Markets trade in green in early deals; Nifty above 11,300 mark

Indian equity benchmarks made positive start and are trading higher with gains of 0.25% each in early deals on Monday. Barring IT and TECK, all the sectoral indices were trading in green on the BSE. Sentiments got some support with report that the country's foreign exchange reserves surged by $4.24 billion to touch a record high of $437.83 billion in the week to October 4. Adding optimism among market participants with Prime Minister Narendra Modi stating that Rs 25 lakh crore will be spent for infrastructural development in the villages across the country, in a big boost to strengthen rural infrastructure. Traders took note of report that Finance Minister Nirmala Sitharaman will hold a review meeting with CEOs of public sector banks (PSBs) to discuss various issues, including progress on credit offtake, as part of efforts to prop up the economy. Besides, investors are looking ahead to the wholesale price (WPI) and consumer price (CPI) inflation prints for September to be released later in the day.

Though, there was some cautiousness amid weak industrial growth data and economic growth concerns as World Bank slashed growth forecast. The government data showed that India’s factory output contracted by 1.1% in August, recording the poorest performance in seven years due to a sharp decline in production of capital goods and consumer durable. Besides, the World Bank slashed its growth forecast for India’s current fiscal year to 6%, down from 7.5%, warning that the severe slowdown could further weaken the country’s stuttering financial sector.

On the global front, all the Asian markets were trading higher as investors’ sentiment was boosted by report that the US and China have reached a partial trade deal. US President Donald Trump said on last Friday that the two countries have reached a very substantial phase one deal, that includes up to $40 billion to $50 billion in Chinese purchases of US agricultural products as well as Chinese concessions on intellectual property and financial services. In exchange for the Chinese concessions, the US has agreed to hold off on an increase in tariffs originally scheduled for next week.

Back home, in scrip specific development, Infosys came under pressure after reporting a 2.21% year-on-year fall in consolidated net profit at Rs 4,019 crore for the quarter ended September 30. The company had posted a profit of Rs 4,110 crore in the corresponding quarter last year. Indian Railways Catering and Tourism Corporation (IRCTC) made its stock market debut with premium at Rs 651, more than double the IPO price of Rs 320 per share.

The BSE Sensex is currently trading at 38229.95, up by 102.87 points or 0.27% after trading in a range of 38066.13 and 38287.09. There were 26 stocks advancing against 5 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.74%, while Small cap index was up by 0.38%.

The top gaining sectoral indices on the BSE were Metal up by 1.98%, Realty up by 1.42%, Basic Materials up by 0.97%, Auto up by 0.91% and  PSU was up by 0.85%, while IT down by 1.22% and TECK was down by 1.02% were the only losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 4.24%, Tata Motors - DVR up by 3.34%, Vedanta up by 3.10%, Tata Steel up by 2.93% and Sun Pharma up by 1.70%. On the flip side, Infosys down by 2.94%, TCS down by 0.47%, Power Grid Corporation down by 0.25%, Tech Mahindra down by 0.17% and Kotak Mahindra Bank down by 0.07% were the top losers.

Meanwhile, citing a broad-based and severe cyclical slowdown, the World Bank has slashed its economic growth forecast for India to 6% for the current fiscal (FY20) from its April projection of 7.5%. It also warned that the severe slowdown could further weaken the country’s stuttering financial sector. In 2018-19, the growth rate of the country stood at 6.9%, down from 7.2% in the 2017-18 financial year. However, the bank in its latest edition of the South Asia Economic Focus said growth is expected to gradually recover to 6.9% in 2020-21 and 7.2% in 2021-22 as the cycle bottoms-out, rural demand benefits from effects of income support schemes, investment responds to tax incentives and credit growth resumes. Besides, exports growth is expected to remain modest, as trade wars and slow global growth depresses external demand.

The World Bank report said reflecting on the below-trend economic momentum and persistently low food prices, the headline inflation averaged 3.4% in 2018-19 and remained well below the Reserve Bank of India’s (RBI’s) mid-range target of 4% in the first half of 2019-2020. This allowed the RBI to ease monetary policy via a cumulative 135 basis point cut in the repo rate since January 2019 and shift the policy stance from ‘neutral’ to ‘accommodative’. It also noted that the current account deficit had widened to 2.1% of the GDP in 2018-19 from 1.8% a year before, mostly reflecting a deteriorating trade balance.

However, the report said disruptions brought about by the introduction of the GST and demonetisation, combined with the stress in the rural economy and a high youth unemployment rate in urban areas may have heightened the risks for the poorest households. The significant slowdown in the first quarter of the fiscal year and high frequency indicators, thereafter, suggested that the output growth would not exceed 6% for the full fiscal year. It said the consumption was likely to remain depressed due to slow growth in rural income, domestic demand (as reflected in a sharp drop in sales of automobiles) and credit from NBFCs. Though, the investment would benefit from the recent cut in effective corporate tax rate for domestic companies in the medium term, but also will continue to reflect financial sector weaknesses.

The CNX Nifty is currently trading at 11333.30, up by 28.25 points or 0.25% after trading in a range of 11290.05 and 11352.00. There were 41 stocks advancing against 9 stocks declining on the index.

The top gainers on Nifty were Tata Motors up by 4.33%, Tata Steel up by 3.04%, Vedanta up by 2.96%, JSW Steel up by 2.83% and Sun Pharma up by 1.79%. On the flip side, UPL down by 3.56%, Infosys down by 2.80%, Cipla down by 0.84%, Zee Entertainment down by 0.54% and TCS down by 0.51% were the top losers.

All Asian markets were trading in green; Hang Seng increased 269.97 points or 1.03% to 26,578.41, Shanghai Composite gained 41.06 points or 1.38% to 3,014.72, Jakarta Composite soared 29.34 points or 0.48% to 6,135.14, Straits Times advanced 10.13 points or 0.33% to 3,124.10, KOSPI rose 28.30 points or 1.38% to 2,072.91and Taiwan Weighted was up by 183.08 points or 1.68% to 11,073.04.