Benchmarks settle with modest gains; Sensex reclaims 39,000 mark

Snapping two-day losing streak, Indian equity benchmarks closed higher on Tuesday, with Sensex and Nifty reclaiming their crucial 39,000 and 11,650 levels, respectively. Markets made positive start tacking supportive global cues. Some support also came in with Niti Aayog CEO Amitabh Kant’s statement that circular economy has the potential to generate 1.4 crore jobs in next 5-7 years and create lakhs of new entrepreneurs. Later markets turned volatile as investors remained cautious ahead of US Federal Reserve's meeting, amid escalating global trade war concerns. Some cautiousness also came in as Fitch lowered India's growth forecast to 6.6 per cent for the current fiscal from 6.8 per cent projected earlier, as manufacturing and agriculture sectors showed signs of slowing down over the past year. Some concern came in as private report indicated that June may end up with a deficit, with monsoon remaining poor across the country so far. It added that there is a possibility of 40 per cent deficient monsoon in the month of June in 66 per cent districts across the country.

However, late hour buying pushed the markets above neutral lines with recovery in European counter parts and on the back of buying in Oil & Gas, PSU and IT counters. Traders took note of Reserve Bank of India Governor Shaktikanta Das’ statement that the central bank will not hesitate to take any required measure to maintain the financial stability of the economy. He said the conventional approach to the regulation and supervision of NBFCs had been ‘light-touch’, so that they could complement banks. However, to strengthen the sector, maintain stability and avoid regulatory arbitrage, RBI was taking necessary regulatory and supervisory steps, keeping in mind the requirements of the changing times.

On the global front, European markets are trading higher on Tuesday after European Central Bank president Mario Draghi promised more monetary stimulus if the economy does not improve, offsetting another warning on slowing sales from the chip sector. Draghi pointed the way to cuts in interest rates or new asset purchases if inflation does not return to target, weakening the euro, lowering European bond yields and pulling stock markets higher. Asian markets ended mostly in green on Tuesday but gains were limited, ahead of the conclusion of a crucial Federal Reserve Bank of Japan meetings due this week.

Back home, most of the aviation stocks ended in green with The Directorate General of Civil Aviation’s latest data showing that passengers carried by domestic airlines during Jan-May 2019 were 586.54 lakh as against 571.58 lakh during the corresponding period of previous year thereby registering a growth of 2.62%. Gem and jewellery stocks ended mostly lower with report that CRISIL believes the withdrawal of benefits under the Generalized System of Preferences (GSP) effective June 5, as announced by the US earlier, will moderately hit gem and jewellery exports from India. The gems and jewellery sector is already under pressure on account of stringent lending rules and working-capital crunch. Defence sector stocks remained in limelight with Joint Secretary (Defence Infrastructure Panel) in the Ministry of Defence Sanjay Jaju’s statement that to boost defence exports, the government will launch 'Open General Export License' scheme with a month.

Finally, the BSE Sensex rose 85.55 points or 0.22% to 39,046.34, while the CNX Nifty was up by 19.35 points or 0.17% to 11,691.50.

The BSE Sensex touched a high and a low of 39,167.83 and 38,870.96, respectively and there were 19 stocks advancing against 11 stocks declining, while 1 stock remain unchanged on the index.

The broader indices ended mixed; the BSE Mid cap index gained 0.08%, while Small cap index was down by was 0.42%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.13%, PSU up by 0.89%, IT up by 0.76%, TECK up by 0.69%, Power was up by 0.58%, while Healthcare down by 0.55%, Auto down by 0.52%, FMCG down by 0.32%, Consumer Disc down by 0.32% were the few losing indices on BSE.

The top gainers on the Sensex were Vedanta up by 2.47%, Coal India up by 2.02%, ICICI Bank up by 1.88%, Power Grid Corporation up by 1.88% and HCL Tech was up by 1.57%. On the flip side, Yes Bank down by 5.94%, Maruti Suzuki down by 2.20%, Asian Paints down by 1.53%, Tata Motors - DVR down by 1.47% and Sun Pharma was down by 1.11% were the top losers.

Meanwhile, Reserve Bank of India (RBI) Governor Shaktikanta Das has said that financial stability has emerged as another key consideration for monetary policy formulation in the post-2008 financial crisis world beyond the imperatives of inflation and growth. He also stated that a healthy financial sector is a pre-requisite to improve growth prospects. He also expressed confidence that the end of political uncertainty with the recent polls and continuation of economic reforms may lead to a reversal of the current weaknesses. His comments come amid a slew of troubles plaguing the non-banking finance companies (NBFCs) which account for a fifth of the credit market.

Das has stated that the central bank is also giving a fresh look at their regulatory and supervisory framework and is continue to monitor the activity and performance of large NBFCs with a view to ensure financial stability. He said “while a delicate balance is necessary between inflation and growth in setting the monetary policy in a flexible inflation targeting framework like the one we adopted since the past two years, financial stability is also important in the present context.”

RBI Governor has stressed that the fact remains that though the focus of monetary policy is mainly inflation and growth, the underlying theme has always been financial stability. He noted that the RBI will focus on effective communication and coordination to achieve broader macroeconomic objectives of price stability, growth and financial stability. He added that a healthy financial sector is a must to reinvigorate the sagging growth by improving investment climate.

The CNX Nifty traded in a range of 11,727.20 and 11,641.15. There were 32 stocks advancing against 17 stocks declining, while 01 stock remain unchanged on the index.

The top gainers on Nifty were Vedanta up by 2.47%, Coal India up by 1.98%, BPCL up by 1.96%, Power Grid Corporation up by 1.93% and ICICI Bank was up by 1.92%. On the flip side, Indiabulls Housing Finance down by 6.86%, Yes Bank down by 5.90%, Maruti Suzuki down by 2.17%, Hindalco down by 1.89% and Asian Paints was down by 1.56% were the top losers.

European markets were trading in green; UK’s FTSE 100 jumped 58.19 points or 0.79% to 7,415.50, France’s CAC increased 78.35 points or 1.45% to 5,469.30 and Germany’s DAX was up by 147.03 points or 1.22% to 12,232.85.

Asian markets ended mostly higher on Tuesday, although overall gains remained capped amid caution ahead of the US Federal Reserve and the Bank of Japan meetings due this week. The US central bank is unlikely to cut rates at its two-day meeting, but the Fed's statement on June 19 may offer fresh clues as to the timing around a possible interest-rate cut later this year. Markets have nearly priced in hopes for a rate cut eventually since the Fed chairman made remarks on June 4 suggesting a lower rate. Japanese shares dropped to a 1-1/2 week low in subdued trade as caution set in ahead of Fed and Bank of Japan (BoJ) meetings.