Bulls make comeback on Dalal Street

Bulls made comeback on Dalal Street on Tuesday, with both the larger peers ending the trading session with strong gains of around 1.30% each. After a fabulous start, the key indices remained firm throughout the session, as India’s retail inflation based on Consumer Price Index (CPI) continued its easing trend for third straight month in December mainly on account of sliding prices of fruits, vegetables and fuel. CPI softened to an 18-month low of 2.19% in December 2018 as compared to 2.33% in November and 5.21% in December 2017. The inflation has remained below the RBI’s medium-term target of 4% for the fifth straight month and it fell to its lowest level since June 2017 of 1.46%. Investors remained encouraged amid reports that the government is considering credit guarantee for term loans of up to Rs 100 crore as well as interest subsidy on loans up to Rs 1,000 crore for electronic manufacturing companies under the new policy in works. Some comfort also came with another report that India is likely be a larger economy than the US by 2030, while China will top the list and Indonesia will figure among the top five. India will likely be the main mover, with its trend growth accelerating to 7.8% by 2020s, partly due to ongoing reforms, including introduction of GST and the Insolvency and Bankruptcy Code (IBC).

The markets managed to hold their rally with a report that the total of investments during 2018 by private equity (PE) and venture capital (VC) companies was $35.1 billion (nearly Rs 2.5 trillion), surpassing the previous high of $26.1 billion (Rs 1.8 trillion) in 2017 by 35 per cent. The report further said that start-ups rebounded in 2018, attracting $6.4 billion (Rs 45,000 crore) or 83 per cent higher than in 2017. Trading sentiments were also got boost after UN report showed that India's creative goods exports nearly tripled from $7.4 billion in 2005 to $20.2 billion in 2014, making it one of the world's leading exporters of such products in the top 10 developing economies. Adding more support, apex industry body, the Associated Chambers of Commerce and Industry of India (ASSOCHAM) said that Wholesale Price Index (WPI) has recorded 3.80 per cent for December 2018 as compared to 4.64 per cent for the previous month due to sharp decline in price of vegetables, onion and fruits. The continuing deceleration in the growth of WPI and softening of global fuel prices provide ample opportunity to MPC (monetary policy committee) to cut down policy rate at earliest which will kick start investment and revival in overall industrial growth.

On the global front, European markets were trading in green, as Germany's wholesale prices rose at a slower pace in December. The data showed wholesale price inflation slowed to 2.5% in the month, from 3.5% in November. The traders overlooked reports that Eurozone's industrial production decreased at a faster-than-expected pace in November. Industrial production decreased a seasonally adjusted 1.7% from October, when it edged up 0.1%, revised from 0.2%. On a year-on-year basis, industrial production fell a calendar adjusted 3.3% in November after a 1.2% increase. Street had predicted a 2.1% slump. Asian markets ended in green, after Chinese finance ministry said that it would implement larger tax and fee cuts to help reduce burdens for small firms and manufacturers. Separately, Chinese central bank said that it would stick with its prudent monetary policy to support growth.

Back home, telecom stocks rang loud, buoyed by report that telecom companies saw a rise of 1.99 per cent - 22.80 million subscribers - in wireless users in the July-September period, while Airline stocks such as Indigo and SpiceJet ended higher after Ministry of Civil Aviation secretary, RN Choubey stating that India will be adding 100 more airports, and one billion trips in the next 15 years. He also said the country is an aviation locomotive for the world and provides humongous opportunities for players across the globe to grow. Further, banking stocks remained in focus, as the Finance Ministry asked the public sector banks (PSBs) to slowly bring down the government's equity to 52 percent in the first phase, in order to align with the best corporate practices. Auto stocks also remained in limelight, as automobile industry body SIAM said that vehicle manufacturers are staring at production stoppage if there is no resolution of the issues over restrictions imposed on domestic manufacturers using imported steel.

Finally, the BSE Sensex gained 464.77 points or 1.30% to 36,318.33, while the CNX Nifty was up by 149.20 points or 1.39% to 10,886.80.

The BSE Sensex touched a high and a low of 36,349.31 and 35,950.08, respectively and there were 28 stocks advancing against 3 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.58%, while Small cap index was up by 0.70%.

The top gaining sectoral indices on the BSE were IT up by 3.02%, TECK up by 2.75%, Energy up by 2.54%, Realty up by 1.72% and Oil & Gas up by 1.70%, while there were no losing sectoral indices on the BSE.

The top gainers on the Sensex were Yes Bank up by 3.86%, Infosys up by 3.66%, Vedanta up by 3.03%, Reliance Industries up by 3.02% and TCS up by 2.74%. On the flip side, Maruti Suzuki down by 0.72%, ICICI Bank down by 0.23% and Power Grid down by 0.03% were the top losers.

Meanwhile, the rating agency ICRA in its latest report has recommended the government to revisit its restrictive retail foreign direct investment (FDI) policy as India has not been able to get sizeable investments despite opportunities. Citing examples of other emerging geographies to allay concerns, it said both organised and unorganised retail sectors can co-exist. It pointed out that, currently, the multi-brand retail sector remains most restrictive to FDI with a cap of 51 percent ownership and guidelines relating to mandatory investments in back-end infrastructure and local sourcing norms.

ICRA has stated that data released by the Department of Industrial Policy and Promotion showed that between 2000 to 2018, Indian retail attracted about $1.4 billion in foreign direct investment, which was only 0.36 percent of the overall FDI inflows. It also said that a population of over 1.3 billion with favourable demographics and a rising middle class present a big opportunity for foreign retailers, who have actually evinced interest. It added that restrictive nature of the retail FDI policy has curtailed the foreign retailers' operations.

According to the report, there remains on-ground opposition for multi-brand retail from local traders, who fear risk of being thwarted by the deep pockets and increased competition from foreign players. Pitching for relaxation in inter-segmental restrictions for multi-brand retail, it said India needs to up the caps on foreign ownership in the segment. It added that there is limited domestic capital being invested in the sector and FDI flows can bridge capital deficit and remove the supply chain inefficiencies. 

The CNX Nifty traded in a range of 10,896.95 and 10,777.55. There were 46 stocks advancing against 04 stocks declining on the index.

The top gainers on Nifty were Wipro up by 5.49%, Yes Bank up by 4.07%, Tech Mahindra up by 3.85%, Infosys up by 3.76% and Reliance up by 3.11%. On the flip side, Maruti Suzuki down by 0.81%, Power Grid down by 0.10%, ICICI Bank down by 0.09% and Bharti Infratel down by 0.04% were the top losers.

European markets were trading in green, UK’s FTSE 100 gained 23.65 points or 0.35% to 6,878.67, France’s CAC added by 21.39 points or 0.45% to 4,784.14 and Germany’s DAX was up by 41.06 points or 0.38% to 10,896.97.

Asian markets ended higher on Tuesday after the US earnings season began on a positive note and China signaled more supportive measures in the near term to counter slowing growth. Investors also looked ahead to the vote on British Prime Minister Theresa May's Brexit deal later in the day. It is widely expected that May's Brexit proposal will face a certain defeat in parliament. Chinese shares ended higher after China said it would aim to achieve ‘a good start’ in the first quarter for the economy. Further, Japanese shares climbed to close near one-month high as the yen dropped against the dollar, helping exporters' shares.