Sensex, Nifty scale fresh record closing highs on Tuesday

Indian equity benchmarks scaled fresh record closing highs on Tuesday’s trading session, with the Sensex and the Nifty gaining around a percent each. Key indices made a positive start of the day, aided with the Commerce and Industry Minister Piyush Goyal’s statement that the tax reforms introduced by the government recently will ensure investments come back to India. Traders remained optimistic, as Union Minister Nitin Gadkari approved changes in the Interest Subvention Scheme guidelines for micro, small and medium enterprises, and said the modifications are expected to boost their productivity through access to credit at reduced cost.

Extending their northward rally of the day, markets settled with strong gains, on the back of positive cues from Asian markets. The street got comfort, after the central government released Rs 35,298 crore to states to make up for the loss of revenue due to rollout of the Goods and Services Tax (GST). Separately, Economic Advisory Council of the Fifteenth Finance Commission discussed issues related to GST stabilisation and possible ways to improve tax collection for additional resource mobilisation. Advisory Council was informed about submission of the 2020-21 report and now the Commission is on its next task of preparing the report for 2021-26 period.

On the global front, European markets were trading in red, as the UK private sector contracted the most since mid-2016 as domestic political and Brexit uncertainties weighed on activity. The flash survey results from IHS Markit and the Chartered Institute of Procurement & Supply showed that the composite output index fell to 48.5 in December from 49.3 in November. Asian markets ended higher, despite Singapore's non-oil domestic exports declined at a slower rate in November. The data from Enterprise Singapore showed that non-oil domestic exports decreased 5.9 percent year-on-year in November, following a 12.5 percent decline in October.

Back home, reality sector stocks ended lower, as rating agency, ICRA maintained a negative outlook for housing because of subdued demand, slow sales, over-supply and liquidity crunch. Stocks related to steel industry remained in focus, after Union Minister for Steel and Petroleum & Natural Gas, Dharmendra Pradhan said that rural India will play a major role in driving steel demand growth. Growing economic activity, implementation of government schemes, rising incomes will drive steel usage in rural areas. He also added that Govt. schemes like Har Ghar Jal Yojana, Pradhan Mantri Awas Yojana, etc. will drive the consumption of steel in rural areas.

Finally, the BSE Sensex gained 413.45 points or 1.01% to 41,352.17, while the CNX Nifty was up by 111.05 points or 0.92% to 12,165.00.

The BSE Sensex touched high and low of 41401.65 and 41005.18, respectively and there were 22 stocks advancing against 09 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.38%, while Small cap index was up by 0.66%.

The top gaining sectoral indices on the BSE were Telecom up by 3.28%, Metal up by 3.02%, TECK up by 1.87%, Basic Materials up by 1.73% and IT up by 1.69%, while Consumer Durables down by 0.68%, Healthcare down by 0.19%, Realty down by 0.18% and Energy down by 0.07% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 4.38%, Bharti Airtel up by 4.30%, Tata Motors - DVR up by 3.78%, Vedanta up by 3.50% and Tata Motors up by 3.03%. On the flip side, Sun Pharma down by 1.37%, Mahindra & Mahindra down by 0.63%, Bajaj Auto down by 0.56%, Hindustan Unilever down by 0.48% and Reliance Industries down by 0.28% were the top losers.

Meanwhile, with India’s GDP growth slowing to over six-year low of 4.5 percent in July-September, IMF Chief Economist Gita Gopinath has said that the government should focus on structural reforms like clean-up of banks and labor reforms to address the slowdown in domestic demand. Given the cyclical position and the structural challenges of the Indian economy at this point, she recommend that policies focus on managing the slowdown in domestic demand, and on boosting productivity growth and supporting employment creation in the medium term. Recommending a series of key policy priorities for the government, she said, 'Politically, the time -- early in the government's second term -- is right for a structural reform push.'

Gopinath has stated that the policy priorities of the government should also include a credible fiscal consolidation path that is more ambitious than currently envisaged by the government. She also noted that this is needed to reduce the high level of debt and reduce crowding out which would free up financial resources for private investment. She added that this should be driven by subsidy-spending rationalization and tax-base enhancing measures.

In this regard, IMF Chief Economist advocated, among others, three policy priorities for the government. First is to accelerate the clean-up of the banks, other financial institution, and corporate balance sheets and enhance governance of public sector banks to revive bank credit and enhance the efficiency of credit provision, while monitoring closely emerging risks from the liquidity stress in non-banking financial companies (NBFCs) and enhancing supervision and regulation of the NBFCs.

The CNX Nifty traded in a range of 12,182.75 and 12,070.35. There were 39 stocks advancing against 11 stocks declining on the index.

The top gainers on Nifty were Tata Steel up by 4.64%, Bharti Airtel up by 4.54%, Vedanta up by 3.36%, Hindalco up by 3.31% and Tata Motors up by 2.94%. On the flip side, Sun Pharma down by 1.25%, GAIL India down by 0.87%, Bajaj Auto down by 0.66%, M&M down by 0.60% and Titan down by 0.40% were the top losers.

European markets were trading mostly in red; France’s CAC decreased 19.00 points or 0.32% to 5,972.66 and Germany’s DAX decreased 73.13 points or 0.55% to 13,334.53, while UK’s FTSE 100 increased 2.18 points or 0.03% to 7,521.23.

Asian markets ended mostly higher on Tuesday after a top White House economic adviser, Larry Kudlow said the phase 1 trade deal between Washington and Beijing has been absolutely completed, adding that US exports to China will double under the agreement. Washington will also reduce some tariffs on Chinese imports in exchange for an about $200 billion increase in Chinese purchases of agricultural, manufactured, and energy products over the next two years. Chinese industrial production and retail sales came better than expected also boosted market sentiment. Japanese shares hit over one-year high, tracking Wall Street's run to a record closing high on renewed optimism over the Sino-US phase 1 trade deal.