Benchmarks trade in fine fettle in early deals; Sensex reclaims 37k mark

Indian equity benchmarks made an optimistic start and are trading mostly in fine fettle in early deals with frontline gauges recapturing their crucial 37,000 (Sensex) and 11,050 (Nifty) levels. Sentiment remained upbeat with Moody's Investors Service’s statement that the direct cash transfer programme for farmers and tax relief steps for the middle-class will give a fiscal stimulus of about 0.45 percent of GDP, and support growth through increased consumption, though at a fiscal cost. Some support also came with report that the government has allowed export of bio-fuels from special economic zones (SEZs) and export-oriented units (EoUs) with certain conditions, according to a notice of the directorate general of foreign trade. In August 2018, the government imposed restrictions on export of bio-fuels for non-fuel purposes. Besides, the government has decided to raise additional Rs 36,000 crore through dated securities to fund its expenses during the current financial year.

On the global front, Asian counters are exhibiting mixed trend at this point of time, as regional investors began to return from their Lunar New Year break. Tokyo edged lower after a negative lead from Wall Street. The US markets ended lower on Wednesday as investors weighed corporate earnings against persistent concerns over trade and another government shutdown.

Back home, power sector stocks remained in focus with report that the government gave its nod to a proposal for setting up 12,000 MW grid-connected solar photovoltaic (PV) power projects with an estimated viability gap funding of Rs 8,580 crore. Stocks related to broadcasting sector too remained buzzing with report that rubbishing claims that the new broadcast tariff regime would increase bill amounts of cable TV and DTH subscribers, the Telecom Regulatory Authority of India (Trai) said the new framework may actually decrease TV bills.

The BSE Sensex is currently trading at 37081.91, up by 106.68 points or 0.29% after trading in a range of 36966.00 and 37145.82. There were 22 stocks advancing against 8 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.85%, while Small cap index was up by 0.56%.

The top gaining sectoral indices on the BSE were Auto up by 1.28%, Healthcare up by 1.03%, Consumer Discretionary Goods & Services up by 0.83%, Industrials up by 0.69% and Capital Goods was up by 0.64%, while Metal down by 0.24% was the lone losing index on BSE.

The top gainers on the Sensex were Bajaj Auto up by 2.94%, Sun Pharma up by 2.32%, Yes Bank up by 1.90%, Tata Motors - DVR up by 1.73% and Tata Motors up by 1.71%. On the flip side, Tata Steel down by 0.50%, HDFC down by 0.40%, Indusind Bank down by 0.36%, Kotak Mahindra Bank down by 0.23% and HDFC Bank down by 0.14% were the top losers.

Meanwhile, expressing hopes on India’s growth, global credit ratings agency, Moody's Investors Service has said that the tax relief steps for the middle-class and direct cash transfer programme for farmers will give a fiscal stimulus of about 0.45% of Gross Domestic Product (GDP), and support growth through increased consumption over the near term, albeit at a fiscal cost. Monitoring that fiscal slippage from the budgeted targets for the past two consecutive years is ‘credit negative’ for India, Moody's said the government will face challenges of meeting its target again next year and this does not bode well for medium-term fiscal consolidation. It said while the middle-class tax relief will weigh somewhat on direct tax revenues, GST collections will continue to pose risks to indirect tax collections if they fall short of budgeted expectations.

The rating agency also said that based on the government's nominal GDP growth assumption of 11.5%, this implies a tax buoyancy of about 1.08, which they consider to be achievable. However, similar to last year, there are risks to the downside in 2019-20. besides, it said ‘Recent adjustments to the Goods and Services Tax (GST) framework will make collections more challenging ... The changes will further shrink the tax base, constraining potential future increases in tax revenue, because SMEs represent the vast majority of businesses in India’.

Moody's further said ongoing fiscal slippage from spending and tax cut proposals ahead of election is credit negative for the sovereign. It said the ongoing fiscal slippage from the budgeted targets over the past two years, and their expectation that the government will face challenges meeting its target again in fiscal 2019, does not bode well for medium-term fiscal consolidation. However, it said that lack of a formal capital support plan for public sector banks is credit negative. The budget does not include any provisions for capital support for public sector banks (PSBs). Meanwhile, the budget also does not address last year's announced merger of three public sector non-life insurers, which creates ambiguity around their merger plan.

The CNX Nifty is currently trading at 11085.95, up by 23.50 points or 0.21% after trading in a range of 11055.95 and 11101.85. There were 31 stocks advancing against 19 stocks declining on the index.

The top gainers on Nifty were Bajaj Auto up by 3.10%, Sun Pharma up by 1.85%, Zee Entertainment up by 1.55%, Hero MotoCorp up by 1.51% and Tata Motors up by 1.51%. On the flip side, JSW Steel down by 1.75%, Tech Mahindra down by 0.86%, Bharti Infratel down by 0.86%, Bajaj Finance down by 0.63% and GAIL India down by 0.59% were the top losers.

Asian markets are trading mixed; Straits Times surged 29.60 points or 0.93% to 3,214.16 and KOSPI gained 5.37 points or 0.24% to 2,208.83. On the flip side, Nikkei 225 declined 116.88 points or 0.56% to 20,757.18 and Jakarta Composite was down by 10.70 points or 0.16% to 6,537.18.