Rally continues on Dalal Street; Sensex garners around 200 points

Rally continued on Dalal Street on Monday, with Sensex and Nifty garnering around half a percent gains each. The start of day was cautious but soon markets gained momentum, aided by Union Commerce and Civil Aviation Minister Suresh Prabhu’s statement that India has the potential to be a $5 trillion economy in the next 7-8 years. Prabhu said his department had prepared a road map to make this possible by focusing on manufacturing, service sector and agriculture. Adding more optimism on the street, central bank Governor Shaktikanta Das said that the Reserve Bank of India (RBI) will make all efforts to maintain financial stability and to facilitate enabling conditions for sustainable and robust growth. Some comfort also came with a private report that India is likely to surpass the United Kingdom in the world’s largest economy rankings in 2019. The report projects real GDP growth of 1.6% for the UK, 1.7% for France and 7.6% for India in 2019.

The trade remained positive for the whole day, amid RBI’s report showing that the forex reserves continued its upward march and increased by $1.267 billion to $397.351 billion in the week to January 11, 2019, aided by a rise in core currency assets and value of gold. Traders were seen taking note of a private report stating that Indian billionaires saw their fortunes swell by Rs 2,200 crore a day last year, with the top 1% of the country's richest getting richer by 39% as against just 3% increase in wealth for the bottom-half of the population. However, some gains got trimmed in the last leg of the trade, amid India Ratings and Research’s latest report stating that the cumulative fiscal deficit of Indian states is expected to rise following the announcement of farm support packages ahead of national elections due by May. The aggregate budget deficit of Indian states is estimated to increase to 3.2% of gross domestic product (GDP) in the next financial year beginning April, compared with 2.8% estimated for the current year.

On the global front, European markets were trading in red, as UK retail sales decreased in December, marking the worst decline in over one-and-a-half years, after a surge in the previous month. The figures from the Office for National Statistics showed that the seasonally adjusted retail sales including auto fuel decreased 0.9% from November, when they grew 1.3%. Asian markets ended in green, as Chinese GDP data came in line with estimates and signs that the US and China are closing in on a trade truce helped ease global growth worries. China's GDP grew a seasonally adjusted 1.5% sequentially in the fourth quarter of 2018, in line with expectations and down from 1.6% in the third quarter. On an annualized basis, GDP expanded 6.4% - again matching forecasts and down from 6.5% in the three months prior. Separately, industrial production climbed 5.7% on year in December, topping forecasts for 5.3% and up from 5.4% in November.

Back home, selected stocks of banking sector ended higher with RBI Governor Shaktikanta Das’ statement that efforts are being made to strengthen corporate governance in the public sector banks to effectively check incidence of financial frauds, while power industry stock fell, despite a report that India is all set to achieve 100% household electrification by the month end, with 2.44 crore families having received power connections out of the targeted 2.48 crore under the Rs 16,320 crore Saubhagya scheme. Further, coal sector stocks remained under pressure during the trade, amid reports that coal imports in India saw a surge of 6.7% to 171.81 million tonne (MT) in the April-December period of the ongoing financial year, while textile sector remained in focus with Union minister Smriti Irani stating that Indian textiles and garments industry would soon get its own country-specific apparel size.

Finally, the BSE Sensex gained 192.35 points or 0.53% to 36,578.96, while the CNX Nifty was up by 54.90 points or 0.50% to 10,961.85.

The BSE Sensex touched a high and a low of 36,701.03 and 36,351.77, respectively and there were 11 stocks advancing against 20 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.56%, while Small cap index was down by 0.70%.

