Local equities gather some more traction in morning deals

After a slightly positive opening, local equity benchmarks have gathered pace and continue to trade firm in morning session due to increased buying by funds. Barring Telecom stocks, there was buying across all sectoral indices. Traders took encouragement from private report that the Indian private equity (PE) market remained a hotbed for deal making in 2018 with investments across 793 deals at $26.3 billion, which was the second highest in the last decade in terms of total investment value. Sentiment on the street also improved with rating agency CRISIL’s report that recovery of stressed assets through the Insolvency and Bankruptcy Code (IBC) was two-times at Rs 70,000 crore compared to that through other mechanisms in 2018-19. Traders took note of a report that India will likely defer its plan yet again by a month to impose retaliatory tariff worth close to $235 million on 29 American products, in response to the Trump administration’s extra levy on supplies of steel and aluminium. Besides, SBI report stated that RBI needs to go in for a larger rate cut, more than 25 basis points, in the next monetary policy review in June to reverse the current slowdown in the economy.

On the global front, Asian markets were trading mostly in green following gains on Wall Street after stocks started the week down on fears of an escalating trade war between the US and China. Back home, the income tax department has deferred for the second time the requirement for companies to include in their tax audit report the details of Goods and Services Tax (GST) and GAAR.

The BSE Sensex is currently trading at 37518.16, up by 199.63 points or 0.53% after trading in a range of 37368.04 and 37552.49. There were 21 stocks advancing against 10 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.28%, while Small cap index was up by 0.67%.

The top gaining sectoral indices on the BSE were Energy up by 0.88%, Oil & Gas up by 0.88%, IT up by 0.80%, Metal up by 0.79% and FMCG was up by 0.71%, while Telecom down by 0.34% was the only losing index on BSE.

The top gainers on the Sensex were Tata Steel up by 2.22%, Mahindra & Mahindra up by 1.53%, ITC up by 1.36%, Vedanta up by 1.34% and Reliance Industries was up by 0.98%. On the flip side, Yes Bank down by 3.65%, Coal India down by 0.93%, Tata Motors down by 0.90%, Tata Motors - DVR down by 0.87% and Bajaj was Auto down by 0.76% were the top losers.

Meanwhile, in order to reverse the current slowdown in the economy, State Bank of India (SBI) in its latest report has said that the Reserve Bank of India (RBI) needs to go in for a larger rate cut, more than 25 basis points, in the next monetary policy review in June 2019. The RBI had cut the key short term lending rate (repo) by 25 points each in its last two policy reviews and is slated to announce the next bi-monthly policy on June 6.

The report highlighted that initial trends in fourth quarter of 2018-19 exhibit overall decline in sectors such as telecom equipment and infra services; agro chemicals; petrochemicals; infrastructure developers and castings. The report also mentioned that pharmaceutical companies dependent on exports are likely to report poor growth numbers. In January-March 2018-19 quarter, of 384 companies more than 330 companies exhibited negative growth in mid-line and bottom-line. Perhaps, significantly depressed rural prices is disturbing rural income and weak demand is affecting the FMCG sector.

Overall, the report said ‘we still believe the current slowdown could still be transitory, if proper policies are adopted in interregnum. For example, the high real interest rates are severely acting as a impediment to investment’. Besides, the report added the RBI should now ensure that asset and liability side of banks move in tandem and ensure repo rate is directly benchmarked to non-volatile bank liabilities /Current Account Savings Account (CASA) that are mostly used for transaction purposes. Otherwise, India would continue to be constrained by lack of transmission.

The CNX Nifty is currently trading at 11277.70, up by 55.65 points or 0.50% after trading in a range of 11235.35 and 11286.80. There were 32 stocks advancing against 18 stocks declining on the index.

The top gainers on Nifty were Tata Steel up by 2.28%, BPCL up by 2.26%, Mahindra & Mahindra up by 1.90%, Eicher Motors up by 1.78% and UPL was up by 1.61%. On the flip side, Zee Entertainment down by 3.73%, Yes Bank down by 3.59%, Tata Motors down by 1.00%, Britannia down by 0.83% and Coal India was down by 0.81% were the top losers.

Asian markets were trading mostly in green; Hang Seng increased 204.79 points or 0.73% to 28,326.81, Taiwan Weighted strengthened 84.43 points or 0.8% to 10,603.68, Nikkei 225 surged 62.46 points or 0.3% to 21,129.69, Shanghai Composite gained 31.67 points or 1.1% to 2,915.28 and KOSPI was up by 11.59 points or 0.56% to 2,093.43.

On the other hand, Straits Times trembled 0.19 points or 0.01% to 3,223.52 and Jakarta Composite was down by 61.35 points or 1.01% to 6,009.85.