhile, indicating that the banking sector is on course to a recovery, Reserve Bank of India (RBI) governor Shaktikanta Das has said the period till September 2018 had seen a decline in gross non-performing asset (NPA) ratios - a first such dip in three years. Governor underlined that after a prolonged period of stress, the banking sector appears to be on course to recovery as the load of impaired assets recedes, adding that state-run lenders, which account for a bulk of the dud assets, need operational improvements.

According to RBI’s half-yearly financial stability report (FSR), the asset quality of banks showed an improvement, with Gross NPAs ratio declining to 10.8% in September 2018 from 11.5% in March 2018, while for the state-run lenders, the same improved to 14.8% in September 2018 from close to 15.2% in March 2018. The RBI Governor expressed hope that the GNPA ratio of all banks would come down to 10.3% by March 2019 from 10.8% in September 2018. In the last financial year (FY18), gross NPAs of the banking system shot up to Rs 10,39,700 crore, or 11.2% of total advances as against Rs 791,800 crore or 9.3% of advances in the same period of previous year(FY17).

Besides, he said even though the current NPA levels were high, stress tests done by the RBI had pointed to an improvement in the ratio in future. The immense effort put in by the stakeholders so far is required to be buttressed with substantive reforms in governance and oversight regime, supported by recapitalisation of weak PSBs.

The CNX Nifty traded in a range of 10,923.60 and 10,807.10. There were 32 stocks advancing against 18 stocks declining on the index.

The top gainers on Nifty were Bharti Airtel up by 2.99%, HDFC up by 2.12%, SBI up by 1.62%, BPCL up by 1.59% and Bharti Infratel up by 1.54%. On the flip side, Mahindra & Mahindra down by 3.84%, Hindalco down by 1.46%, Indiabulls Housing Finance down by 1.38%, Hindustan Unilever down by 1.13% and JSW Steel down by 1.11% were the top losers.