Benchmarks trade jubilantly in early deals; Sensex reclaims 36K mark

Indian equity benchmarks made a gap up start and are trading jubilantly with frontline gauges recapturing their crucial 36,000 (Sensex) and 10,800 (Nifty) levels tacking firm trade in global markets after soothing Federal Reserve comments. Traders took encouragement with Federation of Indian Chambers of Commerce and Industry’s (FICCI) president Sandip Somany’s statement that agricultural reforms, interest rate cut and credit availability to micro, small and medium enterprises will drive India’s economic growth to 7.5% in 2019-20. He added that the economy is on a good footing. Some support also came with Reserve Bank of India (RBI) data showing that the country’s foreign exchange reserves increased by $116.4 million to $393.404 billion in the week to December 28, on account of rise in foreign currency assets. In the previous week, the reserves had increased by $167.2 million to $393.287 billion.

Global cues too remained supportive with all the Asian counters trading in green at this point of time as a dovish turn by the Federal Reserve and startlingly strong US jobs data soothed some of the market’s worst fears about the global outlook. The US markets ended Friday’s trading session in green territory with notable gains on strong US jobs report and upbeat note following dovish Federal Reserve comments.

Back home, sugar sector stocks remained in focus with Indian Sugar Mills Association (ISMA) saying that higher production is attributed to the fact that Maharashtra and Karnataka sugar mills started crushing operations earlier this year. Though, due to substantially lower rainfall and white grub infestation, Maharashtra is likely to produce significantly lower quantities of the commodity this year as compared to the last. Overall, the country is expected to produce much less sugar this season as compared to last year. In scrip specific developments, ONGC gained with overseas arm achieving significant discovery of oil in onshore well and Kirloskar Electric Company edged higher on inking agreement to sell non-core asset.

The BSE Sensex is currently trading at 36019.50, up by 324.40 points or 0.91% after trading in a range of 35895.78 and 36033.20. There were 29 stocks advancing against 2 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.60%, while Small cap index was up by 0.81%.

The top gaining sectoral indices on the BSE were Realty up by 1.77%, Consumer Durables up by 1.67%, Telecom up by 1.39%, Metal up by 1.24% and Energy was up by 1.23%, while there were no losers on the BSE sectoral front.

The top gainers on the Sensex were Indusind Bank up by 3.56%, Tata Motors up by 2.69%, Tata Motors - DVR up by 2.13%, Axis Bank up by 2.10% and Tata Steel up by 1.98%. On the flip side, Bajaj Auto down by 0.37% and Kotak Mahindra Bank down by 0.09% were the top losers.

Meanwhile, expressing concerns over growth of India, the Reserve Bank of India (RBI) warned that a sudden surge in crude prices can upset the country’s key macro-stability parameters, as it can sharply spike the current account deficit (CAD), inflation and the fiscal numbers, whittling the benefits of higher growth. It added that since the country is heavily dependent on oil imports to the tune of over 80% for meeting its domestic demand, it remains susceptible to global crude price shocks. Besides CAD, rise in crude prices can also impact inflation and fiscal deficit.

The international crude prices increased by around 12% between April and September 2018. The mid-year spike in crude prices happened mainly due to spurt in demand, on the back of global growth revival, and partly due to geopolitical risks that led to supply-side shocks. However, since mid-November 2018, the crude prices have declined significantly but they remain volatile.

As per the RBI study, crude price shock will increase inflation, if the price increase is passed on directly to the final consumers. It added that under the most conservative estimate, they quantify that a $10/barrel increase in crude price at the price of $65/barrel will lead to a 49 basis points increase in headline inflation. A similar increase at $55/barrel gives around a 58 bps increase in headline inflation.

The Central Bank further said if the government decides on a zero pass-through to the final consumers, a $10/barrel spike in crude prices could increase the fiscal deficit by 43 bps. This zero pass-through scenario allows us to put an upper band on the amount of fiscal slippage. It concluded that the actual inflation and fiscal deficit will finally depend on the level of government intervention (changes in tax and subsidy) in the domestic oil market.

The CNX Nifty is currently trading at 10813.75, up by 86.40 points or 0.81% after trading in a range of 10782.05 and 10822.45. There were 43 stocks advancing against 7 stocks declining on the index.

The top gainers on Nifty were Indusind Bank up by 3.66%, Titan Co up by 2.59%, Tata Motors up by 2.57%, Axis Bank up by 2.17% and Bharti Infratel up by 2.09%. On the flip side, Zee Entertainment down by 0.98%, Dr. Reddys Lab down by 0.68%, Indiabulls Housing down by 0.47%, Bajaj Auto down by 0.39% and Kotak Mahindra Bank down by 0.22% were the top losers.

All the Asian markets are trading in green; Nikkei 225 soared 512.77 points or 2.62% to 20,074.73, Straits Times jumped 39.07 points or 1.28% to 3,098.30, Hang Seng gained 172.28 points or 0.67% to 25,798.31, Taiwan Weighted surged 192.57 points or 2.05% to 9,575.08, KOSPI added 22.54 points or 1.12% to 2,032.79, Jakarta Composite rose 48.28 points or 0.77% to 6,322.82 and Shanghai Composite was up by 10.96 points or 0.44% to 2,525.83.