Local equities cut some initial gains; Sensex shy of 37,800 mark

After trading in fine-fettle in early deals, local benchmarks have cut some of their initial gains in morning session but continue to trade in green territory. As some concerns came in with a report that even as more and more crippled banks come out of the dud asset tunnel, the heightening growth slowdown and the lingering crisis at non-banking lenders pose fresh challenges to their asset quality. Some cautions also came with a report that former Reserve Bank of India (RBI) governor, Bimal Jalan, has warned that the higher income taxes the government introduced in its budget could lead to a flight of funds from the country. However, markets took support from the private report that India’s central bank plans to discuss next month the government’s proposal to raise foreign currency debt, people familiar with the matter said, amid risks flagged by economists about the plan. The Reserve Bank of India’s board will meet in August. Traders also took note of a report that the government will auction four dated securities worth Rs 17,000 crore on August 2 in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) platform, a move that will suck out liquidity from the financial system.

On the global front, Asian markets were trading mostly in green, ahead of US-China trade talks this week in Shanghai. The Bank of Japan also opted to keep monetary policy steady. Back home, on the sectoral front, metal stocks trading in red, despite the World Steel Association’s report that India’s crude steel output rose by 4 per cent to 9.336 million tonne (MT) in June 2019 compared to the year-ago month. The country had produced 8.976 MT of crude steel in June 2018.

The BSE Sensex is currently trading at 37792.78, up by 106.41 points or 0.28% after trading in a range of 37690.43 and 37950.21. There were 17 stocks advancing against 13 stocks declining, while 1 stock remain unchanged on the index.

The broader indices were trading in red; the BSE Mid cap index slipped 0.41%, while Small cap index was down by 0.48%.

The top gaining sectoral indices on the BSE were Telecom up by 1.48%, Healthcare up by 0.95%, Capital Goods up by 0.54%, TECK up by 0.49% and BANKEX up by 0.34%, while Auto down by 0.77%, Metal down by 0.40%, Power down by 0.36%, Consumer Disc down by 0.30% and Basic Materials was down by 0.27% were the top losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 3.70%, ICICI Bank up by 1.81%, Larsen & Toubro up by 1.22%, Sun Pharma up by 1.10% and Infosys was up by 0.63%. On the flip side, Hero MotoCorp down by 2.11%, Tata Motors down by 1.09%, Bajaj Auto down by 1.01%, Yes Bank down by 1.00% and Vedanta was down by 0.83% were the top losers.

Meanwhile, Crisil, a global analytical company providing ratings, research, and risk and policy advisory services, in its latest report has said that the Indian readymade garment (RMG) makers may witness revenue growth of 10% in this calendar year (CY2019). The growth will be mainly driven by healthy domestic demand and 10% growth in exports. The agency is expecting revenue growth of RMG makers to accelerate 300 basis points (bps) to 10% in CY2019, compared with 7% in CY2018, riding on robust domestic demand and a spurt in exports.

It further mentioned that higher revenue growth will provide the benefit of operating leverage and will help improve profitability. It added that profitability of exporters is also aided by favourable exchange rate and restoration of incentives, resulting in better cash generation, which will improve the credit profiles of RMG firms this fiscal.

It highlighted that credit profiles had moderated in the previous two fiscals on account of depreciation in the rupee against the dollar and a reduction in export incentives. Domestic sales logged an annual growth rate of 9.6% in the five years through CY2018 to Rs 4.83 lakh crore, which was 80% of the sector's revenue.  That pace is set to increase to 10-10.5% this year for two reasons, increasing penetration of both organised retail and brands in tier II and III cities, and rising growth of value apparel retail segment.

The CNX Nifty is currently trading at 11216.60, up by 27.40 points or 0.24% after trading in a range of 11190.70 and 11267.45. There were 24 stocks advancing against 24 stocks declining, while 2 stock remain unchanged on the index.

The top gainers on Nifty were Bharti Airtel up by 3.72%, ICICI Bank up by 1.64%, Indiabulls Housing Finance up by 1.45%, Sun Pharma up by 1.14% and Bajaj Finserv was up by 1.04%. On the flip side, Bharti Infratel down by 2.32%, Hero MotoCorp down by 2.27%, Yes Bank down by 1.06%, Vedanta down by 1.03% and Hindalco was down by 0.93% were the top losers.

Asian markets were trading mostly in green, Hang Seng increased 77.48 points or 0.28% to 28,183.89, Nikkei 225 surged 69.99 points or 0.32% to 21,686.79, Jakarta Composite soared 43.09 points or 0.68% to 6,342.13, KOSPI rose 12.62 points or 0.62% to 2,042.10, Straits Times advanced 5.52 points or 0.16% to 3,351.91 and Shanghai Composite was up by 17.89 points or 0.61% to 2,958.90. On the other side, Taiwan Weighted was down by 46.01 points or 0.42% to 10,839.72.