Local equities continue upward rally; Sensex above 37,300 mark

Local equity benchmarks gave thumbs up to CPI number and are currently trading at the high point of day on the back of buying interest across some blue chip counters. Traders remain energized with government’s data which showed that snapping the 6-month rising streak, the retail inflation fell in the month of July despite rise in the food prices. The CPI-based inflation was reduced to 3.15 per cent in the last month. In June 2019, CPI inflation had soared to 3.18 per cent compared to 3.05 per cent in the previous month. Local investors also cheered with commerce ministry’s report that India and Russia have called for diversifying and deepening of economic ties in priority sectors to meet the bilateral trade target of $30 billion by 2025. Buying further crept in with a report that the slowdown-hit economy may soon get a booster dose from the government with Finance Ministry working on a stimulus package for the industry may include a slew of financial measures ranging from tax cuts, subsidies and other incentives. However, traders ignored a private report that the overall slowdown in the economy, coupled with factors like the NBFC crisis, developer defaults and bankruptcies, have slackened the sentiments of the real estate sector, which may result a decline in residential sales in the next six months.

On the global front, Asian markets were trading higher, after the United States decided to postpone some tariffs on Chinese goods, fueling hopes for a trade deal between the two countries. Back home, Reserve Bank of India (RBI) permitted startups, banks and financial institutions to set up regulatory sandbox (RS) for live testing of innovative products in areas like retail payments, digital KYC and wealth management.

The BSE Sensex is currently trading at 37377.51, up by 419.35 points or 1.13% after trading in a range of 37000.77 and 37384.40. There were 27 stocks advancing against 3 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.58%, while Small cap index was up by 0.29%.

The top gaining sectoral indices on the BSE were Metal up by 1.91%, Basic Materials up by 1.77%, Telecom up by 1.47%, Oil & Gas up by 1.47% and Energy was up by 1.26%, while Healthcare down by 1.50% was the only losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 4.23%, Vedanta up by 3.97%, Hero MotoCorp up by 2.70%, IndusInd Bank up by 2.27% and Bajaj Finance was up by 2.16%. On the flip side, Sun Pharma down by 5.20%, Kotak Mahindra Bank down by 1.06% and Hindustan Unilever was down by 0.11% were the top losers.

Meanwhile, with a view to enable authorities to take a considered view on the regulatory changes or new regulations that may be needed to support useful innovation, while containing the attendant risks, the Reserve Bank of India (RBI) has permitted fintech companies including startups, banks, financial institutions and any other company partnering with or providing support to financial services businesses to set up regulatory sandbox (RS) for live testing of innovative products in areas like retail payments, digital KYC and wealth management.

The RBI further mentioned that the focus of the RS will be to encourage innovations intended for use in the Indian market in areas where there is absence of governing regulations and there is a need to temporarily ease regulations for enabling the proposed innovation. The RS may run a few cohorts (end-to-end sandbox process), with a limited number of entities in each cohort testing their products during a stipulated period. The RS shall be based on thematic cohorts focussing on financial inclusion, payments and lending, digital KYC. The cohorts may run for varying time periods but should ordinarily be completed within six months.

Users of an RS can test the product's viability without the need for a larger and more expensive roll-out, if the product appears to have the potential to be successful, is another major benefit of such exercise. On risks and limitations of RS, the RBI said innovators may lose some flexibility and time in going through the sandbox process. However, running the RS in a time-bound manner at each stage can mitigate this risk.

RS usually refers to live testing of new products or services in a controlled/test regulatory environment for which regulators may or may not permit certain relaxations for the limited purpose of the testing. RS allows the regulator, innovators, financial service providers and customers to conduct field tests to collect evidence on the benefits and risks of new financial innovations, while carefully monitoring and containing their risks.

The CNX Nifty is currently trading at 11044.80, up by 118.95 points or 1.09% after trading in a range of 10935.60 and 11046.60. There were 43 stocks advancing against 7 stocks declining on the index.

The top gainers on Nifty were UPL up by 4.14%, Tata Steel up by 4.10%, Vedanta up by 3.97%, Zee Entertainment up by 3.56% and Bajaj Finserv was up by 2.85%. On the flip side, Sun Pharma down by 5.48%, Dr. Reddys Lab down by 4.28%, Coal India down by 2.23%, Wipro down by 2.17% and Kotak Mahindra Bank was down by 1.14% were the top losers.

All Asian markets were trading in green, Hang Seng increased 177.20 points or 0.7% to 25,458.50, Nikkei 225 surged 207.38 points or 1.01% to 20,662.82, Taiwan Weighted strengthened 95.91 points or 0.93% to 10,458.57, Jakarta Composite soared 34.18 points or 0.55% to 6,245.14, Straits Times advanced 7.12 points or 0.23% to 3,153.85, Shanghai Composite gained 21.79 points or 0.78% to 2,819.05 and KOSPI rose 14.65 points or 0.76% to 1,940.48.