Benchmarks trade in fine fettle in early deals; Nifty reclaims 11,500 mark

With a big gap-up opening Indian equity benchmarks have extended their previous session’s rally and are trading in fine fettle in early deals on Monday as traders continued to take support with report that corporate tax rate cuts by government rekindle hopes of a revival in demand and growth as well as earnings boost. Sensex and Nifty are trading higher with gains of over 2% each, reclaiming their physiological levels of 38,700 and 11,500, respectively. Barring IT and TECK, all the sectoral indices were trading in green on the BSE. Support also came as Reserve Bank governor Shaktikanta Das exuded confidence that second-quarter GDP numbers will be better than the previous one as the government has started spending again. Traders took encouragement with Finance Minister Nirmala Sitharaman’s statement that India has become a highly competitive investment destination post corporate tax reduction as the rates are now lower than that in China and most Southeast Asian countries. Besides, global rating agency Moody's said a reduction in the base corporate tax rate to 22 percent from 30 percent is credit positive for companies. Traders also took note of a private report that the credit from banks must grow by 12% every year to meet the Centre's target to achieve a $5-trillion economy within the next five years and the step taken for mergers of the PSBs is in the right direction to meet the goal. Meanwhile, the all-powerful GST Council on Friday more than doubled the tax on caffeinated beverages to 40 per cent and slashed the rate on hotel room tariffs.

On the global front, all the Asian markets were trading lower after deputy-level trade talks between the US and China ended in Washington without any outcome. Comments from US President Donald Trump indicating he is not interested in a ‘partial deal’ with China dashed hopes of a possible ‘interim deal’. However, the US Trade Representative has described the two days of trade talks in Washington as ‘productive’, while China's Commerce Ministry said the talks were ‘constructive’. Besides, the Japanese market is closed for a holiday.

Back home, Finance Minister Nirmala Sitharaman has said she is not revising the fiscal deficit target for the year and she would take a review closer to the stage when revised estimates will be made. On the sectoral front, hotel industry stocks will be in focus after the GST Council in its 37th meeting approved proposal to cut rates on hotel tariffs. Rooms with tariff Rs 7,500 and above will now be taxed at 18%. Prior to the cut, the GST rate on this category was 28%. GST on rooms with tariff between Rs 1,001 and Rs 7,500 now stands at 12%. No GST on tariffs upto Rs 1,000.

The BSE Sensex is currently trading at 38798.88, up by 784.26 points or 2.06% after trading in a range of 38676.75 and 39346.01. 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 2.39%, while Small cap index was up by 1.70%.

The top gaining sectoral indices on the BSE were FMCG up by 5.31%, Capital Goods up by 4.72%, Consumer Durables up by 4.34%, Bankex up by 3.51% and Industrials was up by 3.50%, while IT down by 4.02% and  TECK was down by 3.31% were the only losing indices on BSE.

The top gainers on the Sensex were ITC up by 7.71%, Indusind Bank up by 7.00%, Asian Paints up by 6.83%, Larsen & Toubro up by 6.18% and Hindustan Unilever up by 5.43%. On the flip side, Infosys down by 5.43%, TCS down by 4.18%, Tech Mahindra down by 3.00%, HCL Technologies down by 2.69% and NTPC down by 1.38% were the top losers.

Meanwhile, expressing confidence over growth of Indian economy, the Reserve Bank of India (RBI) governor Shaktikanta Das has said that second-quarter (Q2) Gross Domestic Product (GDP) numbers will be better than the previous one as the government has started spending again. Attributing the 5% GDP growth in Q1 to very low government spending, he said with the Centre opening its coffers again growth should pick up going forward.

He said in the first quarter the government expenditure, which has a major role in GDP numbers, was very low due to the elections, pulling down the growth numbers to some extent. From the second quarter government expenditure has been picked up. So, he said that second quarter numbers will be hopefully better than the first quarter.

For the first quarter, he said that the RBI analysis showed growth to be at 5.8% and all the surveys it did also projected growth to be in the range of 5.5-5.8% but the final print was much lower. He added ‘when it came in at 5% it was a surprise. That is perhaps due to conflicting signals in the economy. One month the PMI goes up, the next month it goes down. The IIP numbers have also been going up and down.’

Das also reiterated the possibility of more rate cuts if incoming data support such a move but warned against government initiating any fiscal expansion and said that it has no legroom to do so given the high deficit numbers. He also called for urgent structural reforms especially inland and labour as well as entrepreneurial areas. Besides, he welcomed the government announcement to slash corporate tax across the board and termed the same as bold moves which should benefit all sectors. In a major fiscal booster, the government had slashed effective corporate tax to 25.17% inclusive of all cess and surcharges for domestic companies.

The CNX Nifty is currently trading at 11537.80, up by 263.60 points or 2.34% after trading in a range of 11471.35 and 11666.35. There were 35 stocks advancing against 14 stocks declining, while 1 stock remain unchanged on the index.

The top gainers on Nifty were Asian Paints up by 7.40%, Indusind Bank up by 7.39%, ITC up by 7.23%, GAIL India up by 7.09% and Britannia up by 6.39%. On the flip side, Infosys down by 3.54%, Dr. Reddy’s Lab down by 3.09%, Wipro down by 2.62%, TCS down by 2.53% and Tech Mahindra down by 2.26% were the top losers.

All the Asian counters are trading in red; Taiwan Weighted dropped  12.53 points or  0.11% to 10,917.16, KOSPI fell  3.32 points or  0.16% to 2,088.20, Hang Seng decreased  228.41 points or  0.86% to 26,207.26, Shanghai Composite declined  39.44 points or  1.31% to 2,967.01, Straits Times trembled  8.41 points or  0.27% to 3,151.27 and Jakarta Composite  was down by 17.71 points or  0.28% to 6,213.76.