Post Session: Quick Review

Indian equity benchmarks extended their gaining streak for third straight session and ended with gains of around a percent, amid steady global markets, and ahead of the Reserve Bank of India’s (RBI) monetary policy decision tomorrow. After making a cautious start, markets gained traction and traded in fine fettle, as traders reacted positively to report that India and the US are set to seal a trade deal during President Donald Trump's planned visit to India in the last week of this month. Some optimism also came with report that the Foreign Direct Investment (FDI) in India has been increasing on an annual basis and was at $34.90 billion till November of this fiscal. Traders took note of Moody's Investors Service’s statement that economic growth projections made by Finance Minister Nirmala Sitharaman in her Budget for 2020-21 appear ambitious given the structural and cyclical challenges facing the Indian economy.

However, key indices gave up most of their gains to come off their intraday high points in afternoon session, as market-men got anxious with the ratings agency Crisil warned of potentially high stress in non-banking financial companies’ (NBFCs) wholesale book well above the reported bad loan numbers by March, indicating rising risks to their retail books. But, benchmark indices regained their lost ground in the final hour of trade, lifted by buying in Metal and Realty counters. Local investors also cheered with a monthly survey indicating that India's services sector activity surged to a seven-year high in January driven by sharp increase in new business orders, leading to job creation and business optimism amid favorable market conditions. The IHS Markit India Services Business Activity Index rose from 53.3 in December to 55.5 in January, signaling the strongest upturn in output in seven years. 

On the global front, Asian markets ended higher on Wednesday, while European markets were trading in green, as Chinese stocks nudged higher on hopes of additional stimulus to lessen the economic impact of a coronavirus outbreak, but risks remain as the illness continues to spread and the death toll neared 500. Back home, renewable energy stocks were in limelight as India commissioned renewable energy (RE) projects totalling 7,591.99 MW during April-December, 2019-20.  

The BSE Sensex ended at 41130.68, up by 341.30 points or 0.84% after trading in a range of 40703.32 and 41177.00. There were 20 stocks advancing against 10 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index rose 1.40%, while Small cap index was up by 0.76%. (Provisional)

The top gaining sectoral indices on the BSE were Metal up by 2.90%, Realty up by 2.65%, Telecom up by 2.35%, Industrials up by 2.03% and Capital Goods up by 1.72%, while Utilities down by 0.09%, Power down by 0.09% and Consumer Discretionary Goods & Services down by 0.01% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Tata Steel up by 4.96%, Bharti Airtel up by 2.64%, HDFC up by 1.97%, TCS up by 1.77% and SBI up by 1.63%. (Provisional)

On the flip side, Hero MotoCorp down by 3.45%, Power Grid down by 2.37%, Maruti Suzuki down by 2.22%, Asian Paints down by 0.92% and Kotak Mahindra Bank down by 0.60% were the top losers. (Provisional)

Meanwhile, Moody's Investors Service in its latest report has said that economic growth projections made by Finance Minister Nirmala Sitharaman in her Budget for 2020-21 appear ambitious given the structural and cyclical challenges facing the Indian economy. It said the budget expects nominal Gross Domestic Product (GDP) growth of 10% in 2020-21, followed by 12.6% and 12.8% in FY2022 and 2023. But, Moody's saw GDP growth rising to around 8.7% in the next financial year beginning April 1 from about 7.5% in the current fiscal. Stating that growth outlook will remain weak, it has put real GDP growth at 4.9% during the current fiscal ending March 31 (FY20), slightly below the government's forecast of 5%. For the next fiscal (FY21), it estimated real GDP growth of 5.5%, from 6.3 per cent previous estimate.

It also said that growth has remained relatively weak as a prolonged deleveraging cycle and ongoing stress among non-banking financial institutions (NBFIs), which has constrained the financial system's overall provision of credit, weigh on consumption and investment. It added that the significant slowdown in financial sector credit growth from NBFI liquidity constraints and asset quality issues among public sector banks has exacerbated prolonged weakness in private investment and a material decline in consumption, due in part to financial stress among rural households and weak job creation.

Moody's said the government will face challenges in achieving its deficit target for the fiscal year ending March 2021, amid persistent structural and cyclical headwinds to growth. It said while the latest budget targets a narrower deficit, prolonged weakness in nominal GDP growth in India, combined with lower revenue collections, has dampened the outlook for fiscal consolidation, raising the risk that the debt burden may not stabilize. It added that the slippage in meeting fiscal deficit targets reflects significantly weaker economic growth and revenue collection than the authorities forecast in July 2019. Any material strengthening in India's public finances is unlikely in the near term as obstacles to growth persist.

The rating agency said while the fivefold rise in deposit insurance limit to Rs 5 lakh is credit positive for banks, the Budget seeking dividends from state-owned companies that are higher than the tax-saving they got from the abolition of the dividend distribution tax (DDT) was credit negative for oil and gas companies. But, the rise in public infrastructure spending and tax exemptions for sovereign wealth funds was credit positive for the infrastructure sector, it said, adding quicker debt recovery and additional interest deduction on home loans was credit positive for Indian securitization transactions.

The CNX Nifty ended at 12092.80, up by 113.15 points or 0.94% after trading in a range of 11953.35 and 12098.15. There were 36 stocks advancing against 14 stocks declining on the index. (Provisional)

The top gainers on Nifty were Tata Motors up by 10.65%, Yes Bank up by 8.58%, Tata Steel up by 5.75%, JSW Steel up by 4.95% and BPCL up by 4.82%. (Provisional)

On the flip side, Zee Entertainment down by 6.67%, Hero MotoCorp down by 3.58%, Dr. Reddys Lab down by 3.08%, Power Grid down by 2.29% and Maruti Suzuki down by 2.08% were the top losers. (Provisional)

European markets were trading in green; UK’s FTSE 100 increased 57.29 points or 0.77% to 7,497.11, France’s CAC rose 61.07 points or 1.03% to 5,996.12 and Germany’s DAX was up by 163.39 points or 1.23% to 13,445.13.

Asian markets ended higher on Wednesday on expectations that Chinese policymakers will unveil more stimulus measures to support an economic growth jolted by the fast-spreading corona virus outbreak. Chinese shares ended higher after a survey showed China's private sector logged a moderate growth in January. Total new orders received by service providers expanded at a softer rate, in spite of a stronger increase in new work from abroad. Further, Japanese shares ended higher as weaker safe-haven yen buoyed investor sentiment amid easing global worries about the corona virus outbreak.