Markets log strong gains; Sensex reclaims 37,400 mark

Indian equity benchmarks logged strong gains on Monday, with both the larger peers, Sensex and Nifty, closing higher by over 2%. After a positive start, markets slipped in red terrain for a small period, as Moody's Investors Service in its latest report revised downwards India's Gross domestic product (GDP) growth forecast to 6.2% for 2019 calendar year. The GDP growth forecast for current year was revised downwards from its previous estimation of 6.8%. But soon, key indices gained traction, aided by Finance Minister Nirmala Sitharaman’s statement the India's Gross Domestic Product continues to grow at a faster pace than the global economy and any other major economy. She said reform is a continuous process for her government and it tops the agenda.

Bulls hold their grip on markets in the second half of the session, as the Reserve Bank of India (RBI) Governor Shaktikanta Das said that the RBI will continue to unlock entrepreneurial energies and set the country firmly on track to become $5 trillion economy in the next five years. Adding more confident among traders, former president Pranab Mukherjee said the government's ambitious target of becoming a $ 5 trillion economy by 2024-25 is possible through prudent fiscal management. Some support also came with industry body, Confederation of Indian Industry’s (CII) statement that the multi-sectoral and multi-dimensional policy stimulus announced by the government will have significant impact, imparting stability and underpinning a new growth impetus for India.

On the global front, European markets were trading in green, as Czech Republic's economic sentiments rose to the highest level in three months in August. The survey results from the Czech Statistical Office showed that the economic sentiment index rose to 95.6 in August from 95.1 in July. The latest increase was the highest since May, when it was 95.7. Asian markets ended lower, after Singapore's industrial production declined at a slower-than-expected rate in July. The data from the Economic Development Board showed that manufacturing output dropped 0.4 percent year-on-year in July, following an 8.1 percent fall in June. The general manufacturing, biomedical manufacturing & chemicals logged output growth, while the rest of the manufacturing clusters contracted from last year.

Back home, stocks related to the leather industry remained in watch, after Council for Leather Exports (CLE) said that the measures announced by the government to push economic growth will help attract investments and boost exports of leather sector. Further, automobile industry stocks also remained in limelight, as the government announced several relief measures including deferring one-time registration fee, lifting a ban on the purchase of petrol/diesel vehicles by its departments and allowing higher depreciation, but it remained non-committal on the demand for a reduction in GST rates. In a bid to help clear rising inventory of BS-IV emission compliant vehicles, it said such vehicles purchased till March 31, 2020 will be allowed to ply till the validity of their registration.

Finally, the BSE Sensex gained 792.96 points or 2.16% to 37,494.12, while the CNX Nifty was up by 228.50 points or 2.11% to 11,057.85.

The BSE Sensex touched a high and a low of 37,544.48 and 36,492.65, respectively and there were 22 stocks advancing against 09 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 1.57%, while Small cap index was up by 1.65%.

The top gaining sectoral indices on the BSE were Realty up by 3.60%, Bankex up by 3.57%, Capital Goods up by 2.84%, Industrials up by 2.37% and PSU up by 2.12%, while Metal down by 1.12% was the lone losing index on BSE.

The top gainers on the Sensex were Yes Bank up by 6.33%, HDFC up by 5.24%, Bajaj Finance up by 4.66%, HDFC Bank up by 4.29% and ICICI Bank up by 4.09%. On the flip side, Tata Steel down by 2.00%, Sun Pharma down by 1.96%, Hero MotoCorp down by 1.92%, Vedanta down by 1.82% and Reliance Industries down by 0.79% were the top losers.

Meanwhile, the government is likely to soon consider a proposal of relaxing rules for complying with the mandatory 30% local sourcing norms by foreign single brand retailers. According to the proposal, single-brand retail firms would also be allowed to open online stores before setting up brick-and-mortar shops if they bring in over $200 million FDI. Presently, online sale by a single-brand retail player is permitted only after opening of physical outlet.

Relaxations are expected in a provision where foreign retail traders are presently allowed to adjust procurement of goods from India for their global operations for meeting the mandatory local sourcing requirement. However, this is allowed only for five years and incremental sourcing of goods from India is only taken into account presently. Amendments and easing are also likely in this provision.

The move comes in the backdrop of announcements made by Finance Minister Nirmala Sitharaman in her Budget speech that local sourcing norms will be eased for FDI in single brand retail sector. In January 2018, the government allowed 100 percent FDI in the sector, permitting foreign players in single-brand retail trade to set up own shops in India without government approval. FDI in India fell by 11 percent to $22.66 billion during the first half of the financial year 2019 (H1FY19).

The CNX Nifty traded in a range of 11,070.30 and 10,756.55. There were 37 stocks advancing against 13 stocks declining on the index.

The top gainers on Nifty were Adani Ports & SEZ up by 5.81%, HDFC up by 5.20%, Bajaj Finance up by 5.06%, Yes Bank up by 5.06% and Ultratech Cement up by 5.00%. On the flip side, JSW Steel down by 3.06%, Vedanta down by 2.29%, Tata Steel down by 2.10%, Hero MotoCorp down by 2.09% and Sun Pharma down by 2.07% were the top losers.

European markets were trading in green; France’s CAC increased 36.89 points or 0.69% to 5,363.76 and Germany’s DAX was up by 37.71 points or 0.32% to 11,649.22.

Asian markets ended lower on Monday following an escalation of the US-China trade war over the weekend sapped investors' appetite for risk, shrugging off a dovish speech by Fed chief Jerome Powell at the Jackson Hole Economic Policy Symposium. On Friday Trump announced an additional duty on some $550 billion of targeted Chinese goods after China unveiled retaliatory tariffs on $75 billion worth of American products. Japanese shares ended lower as the yen surged to its highest levels since January 2019 following fresh escalation of the US-China trade war. Hong Kong shares ended down on mounting worries over violence during anti-government protests in the city added to the heavy selling pressure. Furthermore, Chinese shares declined as its currency, yuan plunged to an 11-year low as investors worried about the impact of the new US tariffs on China's economic growth.