Markets give firm start to July month

Indian equity benchmarks gave a firm start to the month of July, with Sensex and Nifty closing higher by around 300 and 80 points, respectively. The start of the day was fabulous, as the Reserve Bank of India (RBI) relaxed the leverage ratio (LR) for banks to help them boost their lending activities. The leverage ratio stands reduced to 4% for Domestic Systemically Important Banks (DSIBs) and 3.5% for other banks effective from the quarter commencing October 1, 2019. The street remained enthusiastic amid report that the finance ministry will come up with further reforms in the indirect tax system with the introduction of new return system, rationalization of cash ledger system and a single refund-disbursing mechanism, among others.

Rally continued throughout the day, amid report that foreign investors infused a net amount of Rs 10,384 crore into the Indian capital markets in June and remained net buyers for the fifth month in a row on expectations of continued economic reforms. Some support also came with a report stating that the government is working on a proposal to extend tax benefits to retail investors in its two exchange-traded funds - CPSE and Bharat-22 ETF. Optimism remained among market participants, even though Indian manufacturing sector lost growth momentum in the month of June, on the back of softer increase in output. As per the survey report, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) eased to 52.1 in June from 52.7 in May.

On the global front, European markets were trading in green, despite Eurozone manufacturing activity contracted for the fifth straight month in June and the latest pace of decline was slightly more than initially estimated. The final data from IHS Markit showed that the factory Purchasing Managers' Index fell to a 3-month low of 47.6 in June from 47.7 in May. The score was slightly weaker than the earlier flash reading of 47.8. Asian markets ended mostly in green, despite China's manufacturing activity contracted for the first time in four months in June on trade disputes.

Back home, stocks related to the auto sector ended higher, despite weak sales data for month of June. Bajaj Auto registered a marginal rise of 0.05% in total sales to 404,624 units in June 2019 against 404,429 units in June 2018. Further, sugar industry stocks came under pressure, as industry body Indian Sugar Mills Association’s (ISMA) showed that India's sugar production is estimated to decline 14 per cent to 28.2 million tonne in the next marketing year starting October, mainly due to falling in sugarcane acreage due to fewer rains in states like Maharashtra and Karnataka.

Finally, the BSE Sensex gained 291.86 points or 0.74% to 39,686.50, while the CNX Nifty was up by 76.75 points or 0.65% to 11,865.60.

The BSE Sensex touched a high and a low of 39,764.82 and 39,541.09, respectively and there were 23 stocks advancing against 08 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.54%, while Small cap index was up by 0.30%.

The top gaining sectoral indices on the BSE were Realty up by 2.59%, Auto up by 1.23%, Power up by 1.10%, Healthcare up by 1.09% and Consumer Disc up by 0.73%, while Oil & Gas down by 1.69%, PSU down by 0.70%, Consumer Durables down by 0.28%, Telecom down by 0.08% and Metal down by 0.07% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 3.23%, Bajaj Auto up by 3.14%, Tata Motors - DVR up by 2.70%, HDFC up by 2.50% and Indusind Bank up by 1.64%. On the flip side, ONGC down by 3.99%, HCL Tech. down by 1.43%, Maruti Suzuki down by 0.46%, Hindustan Unilever down by 0.44% and Asian Paints down by 0.26% were the top losers.

Meanwhile, Reserve Bank of India (RBI) in its latest data has showed that India’s Current account deficit (CAD), the excess of country’s imports over exports, has rose to $57.2 billion or 2.1 percent of GDP for the fiscal year ended March 2019 (FY19) as compared to compared to $48.7 billion or 1.8 percent a year ago, amid a general slowdown in the economy. It also indicated that for FY19, the deficit widened despite a narrowing of the same in the fourth quarter of FY19 to $4.6 billion or 0.7 percent of GDP, as against $27.7 billion or 2.7 percent in the December quarter and $13 billion or 1.8 percent in the fourth quarter of FY18.

According to the data, overall trade performance was the prime influencer for both the contraction in CAD for the March quarter as well as a widening for the full year. It noted that a lower trade deficit of $35.2 billion in the March quarter, compared to $41.6 billion in the year-ago period helped in CAD contraction. Similarly, it said an increase in trade deficit to $180.3 billion for the year as a whole as against $160 billion in the year-ago period led to the widening of the CAD in FY19.

Data further showed that net services receipts increased 5.8 percent to $21.3 billion on the back of a rise in net earnings from telecommunications, computer and information services during the March quarter. Private transfer receipts, representing mainly the remittances by expat Indians, declined by 0.9 percent to $17.9 billion in the March quarter. The net foreign direct investment stood at $6.4 billion in March quarter, the same level as the year-ago period, and rose marginally to $30.7 billion for the year as a whole.

The CNX Nifty traded in a range of 11,884.65 and 11,830.80. There were 32 stocks advancing against 18 stocks declining on the index.

The top gainers on Nifty were Zee Entertainment up by 8.37%, Dr. Reddy’s Lab up by 4.06%, Tata Motors up by 3.11%, Bajaj Auto up by 3.11% and HDFC up by 2.65%. On the flip side, BPCL down by 4.10%, ONGC down by 3.87%, Indian Oil Corporation down by 2.44%, Coal India down by 1.79% and HCL Tech. down by 1.46% were the top losers.

European markets were trading in green; UK’s FTSE 100 increased 77.87 points or 1.05% to 7,503.50, France’s CAC rose 42.71 points or 0.77% to 5,581.68 and Germany’s DAX added 159.27 points or 1.28% to 12,558.07.

Asian markets ended mostly higher on Monday after the US and China agreed to restart trade talks on the sidelines of the G-20 summit and decided to not impose additional tariffs on each other's products. The Unites States agreed to put off additional tariffs on Chinese goods indefinitely while removing some curbs on Huawei Technologies Co. buying high-tech equipment from the US. In response, China agreed to make unspecified new purchases of US farm products and return to the negotiating table. Chinese shares ended higher after China said it would soften or lift restrictions on foreign investment in new sectors from July 30. Investors shrugged off data showing that Chinese manufacturing activity contracted for the first time in four months in June on trade disputes. The Caixin manufacturing PMI dropped to 49.4 from 50.2 in May as trade tensions caused renewed declines in total sales, export orders and production. Further, Japanese shares ended higher as the safe-haven yen slid on improved risk sentiment and tech shares gained ground on an easing of restrictions on Huawei. Meanwhile, Hong Kong was closed for a public holiday.