Late hour buying helps D-Street to cut losses

Buying activity which took place during late hour of trade mainly helped Indian equity indices to cut all of their losses and to end Friday’s session on optimistic note with gains of over half percent. The indices staged a gap-down opening, tracking a global selloff as coronavirus cases continued to surge. Traders were concerned after S&P Global Ratings said India's external position should remain stable over the next 12 months but COVID-19 pandemic-related risks to growth trajectory could exert downward pressure of the sovereign ratings if there is a weak recovery. S&P had projected India's economy to shrink by 5 per cent in the current fiscal, and the growth recover to 8.5 per cent next fiscal. Selling further crept in with the credit rating agency ICRA’s report that the pace of credit rating downgrades has accelerated with average monthly downgrades increasing by 22 percent in the past few months amid the rapid spread of the novel coronavirus (Covid-19) across the globe as well as in India. Traders also remained on sidelines ahead of industrial production data for April and CPI inflation for May which are due later in the day.

However, in the last hour of trade, local barometer gauges recovered all of the day's losses to end higher, as sentiments turned optimistic with Niti Aayog vice-chairman Rajiv Kumar’s statement that India's economy will recover after the containment of the COVID-19 pandemic and the country will maintain its sound net external position. He also said that India’s strong democratic institutions promote policy stability and the ongoing economic reforms, if executed well, should keep the country’s growth rate ahead of peers. Traders also found some solace with Commerce and Industry Minister Piyush Goyal’s statement that the country's exports are drastically improving with the outbound shipments contracting 36 percent in May as compared to 60 percent in April.

On the global front, Asian markets ended mostly in red on Friday, as cautious commentary from the Federal Reserve coupled with rising coronavirus infection rates prompted investors to dump equities. European markets were trading higher, as investors shrugged off private report that the U.K. economy suffered a record contraction in April amid the country's pandemic lockdown and health crisis. GDP contracted by 20.4 percent in April from March, when it was down 5.8 percent. GDP was forecast to fall 18.4 percent. In three months to April, GDP decreased 10.4 percent, slightly faster than the expected fall of 10 percent. Back home, stocks related to food processing sector were in focus as foreign direct investment (FDI) in the food processing sector rose 44 per cent to $904.7 million in the financial year 2019-20. The sector had received FDI worth $628.24 million in 2018-19 and $904.90 million in the financial year 2017-18. Telecom stocks were also in focus as the Supreme Court termed as totally impermissible the demand by Department of Telecom (DoT) for dues of Rs 4 lakh crore in Adjusted Gross Revenue (AGR) from the public sector undertakings (PSUs) and said DoT must consider withdrawing it.

Finally, the BSE Sensex gained 242.52 points or 0.72% to 33,780.89, while the CNX Nifty was up by 70.90 points or 0.72% to 9,972.90.

The BSE Sensex touched high and low of 33,856.27 and 32,348.10, respectively and there were 17 stocks advancing against 13 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.96%, while Small cap index was up by 0.13%.

The top gaining sectoral indices on the BSE were Auto up by 2.91%, Energy up by 2.40%, Telecom up by 2.29%, Consumer Discretionary Goods & Services up by 1.69% and Realty up by 1.32%, while IT down by 1.49%, TECK down by 0.82%, Power down by 0.63%, Capital Goods down by 0.33% and Utilities down by 0.24% were the top losing indices on BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 7.22%, Bajaj Finance up by 4.78%, Hero MotoCorp up by 4.00%, Reliance Industries up by 3.34% and Titan Company up by 2.81%. On the flip side, ONGC down by 3.39%, Tech Mahindra down by 2.91%, Power Grid down by 2.84%, Infosys down by 1.63% and Kotak Mahindra Bank down by 1.47% were the top losers.

Meanwhile, after Moody's downgraded India’s rating and S&P retained it at the lowest investment grade, Chief Economic Advisor Krishnamurthy Subramanian (CEA) has said country’s fundamentals demand a much better rating.  India's ability and willingness to repay debt is gold standard, he said making a case for ratings upgrade.

He took comfort in rating agencies acknowledging India's reforms, saying these are critical elements for higher growth next year. On economic growth this year, Subramanian said it will depend on when recovery happens. It is uncertain if the recovery will happen in the second half of this year or next year. Further, he said the finance ministry was working on a large range of growth estimates for this year and a recovery in the second half or next year is also part of baseline expectation.

He mentioned the finance ministry has evaluated pros and cons of options such as deficit monetisation. He added ‘we keep all options under consideration and will be evaluating them.’ On privatisation policy, he said that banking will form part of the strategic sector and the government is working on to identify strategic and non-strategic sectors.

The CNX Nifty traded in a range of 9,996.05 and 9,544.35 and there were 29 stocks advancing against 20 stocks declining on the index.

The top gainers on Nifty were Mahindra & Mahindra up by 7.57%, Bharti Infratel up by 6.54%, Shree Cement up by 5.82%, Bajaj Finance up by 4.66% and Hero MotoCorp up by 3.90%. On the flip side, Zee Entertainment down by 4.46%, ONGC down by 3.39%, Tech Mahindra down by 3.07%, Power Grid down by 2.92% and Wipro down by 2.25% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 76.76 points or 1.26% to 6,153.46, France’s CAC rose 110.48 points or 2.29% to 4,926.08 and Germany’s DAX was up by 175.25 points or 1.46% to 12,145.54.

Asian markets ended mostly lower on Friday, tracking losses in Wall Street overnight as US Fed's dour economic projections along with resurgence of corona virus infections prompted investor concerns. The US Federal Reserve released a gloomy economic outlook at the end of its two-day monetary policy meeting on Wednesday. US Federal Reserve Chairman Jerome Powell warned of a ‘long road’ to recovery. Japanese shares ended lower as the safe-haven yen strengthened, even though Japan's parliament approved a record $300 billion second extra budget in an effort to shore up the economy.