Markets start FY20 on positive note

Key equity benchmarks started the first day of financial year 2019-2020 with jubilation, though they ended off their intraday high points. After a firm start, the markets remained positive throughout the session, aided by the Reserve Bank of India’s (RBI) data showing that India's foreign exchange reserves continued to surge for the third week in a row, adding $1.029 billion at $406.667 billion in the week to March 22. Traders were optimistic with Chief Economic Advisor Krishnamurthy Subramanian’s statement that inflation has remained well under control during the Modi government’s tenure, providing relief to the middle class and the poor. Low prices, strong monetary policy framework by the RBI and economic reforms have boosted the domestic consumption in the country. Sentiments also got boost after the goods and services tax (GST) collections scaled record high of Rs 1.06 lakh crore in March, up from Rs 97,247 crore in the previous month, as compliance improved amid increased number of returns filed. Total number of summary sales return GSTR-3B filed for the month of February up to March 31, stood at 75.95 lakh.

However, in the last leg of the trade, key indices trimmed their gains, as the RBI said that the country's current account deficit (CAD) widened to 2.5% of Gross Domestic Product (GDP) in Q3FY19 from 2.1% a year ago, primarily due to a higher trade deficit. In absolute terms, India’s CAD widened to $16.9 billion in the October-December 2018 quarter against $13.7 billion in the year ago quarter. Adding more worries, credit rating agency, India Ratings and Research (Ind-Ra) in its latest report showed that declining household savings may lead to wider current account deficit (CAD) and rise in the interest rates. Gains also got trimmed, with India’s fiscal deficit touching 134.2% of the full-year revised budgeted estimate at the end of February 2019, mainly due to tepid growth in revenue collections. In absolute term, fiscal deficit for April-February 2018-19 was Rs 8.51 lakh crore as against the revised estimate (RE) of Rs 6.34 lakh crore for the entire year.

On the global front, European markets were trading in green, as UK manufacturing sector grew at the fastest pace in over a year in March, as stockpiling by businesses hit a record as they braced for Brexit disruptions. The survey data from IHS Markit showed that the CIPS purchasing managers' index, or PMI, for the manufacturing sector climbed to a 13-month high of 55.1 from 52.1 in February. Asian markets ended higher, amid signs of progress in US-China trade talks, with Washington saying the negotiations that concluded on Friday in Beijing were candid and constructive. Underlying sentiment also remained buoyant after official data showed China's factory activity in March unexpectedly grew for the first time in fourth months. The Caixin/Markit PMI also showed the manufacturing sector in the world's second biggest economy returning to growth.

Back home, stocks related to the auto companies ended higher, on account of positive monthly sales numbers. Atul Auto reported sale of 4,612 units, with a rise of 15.21% for the month of March 2019 as compared to 4,003 units sold in March 2018, while Mahindra & Mahindra’s (M&M) Auto Sector registered overall 11% growth in FY19 which stood at 6,08,596 vehicles, compared to 5,49,153  vehicles during FY18. Besides, Media & Entertainment sector stocks remained in focus with a joint study by ASSOCHAM-PwC stating that India is expected to be among the top-10 entertainment and media markets globally by 2021 in terms of absolute numbers. Sugar stocks remained under pressure, as rating agency ICRA has revised downwards its sugar production target for 2019 to 30.7 million tonne from its earlier estimate of 31.5 million tonne due to a decline in UP, the largest growing state.

Finally, the BSE Sensex rose 198.96 points or 0.51% to 38,871.87, while the CNX Nifty was up by 45.25 points or 0.39% to 11,669.15.

The BSE Sensex touched a high and a low of 39,115.57 and 38,808.74, respectively and there were 17 stocks advancing against 14 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.52%, while Small cap index was up by 0.78%.

The top gaining sectoral indices on the BSE were Metal up by 2.09%, IT up by 1.65%, Industrials up by 1.52%, TECK up by 1.44% and Capital Goods up by 1.36%, while Realty down by 0.76%, Consumer Durables down by 0.63%, Bankex down by 0.25%, FMCG down by 0.16% and Power down by 0.14% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors - DVR up by 7.75%, Tata Motors up by 7.37%, Vedanta up by 2.86%, Bharti Airtel up by 2.73% and Tata Steel up by 2.66%. On the flip side, Indusind Bank down by 2.22%, Mahindra & Mahindra down by 1.66%, Axis Bank down by 1.42%, Power Grid down by 1.26% and HDFC down by 1.21% were the top losers.

Meanwhile, the government has notified a new Indian Accounting Standard (Ind AS) 116 that will bring in more transparency in recognition and disclosures about leases in companies' balance sheets. Ind AS 116-implementing from April 1, 2019 -- is likely to have a significant impact on various industries, including aviation where airlines mostly operate planes on lease.

The Standard sets out the principles for the recognition, measurement, presentation, and disclosure of leases. It has been notified by the corporate affairs ministry. The standard will help in ensuring more transparency when it comes to recognition of leases by companies and also prevent ‘window dressing’ of accounts.

Leasing of aircraft rather than outright purchase is a common practice in the airlines industry worldwide. With the new accounting standard is in place, the carriers would have to show all such leases on their respective balance sheets which would result in substantial new assets and liabilitie. Ind AS 116 is the equivalent of IFRS (International Financial Reporting Standards) 116.

The CNX Nifty traded in a range of 11,738.10 and 11,644.75. There were 28 stocks advancing against 22 stocks declining on the index.

The top gainers on Nifty were Tata Motors up by 7.49%, Hindalco up by 5.28%, Bharti Airtel up by 2.97%, Wipro up by 2.69% and Maruti Suzuki up by 2.51%. On the flip side, Zee Entertainment down by 3.28%, UPL down by 2.80%, Eicher Motors down by 2.59%, IOC down by 2.55% and Indusind Bank down by 2.23% were the top losers.

European markets were trading in green; UK’s FTSE 100 increased 46.55 points or 0.64% to 7,325.74, France’s CAC increased 36.53 points or 0.68% to 5,387.06 and Germany’s DAX increased 142.79 points or 1.24% to 11,668.83.

Asian markets ended mostly in green on Monday as investors cheered signs of progress in high-level trade talks and positive manufacturing data from China. Beijing announced that it would continue to suspend additional tariffs on US vehicles and auto parts after April 1 as a gesture after Washington delayed tariff hikes on Chinese imports. A delegation led by Vice Premier Liu He will be in Washington this week for another round of talks. Chinese shares ended to its highest level since May 2018, as investors cheered signs of progress in trade talks and signals of an economic recovery. Underlying sentiment was boosted after official data showed China's factory activity in March unexpectedly grew for the first time in fourth months. The Caixin/ Markit PMI also showed the manufacturing sector in the world's second biggest economy returning to growth. Meanwhile, Japanese shares ended off their day's highs after a central bank survey showed Japan's business confidence hit a two-year low in the March quarter, underscoring renewed concerns surrounding global demand. Another private survey showed that manufacturing activity in the country contracted for a second straight month in March, with output down at the sharpest rate in nearly three years.