Markets trade in fine-fettle in early deals

Indian equity benchmarks made gap-up opening and were trading in fine-fettle in early deals on Tuesday. Sharp fall in crude oil prices overnight and firm cues from global markets supported domestic equities. Investors were looking forward to the Reserve Bank of India’s (RBI) bi-monthly policy meeting to be held today and will announce its decision on February 6. There are expectations that the central bank to maintain a status quo. Traders got encouragement as the government said the economy is not in recession and India recorded the highest average growth among the G-20 nations during 2014-19. Also, terming the Union Budget pragmatic, Niti Aayog CEO Amitabh Kant has said the government is determined to take India on a high growth path. He further said if the government will be able to achieve disinvestment target of 2020-21 then the Budget will be very successful. Market participants overlooked Fitch Ratings’ statement that India is expected to clock a GDP growth of 5.6% in the next financial year, as Budget 2020 has not materially altered its view on the country's growth outlook.

Global cues also remained supportive with all of the Asian markets trading in green following the positive cues overnight from Wall Street and as the Chinese market rebounded after sharp losses in the previous session amid concerns about the rapid spread of the coronavirus as well as its impact on the global economy. Stimulus plans announced by China to support its economy has bolstered investor sentiment. Chinese health officials said that the death toll in the country related to the coronavirus outbreak was 425, while the number of people infected rose to 20,438.

Back home, stare-run oil marketing companies BPCL, HPCL and IOC climbed after oil prices settled at a more than one-year low on Monday amid renewed concerns about the outlook for energy demand, especially from China, due to the rapid spread of coronavirus. In stock specific developments, TCS rose on winning a $1.5 billion deal across a ten-year period from a US pharma retailer. TCS has expanded its long-standing partnership with Walgreens Boots Alliance to transform the latter's IT operating model. However, Bharti Airtel came under pressure ahead of its earnings announcement.

The BSE Sensex is currently trading at 40285.32, up by 413.01 points or 1.04% after trading in a range of 40117.46 and 40336.22. There were 23 stocks advancing against 7 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.72%, while Small cap index was up by 0.93%.

The top gaining sectoral indices on the BSE were Energy up by 1.87%, Oil & Gas up by 1.49%, Capital Goods up by 1.22%, PSU up by 1.06% and Industrials was up by 1.04%, while Realty down by 0.27% and Telecom was down by 0.24% were the only losing indices on BSE.

The top gainers on the Sensex were Ultratech Cement up by 2.10%, Reliance Industries up by 1.96%, HDFC Bank up by 1.76%, HDFC up by 1.75% and Hero MotoCorp up by 1.70%. On the flip side, Bajaj Auto down by 1.07%, Bharti Airtel down by 0.66%, Nestle down by 0.56%, Tata Steel down by 0.36% and Asian Paints down by 0.33% were the top losers.

Meanwhile, expressing cautiousness over India’s economic growth, Fitch Ratings has said the country is expected to clock a Gross Domestic Product (GDP) growth of 5.6% in the next financial year (FY21) from 4.6% in FY20. It added that Budget 2020 has not ‘materially altered’ its view on the country's growth outlook. It also said ‘the fiscal slippage announced in the government's new FY21 budget is modest relative to its previous targets, and is consistent with our expectations when we affirmed India's 'BBB-' rating with a stable outlook last December, given slowing growth momentum’. Sitharaman's Budget missed deficit target for the third year in a row, pushing shortfall to 3.8% of GDP in FY20 as compared to 3.3% previously planned. The fiscal deficit target for FY21, has been fixed at 3.5%.

It projected general government debt to remain close to 70% of GDP through FY22 and said that the new budget targets imply some further postponement of fiscal consolidation, in line with the government's ambivalent approach to consolidation of the past few years when deficit outturns have typically exceeded budget targets. It added that India's high public debt relative to peers is a rating weakness. The report further noted that Budget contains some measures which may support GDP growth in the medium-term, including reduced individual income tax rates, some easing of restrictions on foreign portfolio inflows, continued focus on public infrastructure spending, and schemes of which the details remain to be announced to encourage manufacturing in the electronics and textiles sectors.

The rating agency said the assumptions in the budget, including nominal growth of 10% and a rise in revenues by 9.2% were ‘broadly credible’ although there were risks to the downside. It said ‘In particular, reductions in the corporate tax rate, as previously announced, and new cuts in income tax rates are likely, in our view, to cause tax revenues to fall in the short run, before any potential medium-term benefits materialise; the divestment target appears optimistic, at over three times the estimated realisation in FY20’. It also said ‘greater fiscal transparency around off-budget financing is welcome, as the new budget now explicitly recognises borrowing from the National Small Savings Fund of 0.8% of GDP in both FY20 and FY21’.

The CNX Nifty is currently trading at 11829.00, up by 121.10 points or 1.03% after trading in a range of 11783.40 and 11840.35. There were 39 stocks advancing against 11 stocks declining on the index.

The top gainers on Nifty were Bharti Infratel up by 2.75%, GAIL India up by 2.27%, Hero MotoCorp up by 2.22%, Reliance Industries up by 2.10% and HDFC up by 1.97%. On the flip side, Yes Bank down by 2.22%, Tata Motors down by 1.25%, Bajaj Auto down by 0.96%, Britannia Industries down by 0.95% and Eicher Motors down by 0.92% were the top losers.

All Asian markets were trading higher; Hang Seng increased 304.70 points or 1.16% to 26,661.68, Taiwan Weighted strengthened 218.02 points or 1.92% to 11,572.94, Nikkei 225 surged 72.50 points or 0.32% to 23,044.44, Jakarta Composite soared 48.57 points or 0.83% to 5,932.74, KOSPI rose 38.53 points or 1.82% to 2,157.41, Straits Times advanced 37.80 points or 1.21% to 3,154.11 and Shanghai Composite was up by 5.83 points or 0.21% to 2,752.44.