Post Session: Quick Review

Indian equity benchmarks ended Monday’s trade in green terrain that marked a second straight day of gain for the markets. Nifty settled above crucial 10,750 mark, while Sensex ended just shy of 35,850 mark. Key indices started the week with healthy gains, tracking Asian markets on signs of an easing trade tension. 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. The sentiments were also supported by 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.

However, key indices gave up some of their gains in last leg of trade to come off their intraday high points, as selling appeared in Healthcare, Metal, Industrials and Capital Goods stocks. Market-men got anxious with RBI study which showed that a sudden surge in crude prices can upset the nation’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. Anxiety also spread among the investors with report stating that India may have to forgo as much as $1.97 trillion in gross domestic product (GDP) growth promised by investment in intelligent technologies over the next decade if the country fails to bridge the skill gap. But, markets managed to close the session in green, as some support came with reports that Commerce and industry minister Suresh Prabhu will meet the banking and financial services secretaries next week to resolve the huge decline in bank credit to exporters.

On the global front, Asian markets ended in green on Monday, while European markets were trading in red, after soothing Federal Reserve comments and an easing of monetary policy in China triggered a renewed appetite for risk assets. Back home, sugar sector stocks were 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.

The BSE Sensex ended at 35846.95, up by 151.85 points or 0.43% after trading in a range of 35809.23 and 36076.95. There were 21 stocks advancing against 10 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index rose 0.03%, while Small cap index was up by 0.03%. (Provisional)

The top gaining sectoral indices on the BSE were Realty up by 1.32%, Consumer Durables up by 1.26%, Telecom up by 1.17%, TECK up by 1.10% and Utilities up by 1.08%, while Healthcare down by 0.40%, Metal down by 0.09%, Industrials down by 0.08%, Capital Goods down by 0.07% and Auto down by 0.03% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Axis Bank up by 2.83%, Tata Motors - DVR up by 2.73%, Tata Motors up by 2.49%, Infosys up by 1.78% and NTPC up by 1.72%. (Provisional)

On the flip side, Bajaj Auto down by 2.88%, Yes Bank down by 1.40%, Hero MotoCorp down by 1.26%, Bajaj Finance down by 1.21% and Sun Pharma down by 0.75% were the top losers. (Provisional)

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 ended at 10769.30, up by 41.95 points or 0.39% after trading in a range of 10750.15 and 10835.95. There were 31 stocks advancing against 19 stocks declining on the index. (Provisional)

The top gainers on Nifty were Axis Bank up by 2.87%, Bharti Infratel up by 2.72%, Tata Motors up by 2.52%, Grasim Industries up by 1.97% and Maruti Suzuki up by 1.96%. (Provisional)

On the flip side, Indiabulls Housing Finance down by 4.80%, Bajaj Auto down by 3.00%, Yes Bank down by 1.66%, Dr. Reddys Lab down by 1.54% and Eicher Motors down by 1.33% were the top losers. (Provisional)

European markets were trading in red; UK’s FTSE 100 decreased 39.60 points or 0.58% to 6,797.82, France’s CAC shed 25.36 points or 0.54% to 4,711.76 and Germany’s DAX was down by 48.85 points or 0.45% to 10,718.84.

Asian markets ended in green on Monday, with investors indulging in hectic buying amid rising optimism the upcoming fresh round of talks between the US and China will help resolve trade disputes between the two countries. Besides, a fairly strong US jobs data and the Federal Reserve Chairman Jerome Powell's remarks last week that the Fed would be patient and flexible in policy decisions too boosted sentiment across the market. Chinese shares ended higher after the country's central bank slashed the amount of cash that banks must hold in reserve in an attempt to avoid a sharp economic slowdown. Further, Japanese shares closed higher, tracking sharp gains on Wall Street. The services sector in Japan continued to expand in December, albeit at a slower pace, the latest survey from Nikkei revealed on Monday with a PMI score of 51.0. That's down from 52.3 in November, although it remains above the boom-of-bust line of 50 that separates expansion from contraction.