Benchmarks trade higher with notable gains in early deals

Indian equity benchmarks made cautious start amid weakness in Asian peers, but soon gained momentum in early deals on Thursday. Markets were trading higher with gains of around half a percent each, lifted by buying in capital goods, realty and banks counters. Sentiments got some support with Crisil’s statement that it expects a recovery in rural demand in the country from March-April onwards owing to an increase in farm incomes, good monsoons and improving urban demand. Traders took note of report that in a major relief for small traders with an annual turnover of Rs 5 crore or less, the government has announced the extension of the cut-off date for filing monthly GST returns by up to 4 days. Meanwhile, markets regulator SEBI has notified norms governing portfolio managers, under which the minimum investment limit for investors has been doubled to Rs 50 lakh, and the managers have been directed to increase their net worth to Rs 5 crore within three years.

On the global front, most of the Asian markets were trading in red amid worries about the spread of the deadly coronavirus outbreak in China just as the week-long Lunar New Year holidays starts on Friday, when millions of Chinese travel domestically and abroad. The death toll from the virus has risen to 17 in China, with more than 570 cases confirmed. Besides, the Ministry of Finance said that Japan posted a merchandise trade deficit of 152.5 billion yen in December. That narrowly beat forecasts for a shortfall of 152.6 billion yen following the 85.2 billion yen deficit in November.

Back home, Infra stocks were in focus as the government said that Road Transport and Highways Minister Nitin Gadkari will review road projects worth Rs 3 lakh crore on January 23 and January 24 with a view to fast track highway projects. In stocks specific development, Larsen & Toubro jumped on reporting 15.21% rise in consolidated net profit to Rs 2,352.12 crore on 5.55% rise in total income to Rs 36,908.94 crore in Q3 December 2019 over Q3 December 2018. Axis Bank rose on reporting 4.53% rise in net profit to Rs 1,757.00 crore on 7.53% rise in total income to Rs 19,494.87 crore in Q3 December 2019 over Q3 December 2018.

The BSE Sensex is currently trading at 41336.67, up by 221.29 points or 0.54% after trading in a range of 41098.91 and 41340.27. There were 23 stocks advancing against 7 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.64%, while Small cap index was up by 0.41%.

The top gaining sectoral indices on the BSE were Capital Goods up by 2.18%, Industrials up by 1.23%, Realty up by 0.90%, PSU up by 0.87% and Bankex was up by 0.85%, while FMCG down by 0.14% was the only losing index on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 3.23%, Axis Bank up by 2.70%, Infosys up by 1.47%, NTPC up by 0.94% and Tata Steel was up by 0.88%. On the flip side, Hindustan Unilever down by 0.61%, Nestle down by 0.38%, Asian Paints down by 0.30%, Tech Mahindra down by 0.29% and Bajaj Auto was down by 0.28% were the top losers.

Meanwhile, with the help of strong policy push coupled with revival in demand, India Ratings and Research (Ind-Ra) in its latest report has said that India's growth rate is expected to be marginally higher at 5.5% in 2020-21 against the estimated 5% for the current fiscal. Citing an NSO report, it said the slowdown is a combination of several factors including an abrupt and significant fall in lending by non-banking financial companies close on the heels of a slowdown in bank lending and reduced income growth of households coupled with a fall in savings and higher leverage. Although some improvement in FY2020-21 is expected, these risks are going to persist. As a result, the Indian economy is stuck in a phase of low consumption as well as low investment demand.

As per the report, a strong policy push coupled with some heavy lifting (even if this requires using the escape clause as suggested by the FRBM Review Committee headed by N K Singh) by the government is required to revive the domestic demand cycle and catapult the economy back into a high growth phase. The government has announced a slew of measures recently to prop-up the economy, but Ind-Ra believes they will come to aid only in the medium term. It said the shortfall in the tax plus non-tax revenue to result in the fiscal deficit slipping to 3.6% of GDP (budgeted 3.3%) in FY2020, even after accounting for the surplus transferred by the RBI.

Ind-Ra said a continuance of low GDP growth even in FY 21 means subdued tax revenue and limited room for stepping-up expenditure. It believes the government will have to construct the FY21 budget in a way that expenditure is rationalised and prioritised and all avenues of revenue generation are tapped. While rationalising, the focus of expenditure has to be on creating direct employment and putting more money in the pockets of the people at the bottom of the pyramid, and it added that since their marginal propensity to consume is close to one, they are likely to spend what they receive. This will support the consumption demand. Therefore, it said budgetary allocation to heads such as rural infrastructure, road construction, affordable housing and MNREGA must be prioritised and allocation for non-merit subsidy/expenditure less critical for growth be rationalised.

The CNX Nifty is currently trading at 12164.15, up by 57.25 points or 0.47% after trading in a range of 12094.10 and 12179.05. There were 33 stocks advancing against 16 stocks declining, while 1 stock remains unchanged on the index.

The top gainers on Nifty were Larsen & Toubro up by 2.97%, Axis Bank up by 2.92%, Indian Oil Corporation up by 2.64%, Infosys up by 1.53% and ONGC up by 1.37%. On the flip side, Zee Entertainment down by 4.28%, UPL down by 0.84%, Bharti Infratel down by 0.73%, Cipla down by 0.70% and Hindustan Unilever down by 0.46% were the top losers.

Asian markets are trading mostly in red; Hang Seng decreased 468.25 points or 1.65% to 27,872.79, Nikkei 225 slipped 224.77 points or 0.94% to 23,806.58, Shanghai Composite declined 44.57 points or 1.46% to 3,016.18, KOSPI fell 18.72 points or 0.83% to 2,248.53 and Straits Times was down by 7.92 points or 0.24% to 3,246.01. On the flip side, Jakarta Composite was up by 9.94 points or 0.16% to 6,243.39.