Markets bounce back to green; Sensex closes near 35,700 mark

Indian equity bourses bounced back to green on the last trading day of the week, with Sensex and Nifty closing with gains of over a half percent. Key equity indices made a positive start but failed to retain gaining momentum, as India’s services sector activity fell in month of December, as growth of new work and activity moderated from November’s recent high. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index slipped to 53.2 in December from 53.7 in November. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services -- too eased to 53.6 in December from 54.5 in November. Domestic sentiments also got affected with a private report that despite crossing the Rs 1-trillion mark twice this year, the goods and services tax (GST) collections are running well behind the budgeted target. As opposed to a monthly target of Rs 1.04 trillion, the monthly run rate adjusting for refunds, works out to around Rs 89,600 crore. This could force the government to either cut its capital expenditure this year or roll over spending on account of subsidies to next year in order to meet the fiscal deficit target.

But, in noon deals, the markets bounced back to end the session in green, aided by Finance Minister Arun Jaitley’s statement that enacting the Insolvency and Bankruptcy Code (IBC) has helped lenders get Rs 80,000 crore in 66 cases and another about Rs 70,000 crore is likely to be recovered in the remaining months of the current financial year. Separately, Finance Minister Arun Jaitley said that there would be no loss of jobs due to merger of public sector banks. Positive cues from the global markets also provided support to the equity indices to hold their gains. Some support came with a report that the Central Board of Indirect Taxes and Customs (CBIC) has allowed businesses to correct any error or omission in filing of final sales return or GSTR-1 for the period July 2017-March 2018. Now businesses can correct the errors in the returns to be filed for January-March 2019. The market participants took a note of a private report stating that the Reserve Bank of India will definitely shift its stance from calibrated tightening to neutral in the next policy.

On the global front, European markets were trading in green, as France's consumer price inflation slowed for a second straight month in December. The preliminary figures from the statistical office INSEE showed that the consumer price index rose 1.6 percent year-on-year following a 1.9 percent increase in November. The fall in inflation was driven by a deceleration in the prices of energy, services and tobacco and a more pronounced drop in those of manufactured products. In contrast, food prices accelerated. The street overlooked a report that British construction sector growth was the weakest in three months in December amid a slower rise in commercial work. The survey data from IHS Markit showed that the CIPS Purchasing Managers' Index, or PMI, fell to 52.8 from 53.4 in November. Asian markets ended mostly in green, although underlying sentiment likely remain cautious amid risk-off sentiment prevailing globally on worries over slowing global growth.

Back home, sugar companies stocks ended mixed, despite industry body ISMA said that India's sugar production increased by 7 percent to 110.52 lakh tonnes in the first quarter of 2018-19 marketing year that started in October, as mills in Maharashtra and Karnataka started operations early, while NBFCs stocks settled in green despite ratings agency ICRA’s report that the ongoing issues with the non-bank lenders will crimp the operating profits of such companies by up to 0.50%. It said the decline in profitability will be primarily due to increase in the cost of funds, slowdown in portfolio growth and cost of carrying additional liquidity due to the troubles. Further, stocks related to the coal sector remained in limelight with Coal Minister Piyush Goyal’s statement that the country faces no shortage of coal and its imports have declined to 208 million tonnes (MT) from 217 MT in 2014.

Finally, the BSE Sensex gained 181.39 points or 0.51% to 35,695.10, while the CNX Nifty was up by 55.10 points or 0.52% to 10,727.35.

The BSE Sensex touched a high and a low of 35,744.20 and 35,382.08, 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 0.48%, while Small cap index was up by 0.14%.

The top gaining sectoral indices on the BSE were Telecom up by 2.73%, Metal up by 1.44%, PSU up by 1.44%, Utilities up by 1.03% and Power up by 0.97%, while IT down by 1.15%, TECK down by 0.58%, Consumer Durables down by 0.19%, FMCG down by 0.12% and Capital Goods down by 0.06% were the top losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 3.05%, Bharti Airtel up by 3.02%, Tata Motors up by 2.74%, Vedanta up by 2.66% and Tata Motors - DVR up by 2.58%. On the flip side, HCL Tech. down by 1.55%, TCS down by 1.19%, Infosys down by 1.02%, Indusind Bank down by 0.68% and Hero MotoCorp down by 0.65% were the top losers.

Meanwhile, with an aim to increase lending of banks, a parliamentary panel has asked the Reserve Bank of India (RBI) to ease capital adequacy norms for banks, review supervisory framework - prompt corrective action (PCA). Panel also urged the government to set up a committee to look into issues concerning accountability of the central bank as a regulator. The standing committee on finance also asked the RBI to evaluate the efficacy of its own guidelines on dealing with frauds.

Talking about the RBI's decision to keep capital adequacy norms higher than prescribed under global framework of Basel III, the lawmakers said the central bank has restricted lending capacity of banks and increased the burden on the government for recapitalisation of PSBs. Indian banks are required to maintain a minimum capital to risk weighted asset ratio (CRAR) at 9%, against the global Basel-III requirement of 8%. The committee said it has been informed that while Basel framework requires application of capital standards to internationally active banks of the 21 PSBs, nine PSBs are not internationally active as also most of the older private banks are also not internationally active.

Besides, the committee also suggested increasing the retirement age of chiefs of public sector banks to 70 years and effect proper manpower planning and HR development strategies in PSBs.

The CNX Nifty traded in a range of 10,741.05 and 10,628.65. There were 33 stocks advancing against 17 stocks declining on the index.

The top gainers on Nifty were Bharti Infratel up by 5.67%, Yes Bank up by 3.20%, Vedanta up by 3.17%, Tata Motors up by 3.07% and Bharti Airtel up by 2.71%. On the flip side, HCL Tech down by 1.72%, Tech Mahindra down by 1.42%, Infosys down by 1.33%, Hero MotoCorp down by 0.98% and IndusInd Bank down by 0.95% were the top losers.

All the European markets were trading in green; UK’s FTSE 100 rose 71.73 points or 1.07% to 6,764.39, Germany’s DAX gained 157.57 or 1.51% points to 10,574.23 and France’s CAC was up by 52.94 points or 1.15% to 4,664.43.

Asian markets ended mostly higher on Friday, with solid services sector data and hopes of trade talks lifting Chinese and Hong Kong markets sharply higher while Japanese shares succumbed to heavy selling as trading resumed after a long week of holidays. China's commerce ministry said China and the United States would hold vice-ministerial level trade talks in Beijing on January 7-8. As per report, Chinese slowing growth is having an impact on Apple and other American companies, but sales should recover once Washington strikes a trade deal with Beijing. On the data front, growth in China's services sector edged higher in December, a private survey showed, helping ease investor concerns over growth. The Caixin/Markit services PMI rose to a six-month high of 53.9 from 53.8 in November. Elsewhere, the private sector in Hong Kong continued to contract in December, although at a slightly slower rate, the latest PMI from Nikkei showed.