Benchmarks trade firm in early deals; Sensex reclaims 40k level

Indian equity markets have made optimistic start and are trading firm in early deals on Friday, with Sensex reclaiming the 40,000 mark and NSE Nifty just shy of 12,000 level, ahead of Union Budget to be presented by Finance minister Nirmala Sitharaman in the Parliament later in the day. Investors expect that the government could announce measures in the fiscal Budget to ease liquidity situation and boost the slowing economy. Traders took encouragement with Former Finance Minister Arun Jaitley’s statement that Indian economic growth graph was on an upward trajectory after past policy uncertainties have been replaced by certainties. Adding some optimism Chief Economic Adviser K V Subramanian said India needs to accelerate investment in excess of 35% of the GDP to achieve 8% sustained growth which is essential for becoming a $5 trillion economy by 2024-25.

On the global front, Asian markets are trading mostly in red at this point of time ahead of the upcoming release of the US nonfarm payrolls report, which may provide clues as to whether the Federal Reserve will cut interest rates at its monetary policy meeting at the end of July. On the other hand, the US markets remained closed on Thursday on account of the Independence Day.

Back home, on the sectoral front, pharma stocks were buzzing with ICRA’s report that Indian pharmaceutical industry is likely to grow by 11-13 per cent in the current fiscal, on the back of healthy demand from the domestic market, given increasing spend on healthcare along with improving access. Telecom stocks were in focus with the Economic Survey 2018-19 stating that the telecom industry’s contribution to GDP is estimated to reach 8.2% by 2020, by when industry players are slated to also leverage 5G technologies to connect with global markets and ring in a fully networked, knowledge and services economy.

The BSE Sensex is currently trading at 40017.57, up by 109.51points or 0.27% after trading in a range of 39944.93 and 40032.41. There were 18 stocks advancing against 11 stocks declining, while 2 stocks remain unchanged on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.04%, while Small cap index was up by 0.13%.

The top gaining sectoral indices on the BSE were Realty up by 0.54%, FMCG up by 0.40%, Capital Goods up by 0.38%, Industrials up by 0.27%, Telecom was up by 0.24%, while Oil & Gas down by 0.58%, Metal down by 0.44%, Power down by 0.38%, PSU down by 0.38% and Utilities was down by 0.30% were the top losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 1.04%, Indusind Bank up by 1.02%, HDFC up by 0.81%, Larsen & Toubro up by 0.73% and Bajaj Auto up by 0.66%. On the flip side, Yes Bank down by 3.38%, ONGC down by 1.59%, Vedanta down by 1.43%, NTPC down by 0.87% and Tata Motors down by 0.67% were the top losers.

Meanwhile, in order to achieve the objective of becoming a $5 trillion economy by 2024-25, Chief Economic Adviser (CEA) KV Subramanian has said India needs to sustain a real Gross Domestic Product (GDP) growth rate of 8 percent. He added that to achieve this growth rate the country needs to accelerate investment in excess of 35 percent of the GDP. Besides, India's economic growth is expected to rebound from a five-year low to 7 percent this year (FY20).

He said ‘the investment as percentage of GDP has to be in excess of 35 percent. In fact, China for instance reached 50 percent of GDP. Definitely, we need to invest close to 35 percent.’ Currently, the country's investment level as percentage of GDP is 29.3 percent. He also said ‘From 29-odd if we get to mid-30s we will really get into virtuous cycle and then we need to sustain at that level’.

Subramanian further said international experience, especially from high-growth East Asian economies, suggests that such growth can only be sustained by a ‘virtuous cycle’ of savings, investment and exports catalysed and supported by a favourable demographic phase. Investment, especially private investment, is the ‘key driver’ that drives demand, creates capacity, increases labour productivity, introduces new technology, allows creative destruction, and generates jobs.

The CEA added that exports must form an integral part of the growth model because higher savings preclude domestic consumption as the driver of final demand. Similarly, job creation is driven by this virtuous cycle. He added that when examined across the entire value chain, capital investment fosters job creation as the production of capital goods, research and development and supply chains generate jobs.

The CNX Nifty is currently trading at 11974.50, up by 27.75 points or 0.23% after trading in a range of 11959.25 and 11981.75. There were 32 stocks advancing against 18 stocks declining on the index.

The top gainers on Nifty were Indiabulls Housing Finance up by 1.50%, Hindustan Unilever up by 1.03%, Indusind Bank up by 0.94%, HDFC up by 0.89% and Bharti Infratel up by 0.89%. On the flip side, Yes Bank down by 3.12%, ONGC down by 1.77%, Vedanta down by 1.46%, Hindalco down by 1.01% and BPCL down by 0.97% were the top losers.

Asian counters are trading mostly in red; Straits Times declined 17.50 points or 0.52% to 3,354.75, Taiwan Weighted shed 11.95 points or 0.11% to 10,763.95, Kospi dropped 1.75 points or 0.08% to 2,106.98, Jakarta Composite decreased 11.08 points or 0.17% to 6,364.89, Shanghai Composite slipped 5.33 points or 0.18% to 2,999.92. On the other hand, Nikkei 225 surged 12.72 points or 0.06% to 21,715.17 and Hang Seng was up by 21.90 points or 0.08% to 28,817.67.