Benchmarks trade higher in early deals

Indian equity benchmarks made a cautious start and soon gained traction to trade higher with gains of around half a percent each in early deals on Wednesday. Investors were looking forward to services PMI data for the month of January out to be later in the day. Traders took some support with 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. Sentiments also got some support 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.

Global cues remained supportive with all the Asian markets trading in green, extending gains from the previous session following the positive cues overnight from Wall Street amid optimism that China's stimulus measures will help offset the economic impact of the deadly coronavirus outbreak. Chinese health officials said that 490 people have died in the country and a total of 24,324 cases have been confirmed related to the coronavirus outbreak. Besides, the latest survey from Jibun Bank revealed that the services sector in Japan continued to expand in January, albeit at a slower rate, with a PMI score of 51.0. That's down from 52.1 in December.

Back home, NBFCs stocks were in focus with rating agency CRISIL’s report that realty exposure of non-banking financial companies (NBFCs), which is out of moratorium, has a bad loan ratio of over 10 per cent as of September 2019 and the fear is rest of the book under moratorium may go the same way. There will be lots of important earnings announcements too, to keep the markets in action. In stock specific developments, JSW Energy rose after its consolidated net profit for the third quarter jumped more than two-fold as total expenses dropped during the quarter. Also, Adani Transmission gained after it raised $310 million in foreign currency debt.

The BSE Sensex is currently trading at 40955.56, up by 166.18 points or 0.41% after trading in a range of 40703.32 and 40970.30. There were 22 stocks advancing against 8 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 1.04%, while Small cap index was up by 0.71%.

The top gaining sectoral indices on the BSE were Telecom up by 1.56%, Realty up by 1.43%, Auto up by 1.25%, Energy up by 1.24% and Capital Goods was up by 1.20%, while there were no looser on BSE sectoral front on the BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 1.98%, Bajaj Auto up by 1.50%, HCL Technologies up by 1.47%, Larsen & Toubro up by 1.37% and Bharti Airtel up by 1.25%. On the flip side, ITC down by 1.34%, Infosys down by 1.02%, Hero MotoCorp down by 0.96%, Titan Company down by 0.53% and Asian Paints down by 0.45% were the top losers.

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 is currently trading at 12033.35, up by 53.70 points or 0.45% after trading in a range of 11953.35 and 12037.25. There were 36 stocks advancing against 14 stocks declining on the index.

The top gainers on Nifty were Tata Motors up by 3.86%, Bharti Infratel up by 3.40%, UPL up by 2.42%, BPCL up by 2.34% and Mahindra & Mahindra up by 1.78%. On the flip side, Zee Entertainment down by 2.54%, ITC down by 1.30%, Hero MotoCorp down by 1.18%, Infosys down by 1.02% and Yes Bank down by 1.00% were the top losers.

All Asian markets were trading higher, Nikkei 225 surged 297.42 points or 1.29% to 23,382.01, Hang Seng increased 138.30 points or 0.52% to 26,814.28, Taiwan Weighted strengthened 55.00 points or 0.48% to 11,610.92, Shanghai Composite gained 45.46 points or 1.63% to 2,828.75, Jakarta Composite soared 34.18 points or 0.58% to 5,956.52, Straits Times advanced 24.47 points or 0.78% to 3,181.04 and KOSPI was up by 15.97 points or 0.74% to 2,173.87.