Bulls march continues; Sensex, Nifty scale fresh record closing highs

Indian equity benchmarks scaled to fresh record closing highs on Monday, with Sensex and Nifty gaining more than half a percent each. Key indices made a cautious start of the day, amid reports that foreign investors have pulled out a net amount of Rs 4,375 crore from the Indian capital markets in May so far, driven by global and domestic factors. Trading sentiments were also subdued during early morning deals with another private report stating that the fourth quarter (January to March 2019) financial results released by 304 companies in the corporate sector show a sequential drop in revenue growth to 10.7 per cent from 20.1 per cent in the previous quarter (October to December 2018). Traders took a note of Niti Aayog vice-chairman Rajiv Kumar’s statement which stressed on the revamp and modernisation of the Indian statistical system so that real-time data is captured and used for policy analysis.

But, markets soon gained ground to rally throughout the session, as the Reserve Bank of India (RBI) said it will inject Rs 15,000 crore into the financial system in the month of June 2019. It will infuse liquidity through purchase of government bonds via the auction route. Investors took encouragement after international rating agency S&P Global Ratings said that the landslide victory for Prime Minister Narendra Modi-led BJP in the general election is likely to improve the flow of foreign capital for corporates in India. Adding more comfort, the Commerce and Industry Ministry proposed cutting down compliance time significantly to just one hour per month for start-ups as part of measures to ease regulatory requirements for budding entrepreneurs. The proposal is a part of 'Start-up India Vision 2024', prepared by the Department for Promotion of Industry and Internal Trade (DPIIT) for the new government to promote the growth of budding entrepreneurs.

On the global front, European markets were trading in green, as the Finnish manufacturing confidence rose in May after falling in the previous month. The data released by the Confederation of Finnish Industries EK showed that the business confidence of manufacturing companies rose to 1 in May from minus 1 in April. Confidence in the construction sector rose to 5 in May from 3 in the preceding month. Asian markets ended mostly in green, after Hong Kong's trade deficit narrowed in April as exports and imports fell. The data from the Census and Statistics Department showed that the trade deficit fell to HK$35.091 billion in April from HK$46.946 billion in the same month last year. In March, the deficit was HK$59.241 billion. Exports fell 2.6 percent year-on-year in April after a 1.2 percent decline in March, while Imports dropped 5.5 percent in April, following a 0.1 percent fall in the previous month.

Back home, stocks related to the banking industry ended in green, amid reports that public sector banks (PSBs) recovered around Rs 1.2 lakh crore form bad loans during the last financial year (FY19) as compared to 74,562 crore in financial year 2018 (FY18) mainly helped by resolution under the Insolvency and Bankruptcy Code (IBC). During the first half of FY19, banks recovered Rs 60,713 crore from stressed assets. Further, minerals and mining industry stocks remained in focus, as the mining industry body pitched for an immediate extension of leases of more than 300 non-captive mines until March 2030, expressing fear that the sector may face a crisis-like situation post expiry of licences of these mines next year, while Non-Banking Financial Companies’ (NBFCs) stocks also remained in limelight, with a report stating that the RBI proposed a set of guidelines for large NBFCs to help them deal with severe liquidity problems and prevent re-occurrence of IL&FS type of debt crisis.

Finally, the BSE Sensex gained 248.57 points or 0.63% to 39,683.29, while the CNX Nifty was up by 80.65 points or 0.68% to 11,924.75.

The BSE Sensex touched a high and a low of 39,821.94 and 39,353.16, respectively and there were 18 stocks advancing against 13 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 1.13%, while Small cap index was up by 1.77%.

The top gaining sectoral indices on the BSE were Capital Goods up by 3.06%, Power up by 2.89%, Industrials up by 2.44%, Utilities up by 2.34% and Metal up by 2.21%, while Energy down by 0.82%, Healthcare down by 0.26%, TECK down by 0.18%, IT down by 0.07% and Telecom down by 0.06% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 5.78%, Yes Bank up by 3.79%, NTPC up by 3.21%, Larsen & Toubro up by 3.00% and Axis Bank up by 2.37%. On the flip side, Indusind Bank down by 2.11%, Reliance Industries down by 1.95%, Asian Paints down by 1.43%, Bharti Airtel down by 0.93% and ONGC down by 0.80% were the top losers.

Meanwhile, in a major relief for exporters, a single authority for sanctioning and processing Goods and Services Tax (GST) refunds is in the offing as the Finance Ministry looks to speed up and simplify the process for exporters. The current mechanism entails a twin refund sanctioning authority of the central and state tax officers but that could well change by August when the proposed new structure involving a single authority comes in place.

As per the system being worked out by the Revenue Department, the taxpayer will get full refund from his jurisdictional officer once the claim is sanctioned, while at the back-end the Centre and states will apportion the amount to be paid to each other. Currently, once a taxpayer files refund claim with the jurisdictional tax authority, then he would clear 50 per cent of the claims, and the remaining is cleared by the state tax officers after further scrutiny. A similar system is followed when a taxpayer approaches the state tax officers for GST refunds. Thus, the time taken to clear the entire refund amount gets longer, leading to liquidity crunch for exporters - an issue that the proposed single mechanism for refund clearing intends to fix.

Under the proposed ‘single authority mechanism’, once a refund claim is filed with a tax officer, whether Centre or state, the officer will check, assess and sanction full tax refund both Central GST and State GST portion, thereby removing difficulties faced by the taxpayers. This will later get adjusted/settled amongst the two tax authorities through internal account adjustments. Currently, the two authorities settling the same refund claims adds to unnecessary complexities and inconvenience for the taxpayers.

The CNX Nifty traded in a range of 11,957.15 and 11,812.40. There were 31 stocks advancing against 18 stocks declining, while 1 stock remain unchanged on the index.

The top gainers on Nifty were Tata Steel up by 5.80%, Yes Bank up by 3.93%, Indian Oil Corporation up by 3.38%, NTPC up by 3.37% and Larsen & Toubro up by 3.20%. On the flip side, Zee Entertainment down by 4.47%, Indusind Bank down by 2.00%, Reliance Industries down by 1.77%, Bharti Airtel down by 1.19% and Tech Mahindra down by 1.19% were the top losers.

European markets were trading in green; France’s CAC rose 10.65 points or 0.20% to 5,327.16 and Germany’s DAX was up by 46.28 points or 0.39% to 12,057.32.

Asian markets ended mostly in green on Monday despite trade worries and provisional results for the European Union elections showed no party was able to secure a majority in European parliament. Besides, British Prime Minister Theresa May's resignation, limit the further gains. Chinese shares ended higher despite data showing that profits for China's industrial firms dropped in April on slowing demand and manufacturing activity. China's industrial profits fell an annual 3.7 percent in April in contrast to an increase of 13.9 percent growth in March, the country's statistics bureau said. Japanese shares ended up in thin trade as US President Trump announced he will announce something on a US-Japan trade agreement in August. Trump also said he was happy with how things were going with North Korea. Meanwhile, Seoul stocks declined as investors continued to fret about the trade war between the United States and China.