Tuesday brings positive vibes for markets

Tuesday brought positive vibes for Indian equity markets, with Sensex and Nifty closing higher by around 0.75% each. Key indices made a cautious start but soon gained momentum, aided with Finance Minister Nirmala Sitharaman’s statement that the government planned steps to improve the state of the economy fairly quickly after getting inputs from business leaders. Traders took a note of a report that India's economy needs external capital flow to grow at nine per cent and touch $5 trillion in the next five years. It also said that one of the positive thing in India is the monsoon is good and expecting rural economy to pick up and therefore slowly the country will see economy coming back to normalcy.

Benchmarks extended their gains in late afternoon session to trade near their intraday high points, on account of positive European markets. The street remained optimistic, as the ASSOCHAM expects the Reserve Bank of India (RBI) to cut the benchmark policy Repo rate by 50 basis points or more, in the wake of a realistic assessment of the state of economy which needs an immediate demand push and investment support by way of reduced cost of borrowing. Meanwhile, the finance ministry has said that banks have agreed to take measures as per RBI guidelines to review their lending rates as they have not commensurately transmitted to borrowers benefits of reduction in the policy rate by the RBI.

On the global front, European markets were trading in green, as Germany's factory orders rebounded at a faster than expected pace in June. The data from Destatis showed that factory orders grew 2.5 percent month-on-month in June, reversing a revised 2 percent drop in May. The pace of growth also exceeded the expected rate of 0.5 percent. Asian markets ended in red, after Japan's leading index fell to the lowest level in nearly nine-and-a-half years in June. The preliminary data from the Cabinet Office showed that the leading index, which measures the future economic activity, fell to 93.3 in June from 94.9 in May. The expected score for June was 93.5.

Back home, the Non-banking finance companies (NBFCs) stocks remained in focus amid report that bank credit to NBFCs fell by over Rs 6,000 crore between April and June, once again highlighting the risk aversion towards the sector. Stocks related to the coal sector remained in watch as the government has begun the process of auction of 27 coal mines and allotment of 15 blocks to public sector undertakings. Besides, e-commerce sector also remained in focus after the Department of Consumer Affairs released draft guidelines for e-commerce firms. The ministry has sought views of stakeholders on the draft guidelines on e-commerce by September 16.

Finally, the BSE Sensex gained 277.01 points or 0.75% to 36,976.85, while the CNX Nifty was up by 85.65 points or 0.79% to 10,948.25.

The BSE Sensex touched a high and a low of 37,241.77 and 36,536.59, 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 1.44%, while Small cap index was up by 1.72%.

The top gaining sectoral indices on the BSE were Capital Goods up by 2.12%, Telecom up by 1.94%, Realty up by 1.78%, Industrials up by 1.70% and Basic Materials up by 1.69%, while Energy down by 0.68%, IT down by 0.20%, TECK down by 0.15% and Oil & Gas down by 0.02% were the top losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 5.30%, Tech Mahindra up by 3.97%, Bajaj Finance up by 3.41%, Bharti Airtel up by 3.18% and Maruti Suzuki up by 2.88%. On the flip side, Power Grid down by 1.52%, TCS down by 1.47%, Reliance Industries down by 1.31%, Tata Motors - DVR down by 1.02% and Tata Motors down by 0.97% were the top losers.

Meanwhile, the Ministry of Power has introduced mechanism ‘Trust Retention Account’ (TRA) for certain stressed power plants to utilize their surplus after meeting operating expense, for servicing debt in the first place. It noted that in case the developers using coal linkage of amended SHAKTI policy, TRA must be put in place, if it is not there already.

According to the Ministry, all the revenues generated shall be deposited to the TRA. Generally, the lead banker would act as a TRA agent. However, it said that in case of a non-banking financial company (NBFC), like PFC or REC, which is a lead financier, any bank, which is one of the lenders, can be appointed as the TRA agent. The companies will first pay statutory payment (taxes) followed by fuel cost, transmission expenses, operation and maintenance expenses and then pay interest on loan and principal payments.

In November 2018, the high level empowered committee on stressed thermal power plants in its report had suggested that the net surplus after meeting operating expenses generated shall be used for servicing debt in the first place. The recommendations were implemented in earlier in March 2019. Now, the Ministry of Power has brought out the mechanism for that. 

The CNX Nifty traded in a range of 11,018.55 and 10,813.80. There were 35 stocks advancing against 15 stocks declining on the index.

The top gainers on Nifty were Indiabulls Housing Finance up by 7.39%, Yes Bank up by 5.49%, Tech Mahindra up by 3.70%, Bajaj Finance up by 3.64% and Bharti Airtel up by 3.16%. On the flip side, Zee Entertainment down by 5.85%, Cipla down by 3.19%, Reliance Industries down by 1.84%, Power Grid down by 1.72% and TCS down by 1.55% were the top losers.

European markets were trading in green; UK’s FTSE 100 increased 8.06 points or 0.11% to 7,231.91, France’s CAC increased 48.87 points or 0.93% to 5,290.42 and Germany’s DAX was up by 84.04 points or 0.72% to 11,742.55.

Asian markets ended mostly lower on Tuesday, with cautious trading over escalating Sino-American tensions after the Trump administration labeled China a currency manipulator and China confirmed it has halted purchases of US farm products. Though, the Yuan stabilized to hold above 7 per dollar, supported by signs that Beijing might not permit a steep depreciation. Japanese shares closed down as the yen strengthened as investors opted for a safe-haven bid amid escalation in the Sino-US trade war.