Markets end higher on firm Asian cues, rising direct tax collection

Firm cues from Asian counters coupled with rising direct tax collection data kept Indian equity benchmarks higher on Monday, with Sensex and Nifty closing the trading session above 35,800 and 10,750 levels, respectively. Revenue from direct tax grew 13.6% to Rs 7.43 lakh crore in the first nine months of the current financial year 2018-19 (April-March). The government has met more than 64.7% of the total budget estimate of direct taxes, for which the mop-up target is Rs 11.50 lakh crore.  After a firm start, the key indices remained positive throughout the day, aided by the Federation of Indian Chambers of Commerce and Industry (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 7.5-7.6% 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. The street also got relief 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.

During the trade, the market participants were also seen taking note of Governor Shaktikanta Das’ statement that the Reserve Bank of India (RBI) will not like the banking system to be in a situation of loose money. He further said that the RBI is also looking at new governance reforms for state-owned banks but will not throttle their functioning. However, the last leg sell-off along with weak cues from European markets dragged the markets from their intraday high points. Domestic sentiments got hit with a private 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. Anxiety also persisted among the traders, as the 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. Adding more concerns, overseas investors pulled out over Rs 83,000 crore from the capital markets in 2018, after pouring in a record Rs 2 lakh crore in the preceding year, on the back of rate hikes in the US, rise in global crude prices and rupee depreciation.

On the global front, European markets were trading in red, as the Eurozone private sector expanded the weakest pace in over four years. The survey data from IHS Markit showed that Eurozone Composite Purchasing Managers' Index, or PMI, fell to 51.1 from 52.7 in November. The final reading was weaker than the flash estimate of 51.3. Sentiments were pessimistic, even though British services sector expanded at a faster-than-expected pace at the end of 2018 amid modest gains in activity and demand, yet the overall business situation remained subdued. The survey data from IHS Markit showed that the CIPS UK Services Purchasing Managers' Index rose to 51.2 from November's 50.4, a 28-month low. Meanwhile, Eurozone's consumer price inflation slowed more-than-expected in December to its lowest level in eight months. As per preliminary figures from Eurostat, the consumer price index rose 1.6% year-on-year following a 1.9% increase in November. Asian markets ended in green, as China's service sector growth hit a six-month high in December amid greater demand from abroad, leading to faster private sector expansion. The survey results from IHS Markit showed that the headline seasonally adjusted Caixin services Purchasing Managers' Index rose slightly to 53.9 from 53.8 in November.

Back home, stocks related to agri sector remained in limelight, with Minister of State for Chemicals and Fertilisers Rao Inderjit Singh’s statement that a committee to look into direct transfer of fertiliser subsidy to farmers has been set up by NITI Aayog and its report is awaited. The idea is to provide subsidy to farmers directly, while banking stocks remained in focus, amid reports that Public sector banks are in the process of closing or rationalizing about 69 overseas operations in the next few months as part of their capital conservation exercise. Planned rationalization of operations and examination of a total of 216 overseas operations of the public sector banks (PSBs) was undertaken last year. Following the review, as many as overseas operations were closed while 69 are under process or being considered for rationalization.  Further, most of the oil industry stocks ended higher, with a report that after months of delay, India will launch the second auction of 14 blocks for prospecting of oil and gas in an attempt to raise domestic output to cut imports. The Open Acreage Licensing Policy (OALP) bid round-II, with 14 blocks measuring 29,333 square kilometres in aggregrate area on offer, will be launched by Oil Minister Dharmendra Pradhan.

Finally, the BSE Sensex gained 155.06 points or 0.43% to 35,850.16, while the CNX Nifty was up by 44.45 points or 0.41% to 10,771.80.

The BSE Sensex touched a high and a low of 36,076.95 and 35,809.23, 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 0.03%, while Small cap index was up by 0.06%.

The top gaining sectoral indices on the BSE were Realty up by 1.55%, Telecom up by 1.26%, TECK up by 1.16%, Utilities up by 1.14% and IT up by 1.11%, while Healthcare down by 0.39%, Metal down by 0.17%, Capital Goods down by 0.11%, Industrials down by 0.08% and Auto down by 0.02% were the top losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 2.84%, Tata Motors up by 2.64%, Tata Motors - DVR up by 2.57%, Infosys up by 1.57% and Maruti Suzuki up by 1.54%. On the flip side, Bajaj Auto down by 2.82%, Yes Bank down by 1.35%, Hero MotoCorp down by 1.11%, Bajaj Finance down by 1.03% and Sun Pharma down by 0.64% were the top losers.

Meanwhile, the government's revenue mop-up from the telecom industry declined by nearly 22 percent in the financial year 2018, mainly due to a decline in earnings of service providers from sale of services. The government collects license fee and spectrum usage charge (SUC) as a percentage of revenue earned by telecom service providers from sale of telecom services.

The adjusted gross revenue (AGR) earned by companies from the sale of telecom services dropped 18.62 percent to Rs 1,30,844.9 crore in FY18 as compared to Rs 1,60,787.9 crore in the previous fiscal. This resulted in lower licence fees and SUC for the government.

Besides, the government's revenue from licence fee declined 18.12 percent to Rs 10,670.6 crore in FY18, from Rs 13,032.9 crore in FY17. The SUC, which is calculated based on quantum of radiowaves allocated to mobile operators, dipped by over 29 percent to Rs 4,983.75 crore in 2017-18 from Rs 7,048 crore in the preceding financial.  

The CNX Nifty traded in a range of 10,835.95 and 10,750.15. There were 32 stocks advancing against 18 stocks declining on the index.

The top gainers on Nifty were Axis Bank up by 2.86%, Bharti Infratel up by 2.79%, Tata Motors up by 2.40%, Titan up by 2.11% and Grasim Industries up by 1.95%. On the flip side, Indiabulls Housing Finance down by 4.56%, Bajaj Auto down by 2.92%, Dr. Reddy’s Lab down by 1.43%, Yes Bank down by 1.42% and Eicher Motors down by 1.37% were the top losers.

European markets were trading in red; UK’s FTSE 100 lost 39.60 points or 0.58% to 6,797.82, France’s CAC fell 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.