Markets stage recovery to end higher

Indian equity bourses staged recovery to end higher on the last trading day of the week. The start of the day was negative, 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. Domestic sentiments remained subdued during first half of the session, amid reports 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.

But, in the second half of the session, key indices gained the traction, following firm global markets. Domestic sentiments got a boost, as the Central Board of Direct Taxes (CBDT) said 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. Market participants also took support with 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.

On the global front, European markets were trading in green, after Austria's production index rose in June, led by a growth in industrial output and construction. The data from Statistics Austria showed that the production index that combines both industry and construction grew 1.3 percent year-on-year in June, after a 0.4 percent fall in May. Asian markets ended higher, as Indonesia's central bank unexpectedly slashed its key interest rate for a second straight month in August in a bid to support growth amid a global slowdown. The Board of Governors, led by Governor Perry Warjiyo, decided to reduce the 7-day reverse repo rate by 25 basis points to 5.50 percent.

Back home, airline stocks ended higher, after Directorate General of Civil Aviation (DGCA) in its monthly data showed that India’s domestic air passenger traffic rose by 3.01 percent in July over the year-ago period, with local carriers flying 11.90 million passengers in the month. Domestic airlines flew 11.55 million passengers in the same month last year. Further, stocks related to pharma sector remained in watch, with the Organisation of Pharmaceutical Producers of India’s (OPPI) statement 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.

Finally, the BSE Sensex gained 228.23 points or 0.63% to 36,701.16, while the CNX Nifty was up by 88.00 points or 0.82% to 10,829.35.

The BSE Sensex touched a high and a low of 36807.34 and 36,102.35, 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 0.93%, while Small cap index was up by 0.55%.

The top gaining sectoral indices on the BSE were Metal up by 3.49%, Oil & Gas up by 3.35%, Energy up by 2.74%, PSU up by 2.44% and Basic Materials up by 2.05%, while FMCG down by 0.83%, Bankex down by 0.31% and Capital Goods down by 0.19% were the only losing indices on BSE.

The top gainers on the Sensex were Vedanta up by 6.55%, Yes Bank up by 5.24%, ONGC up by 4.66%, Mahindra & Mahindra up by 4.09% and Tata Steel up by 3.43%. On the flip side, Indusind Bank down by 1.90%, ITC down by 1.71%, ICICI Bank down by 0.85%, Power Grid down by 0.69% and Hindustan Unilever down by 0.69% were the top losers.

Meanwhile, amid a slowdown in the expansion of industry and agriculture, credit rating agency ICRA has estimated India’s gross domestic product (GDP) growth rate at 5.5-6 percent in the first quarter (April-June) of the fiscal year 2019-20. It highlighted that the country’s economy accelerated to 8.2% during the same quarter of the previous year, on the back of a strong core performance and a healthy base.

According to the report, industrial growth is expected to decelerate sharply to 5.0% in Q1 FY20 from 9.8% in Q1 FY19, due to factors like weakening domestic demand, a contraction in exports, muted investment activity during the elections and an unfavourable base effect. Based on a modest rise in volumes and subdued earnings in various sectors, it expects manufacturing gross value added (GVA) growth to ease significantly to around 5.0% in Q1 FY20 from 12.1% in Q1 FY19. It also expects construction GVA growth to record a considerable easing to around 5.0% in Q1 FY20 from 9.6% in Q1 FY19. However, it said that electricity generation is expected to record an improved performance in Q1 FY20 on the back of a turnaround in hydroelectricity.

Rating agency further said that services sector growth is expected to remain steady at around 7.1% in Q1 FY20, in line with the performance in Q1 FY19. It said an improved performance of financial, real estate and professional services, and public administration and defence, is likely to offset a slowdown in the growth of trade, hotels, transport, communication and services related to broadcasting. It added that the enhanced profitability metrics of the banking system, led by lower provisioning and treasury gains, as well as a turnaround in FII inflows, are expected to boost the GVA growth of financial, real estate and professional services in Q1 FY20.

The CNX Nifty traded in a range of 10,862.55 and 10,637.15. There were 41 stocks advancing against 09 stocks declining on the index.

The top gainers on Nifty were Zee Entertainment up by 6.55%, UPL up by 6.18%, Vedanta up by 5.70%, Yes Bank up by 5.60% and BPCL up by 5.22%. On the flip side, Indusind Bank down by 1.78%, ITC down by 1.50%, Eicher Motors down by 0.94%, ICICI Bank down by 0.80% and Kotak Bank down by 0.60% were the top losers.

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.