The top gaining sectoral indices on the BSE were Energy up by 2.68%, Oil & Gas up by 0.70%, IT up by 0.64%, TECK up by 0.48% and Healthcare up by 0.29%, while Realty down by 1.22%, Auto down by 1.08%, PSU down by 0.92%, Industrials down by 0.79% and Consumer Disc down by 0.70% were the top losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 4.36%, Kotak Mahindra Bank up by 2.42%, Sun Pharma up by 1.94%, Bajaj Finance up by 1.89% and Infosys up by 1.61%. On the flip side, Hero MotoCorp down by 3.40%, Yes Bank down by 3.10%, Maruti Suzuki down by 2.07%, Power Grid down by 1.50% and Bajaj Auto down by 1.14% were the top losers.

Meanwhile, credit rating agency Care Ratings in its latest report has said that the government is likely to miss its disinvestment target of Rs 80,000 crore for the current fiscal 2018-19, leading to fiscal slippage. It expected that disinvestment proceeds could be around Rs 60,000 crore for FY19. It noted that owing to a shortfall in disinvestment realisations as well in indirect tax collections under the GST regime, fiscal deficit will come in at 3.5 percent as against the targeted 3.3 percent, signifying a slippage of around Rs 20,000 crore.

According to the report, on an average, the government has achieved nearly 65 percent of the budgeted divestment target between FY14 and FY17, and pointed out that FY14 was the lowest with divestment proceeds being only 53 percent of the targeted. It also said that in FY18, total disinvestment proceeds came in at Rs 1 trillion, exceeding the budgeted target of Rs 72,500 crore. It stated that with a little over two months to go for the fiscal year to end, the government had raised Rs 32,142 crore, or 43 percent of the target as of December. It added that of this, Rs 25,325 crore has been raised through the Central Public Sector Enterprises Exchange Traded Fund (CPSE-ETF) the mechanism allowing the simultaneous sale of government stake in various CPSEs across diverse sectors through a single offer.

To make up the shortfall, rating agency said that the government has decided to come up with another tranche of ETF in the form of further fund offer of Bharat 22 ETF, and can raise about Rs 14,000 crore by selling 52.63 percent stake in Rural Electrification Corporation. It also stated that the government can raise another Rs 12,000 crore through buybacks of shares of public sector units in a context limited by the volatility in the markets.

The CNX Nifty traded in a range of 10,987.45 and 10,885.75. There were 17 stocks advancing against 33 stocks declining on the index.

The top gainers on Nifty were Reliance Industries up by 4.28%, Kotak Mahindra Bank up by 2.73%, Bajaj Finserv up by 2.08%, Sun Pharma up by 2.00% and Bajaj Finance up by 1.77%. On the flip side, Hero MotoCorp down by 3.99%, Yes Bank down by 3.73%, Wipro down by 2.80%, Maruti Suzuki down by 2.31% and Bajaj-Auto down by 1.79% were the top losers.

European markets were trading mostly in red; France’s CAC declined 11.79 points or 0.24% to 4,864.14 and Germany’s DAX fell 58.95 points or 0.53% to 11,146.59, while UK’s FTSE 100 was up by 17.68 points or 0.25% to 6,986.01.

Asian markets ended mostly higher on Monday as weak GDP data from China spurred hopes that authorities will pursue more stimulus to support growth. Investors also cheered media reports suggesting that China had offered to buy more American goods through 2024 to eliminate its trade imbalance with the US. Chinese shares rose as GDP figures came in line with expectations and reports on industrial production and retail sales topped forecasts. China's GDP grew a seasonally adjusted 1.5 percent sequentially in the fourth quarter of 2018, in line with expectations and down from 1.6 percent in the third quarter. On an annualized basis, GDP expanded 6.4 percent - again matching forecasts and down from 6.5 percent in the three months prior. Separately, industrial production climbed 5.7 percent on year in December, topping forecasts for 5.3 percent and up from 5.4 percent in November. Retail sales were up an annual 8.2 percent - topping expectations for 8.1 percent, which would have been unchanged. Further, Japanese shares eked out modest gains to hit over one-month high as a softer yen boosted exporters. Meanwhile, Malaysian markets are closed for a public holiday.