Post Session: Quick Review

Snapping a three-session losing run, Indian equity benchmarks ended Friday’s trade with healthy gains, on expectations of FPI tax rollback and some measures by the government to boost growth. Domestic indices opened with heavy losses, as traders were cautious with report that Chief Economic Adviser (CEA) Krishnamurthy Subramanian virtually ruled out a major stimulus package for the economy, saying profit is private, losses are public is not good economics. He said sunrise and sunset phases for industry are usual and expecting the government to support industry in sunset phases can be morally hazardous. Some cautiousness also crept in as credit rating agency ICRA estimated that India’s gross domestic product (GDP) growth may ease to 5.5-6 percent in the first quarter (April-June) of the fiscal year 2019-20, amid a slowdown in the expansion of industry and agriculture.

However, markets shed their early losses and took a turn towards the positive zone in second half of the day and traded with full traction, as market participants got some support with Niti Aayog Vice Chairman Rajiv Kumar’s statement that the government is considering a number of measures which will be taken at an appropriate time to deal with financial stress and unleash animal spirit in the economy. Traders also reacted positively to reports that the commerce ministry will soon come out with a new foreign trade policy, with an aim to simplify procedures for exporters and importers besides providing incentives to boost outbound shipments. Traders also took a note with the Central Board of Direct Taxes (CBDT) stating that small startups with turnover up to Rs 25 crore will continue to get the promised tax holiday as specified in Section 80-IAC of the Income Tax Act, 1961 (the Act), which provides deduction for 100 per cent of income of an eligible start-up for 3 years out of 7 years from the year of its incorporation.

On the global front, Asian markets ended mostly in green on Friday, while European markets were trading in green, following Wall Street's rebound as investors looked ahead to a speech by the U.S. Federal Reserve chairman for clues about possible interest rate cuts. Back home, aviation stocks were in focus with the Directorate General of Civil Aviation’s data showing that air passenger traffic in India grew 3.01% in the first seven months of 2019-the slowest pace in at least five years-amid market uncertainties in a slowing economy and the grounding of Jet Airways (India). Also, pharma sector were in focus with the Organisation of Pharmaceutical Producers of India (OPPI) stating that while the pharma industry supports the government’s initiatives to offer medicines at affordable prices, it wants certainty and predictability in the price control mechanism.

The BSE Sensex ended at 36742.32, up by 269.39 points or 0.74% after trading in a range of 36102.35 and 36807.34. There were 23 stocks advancing against 8 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index rose 0.97%, while Small cap index was up by 0.53%. (Provisional)

The top gaining sectoral indices on the BSE were Oil & Gas up by 3.37%, Metal up by 3.37%, Energy up by 2.72%, PSU up by 2.44% and Basic Materials up by 2.01%, while FMCG down by 0.72%, Bankex down by 0.33% and Capital Goods down by 0.03% were the few losing indices on BSE. (Provisional)

The top gainers on the Sensex were Vedanta up by 5.70%, Yes Bank up by 5.15%, ONGC up by 4.84%, Mahindra & Mahindra up by 4.60% and Tata Motors up by 3.58%. (Provisional)

On the flip side, Indusind Bank down by 1.98%, ITC down by 1.67%, ICICI Bank down by 1.03%, Kotak Mahindra Bank down by 0.61% and Hindustan Unilever down by 0.55% were the top losers. (Provisional)

Meanwhile, terming the stress in the financial sector as unprecedented, Niti Aayog vice chairman Rajiv Kumar has said that the government needs to take steps which eliminate apprehension from the minds of private sector players and encourage them to step up investments. He added this stress in the financial sector has resulted in an economic slowdown in the country. He also said private investments will drive India out of the middle income trap. He said nobody had faced this sort of situation in the last 70 years where entire financial system was under threat. Explaining further, Kumar said some of the steps have already been announced in the Union Budget to address stress in the financial sector and give a push to economic growth which hit a 5-year low of 6.8% in 2018-19.

Elaborating how stress in the financial sector has led to a slowdown in the economy, the Niti Aayog vice chairman said the entire episode started with indiscriminate lending during 2009-14 leading rise in non-performing assets (NPAs) post 2014. He said rising NPAs reduced the ability of banks to do fresh lending and added that the space was occupied by the shadow banks with credit growth of 25%. The NBFCs could not manage this high loan growth leading to defaults by some of the large entities triggering slowdown in the economy eventually.

He said the whole nature of the game has changed after demonetisation, the Goods and Services Tax and the Insolvency and Bankruptcy Code. The earlier period where you had 35% cash sloshing around, it has become much less now. All of these put together it is a fairly complex situation. There is no easy answer. On the issue of delay of payments by the government and its departments to private sector in lieu of goods and services availed from them, he said, it could be one of the reasons for the slowdown but the authorities are making all efforts to expedite the process.

The CNX Nifty ended at 10842.50, up by 101.15 points or 0.94% after trading in a range of 10637.15 and 10862.55. There were 41 stocks advancing against 9 stocks declining on the index. (Provisional)

The top gainers on Nifty were Zee Entertainment up by 6.55%, UPL up by 6.23%, Vedanta up by 5.70%, Yes Bank up by 5.68% and BPCL up by 5.40%. (Provisional)

On the flip side, Indusind Bank down by 1.79%, ITC down by 1.54%, Eicher Motors down by 0.94%, ICICI Bank down by 0.80% and Kotak Mahindra Bank down by 0.60% were the top losers. (Provisional)

European markets were trading in green; UK’s FTSE 100 increased 51.09 points or 0.72% to 7,179.27, France’s CAC rose 27.18 points or 0.5% to 5,415.43 and Germany’s DAX was up by 43.55 points or 0.37% to 11,790.59.

Asian markets ended mostly higher on Friday as investors waiting to US Federal Reserve Chairman Jerome Powell's speech at the Jackson Hole Economic Policy Symposium later in the day for additional clues about the outlook for interest rates. Meanwhile, tensions between Japan and South Korea escalated after Seoul said it was cancelling a military intelligence-sharing pact with Tokyo over a bitter trade dispute. The arrangement was designed to share information on the threat posed by North Korea and its missile and nuclear activities. Chinese shares ended up after reports that the Trump administration is still planning for a round of in-person talks between US and Chinese officials in September. Japanese shares ended higher, supported by weaker yen and jump in defense stocks following an escalated diplomatic row with South Korea.