Local equities gather traction to trade on firm note

After trading flat in opening trade, local equity benchmarks have gathered pace and are trading firm in morning session, amid improved sentiment due to the government's economic measures. Buoyant Small-caps elevated over 1% gains on their respective front line stocks. Likewise, Capital Goods, Industrials and Basic Materials have also elevated with gains on their respective front line stocks. Traders turned optimistic with a report that the Reserve Bank of India (RBI) approved the transfer of record Rs 1.76 lakh crore dividend and surplus reserves to the government, boosting Prime Minister Narendra Modi-led regime's prospect to stimulate the slowing economy without widening fiscal deficit. Traders took note of a report that Prime Minister Narendra Modi informed President Donald Trump that India plans to further step up imports, including oil, from the US and that $4 billion worth of imports were already ‘in the pipeline’, as the two countries sought to overcome their differences on tariffs and market access. However, market participants ignored a private report that the Indian economy likely expanded at its slowest pace in more than five years in the April-June quarter, driven by weak investment growth and sluggish demand.

On the global front, Asian markets were trading mostly in green, as investors found reason to be cautiously optimistic again about the potential for progress in the costly trade war between the US and China. Back home, Auto industry stocks were in focus, as Fitch Ratings stated that the subdued demand conditions that led to weak performance by Indian automakers in the first quarter of 2019-20, will likely persist, adding to the challenges from the implementation of stricter emission norms under BS6 from April 2020.

The BSE Sensex is currently trading at 37678.42, up by 184.30 points or 0.49% after trading in a range of 37449.69 and 37722.13. There were 23 stocks advancing against 8 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.82%, while Small cap index was up by 1.28%.

The top gaining sectoral indices on the BSE were Capital Goods up by 2.60%, Industrials up by 2.23%, Basic Materials up by 2.11%, Metal up by 1.86% and PSU was up by 1.85%, while TECK down by 1.39%, IT down by 1.36% and Telecom was down by 1.33% were the few losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 5.88%, Tata Motors - DVR up by 5.36%, IndusInd Bank up by 3.49%, Larsen & Toubro up by 2.97% and Yes Bank was up by 2.94%. On the flip side, Bharti Airtel down by 2.59%, Infosys down by 2.22%, HCL Tech down by 1.25%, TCS down by 1.15% and Tech Mahindra was down by 1.01% were the top losers.

Meanwhile, rating agency Moody's has said that the latest announcement by the Indian government that it will frontload its planned Rs 70,000 crore capital infusion into the public sector banks (PSBs) will allow them to grow loans by around 13-15% in the current financial year (FY20) compared with about 10% in fiscal 2019 and will also allow them to meet the final Basel III capital requirements.

The capital infusion is part of India's government budget for fiscal 2020. The government's announcements of an upfront capital infusion of Rs 70,000 crore in PSBs will improve the bank's capitalisation and help them calibrate their balance sheet growth.

Besides, in order to boost lending and improving liquidity situation, Finance Minister Nirmala Sitharaman had announced upfront capital infusion of Rs 70,000 crore into public sector banks. The move is expected to generate additional lending and liquidity in the financial system to the tune of Rs 5 lakh crore.

The CNX Nifty is currently trading at 11123.75, up by 65.90 points or 0.60% after trading in a range of 11049.50 and 11138.10. There were 37 stocks advancing against 13 stocks declining on the index.

The top gainers on Nifty were Britannia up by 6.00%, Tata Motors up by 5.56%, Ultratech Cement up by 4.37%, UPL up by 3.91% and IndusInd Bank was up by 3.62%. On the flip side, Bharti Airtel down by 2.52%, Infosys down by 2.14%, HCL Tech down by 1.52%, Cipla down by 1.37% and TCS was down by 1.16% were the top losers.

Asian markets were trading mostly in green, Nikkei 225 surged 211.48 points or 1.04% to 20,472.52, Shanghai Composite gained 48.05 points or 1.68% to 2,911.62, Jakarta Composite soared 46.10 points or 0.74% to 6,260.61, Taiwan Weighted strengthened 42.75 points or 0.41% to 10,397.32, KOSPI rose 7.43 points or 0.39% to 1,923.74 and Straits Times was up by 5.37 points or 0.18% to 3,070.70. On the other side, Hang Seng was down by 20.93 points or 0.08% to 25,659.40.