Post Session: Quick Review

Indian markets extended their jubilation to the new week and ended at record closing highs on Monday, following rise in Asian peers coupled with growth in India’s industrial production data. The day began on a positive note, as a rebound in manufacturing activity pulled up November’s overall industrial output, helping it to grow 1.8% after declining for three consecutive months. Output had declined by 3.8% in October after a 4.3% contraction in September, the steepest fall in eight years. Sentiments remained on optimistic note as country's foreign exchange reserves touched a record high of $461.157 billion, after it surged by $3.689 billion in the week to January 3. Investors cheered with Union minister for micro, small and medium enterprises (MSMEs) Nitin Gadkari’s statement that the Centre is formulating a scheme to encourage import substitute products in the manufacturing sector in order to save foreign exchange.

However, traders pared some of their initial gains in the second half of the trade as some cautious came with eminent economist R Nagaraj’s statement that India would need to grow at 9% to achieve the target of $5 trillion economy by 2024, which currently looks ‘unimaginably ambitious’. Some concerns also came with NITI Aayog CEO Amitabh Kant’s statement that the service sector is the largest component of India’s GDP but the country cannot achieve an ambitious goal of a $5 trillion economy without the active participation of the manufacturing sector. Meanwhile, SBI research report stated that the economic slowdown has adversely impacted employment generation in the country as nearly 16 lakh fewer jobs are projected to be created in FY20 compared to 89.7 lakh fresh jobs in FY19. Though,  bulls came back in action in the final hour of trade following short covering witnessed in Realty and IT stocks.

On the global front, European markets were trading higher as optimism surrounding the US-China trade deal helping underpin investor sentiment ahead of the reporting season. Asian markets ended mostly in green, ahead of the signing of a ‘phase one’ trade deal between the US and China later this week. Back home, Steel sector stocks remained in limelight as Union Minister Dharmendra Pradhan stated that steel ministry is planning at an aggregate investment of $70 billion in the eastern region of the country through accelerated development of the sector.

The BSE Sensex ended at 41854.80, up by 255.08 points or 0.61% after trading in a range of 41720.76 and 41899.63. There were 23 stocks advancing against 7 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index gained 0.84%, while Small cap index was up by 0.93%. (Provisional)

The top gaining sectoral indices on the BSE were Realty up by 2.11%, IT up by 1.84%, TECK up by 1.78%, Telecom up by 1.71% and Utilities was up by 1.24%, while there were no losing sectoral indices on the BSE. (Provisional)

The top gainers on the Sensex were Infosys up by 4.71%, IndusInd Bank up by 3.52%, Bharti Airtel up by 2.56%, Hindustan Unilever up by 2.06% and Tata Steel was up by 1.96%. (Provisional)

On the flip side, TCS down by 1.01%, SBI down by 0.56%, ICICI Bank down by 0.34%, Bajaj Auto down by 0.26% and Reliance Industries was down by 0.24% were the top losers. (Provisional)

Meanwhile, in order to meet the debt obligations of government bonds in the next financial year (FY21) standing at Rs 3.02 trillion to avoid putting pressure on higher borrowings from the market, the government may choose for auctioning of more cash management bills (CMBs). The Reserve Bank of India (RBI) announced the auction of a 63-Day Government of India Cash Management Bill. The central bank carries on the auctioning of GSec on behalf of the government. Cash Management Bills are short term bills issued by the central government to meet its immediate cash needs. The bills will be auctioned on January 13, 2020 and will mature on March 13, 2020 will raise Rs 30,000 crore. Government bonds worth Rs 61,000 crore came up for redemption on January 2 when investors received the money back with interest.

According to RBI data, the redemption pressure that is to come in FY21 include, on April 9, the debt obligations government has to meet is Rs 35,268.36 crore whole on April 22, the amount is Rs 6,000 crore and on May 03, the redemption pressure is of Rs 71,130 crore and on June 9, it is Rs 67,182 crore.  India’s higher market borrowings can impact the fiscal deficit.

However, the Union Budget 2020 will decide the fiscal deficit for FY21, it is now almost certain that the current fiscal deficit of 3.3 per cent may be unattainable given the weak tax and disinvestment revenue positions. Excess borrowing to meet debt servicing will create further mismatch between the revenue and expenditure which the government may try to avoid next fiscal. This leaves to banking on CMBs more for debt servicing to a large extend.

The CNX Nifty ended at 12329.60, up by 72.80 points or 0.59% after trading in a range of 12285.80 and 12337.75. There were 36 stocks advancing against 14 stocks declining on the index. (Provisional)

The top gainers on Nifty were Infosys up by 4.65%, IndusInd Bank up by 3.67%, Coal India up by 3.07%, GAIL India up by 2.91% and Bharti Airtel was up by 2.54%. (Provisional)

On the flip side, Yes Bank down by 5.92%, UPL down by 1.18%, Bharti Infratel down by 1.18%, TCS down by 0.93% and Eicher Motors was down by 0.67% were the top losers. (Provisional)

All European markets were trading higher, UK’s FTSE 100 increased 42.55 points or 0.56% to 7,630.40, France’s CAC increased 18.57 points or 0.31% to 6,055.68 and Germany’s DAX was up by 19.19 points or 0.14% to 13,502.50.

Asian markets ended mostly higher on Monday as investors waiting the signing of a phase-one trade deal between the United States and China in Washington on January 15, 2020. Chinese shares ended higher, with Chinese electric-vehicle makers surging after the government signaled it would not make significant cuts to subsidies for new energy vehicles this year. However, the United States imposed additional sanctions on Iran and rebuffed the Iraqi government's request to begin discussions on pulling out troops. Reports of another rocket attack on an Iraqi airbase also kept investors nervous. US Job growth slowed more than expected in December and wage growth dropped below 3 percent for the first time since July 2018, while the unemployment rate stayed at a 50-year low of 3.5 percent, the Labor Department's monthly report showed. Meanwhile, the Japanese market was closed for the 'Respect for the Aged Day' holiday.