Local equities continue firm trade in morning session

Local equity benchmarks continue to trade firm in morning session on account of buying in front line counters, with the Sensex and Nifty gaining more than 200 and 70 points, respectively. Market participants took encouragement as the Finance Ministry has cited ‘green shoots’ of recovery in agriculture, manufacturing and services sectors, and said the government and the RBI have taken prompt policy measures - both short term and long term - in a calibrated manner to reinvigorate the economy at the earliest with minimal damage. Some support also came with Fitch Solutions’ statement that the country’s farm trade, which was disrupted during the COVID-19 lockdown due to logistic issues in March-June, is expected to rebound in the second half of the calendar year 2020. Further, positive sentiment in global markets and unabated foreign fund inflows also supported domestic equities. On the sectoral front, majority of stocks related to IT sector were trading in red with ICRA’s statement that the temporary suspension of H1-B and L-1 visas by the US is a mildly negative development for the Indian IT companies as their dependence on permits has gone down lately.

On the global front, Asian markets were trading higher, following the overnight gains on Wall Street on upbeat economic data and optimism that the US-China trade deal is intact. Nevertheless, investors remain cautious and the safe-haven yen strengthened due to the rising number of coronavirus cases in the US. Back home, the BSE Sensex is currently trading at 35636.36, up by 205.93 points or 0.58% after trading in a range of 35515.76 and 35681.92. There were 19 stocks advancing against 11 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 1.18%, while Small cap index was up by 0.90%.

The top gaining sectoral indices on the BSE were Auto up by 1.88%, FMCG up by 1.71%, Consumer Discretionary up by 1.69%, Industrials up by 1.62% and Consumer Durables up by 1.45%, while Telecom down by 0.30%, TECK down by 0.12%, IT down by 0.08% and Healthcare down by 0.04% were the top losing indices on BSE.

The top gainers on the Sensex were Asian Paints up by 4.31%, ITC up by 4.22%, Bajaj Auto up by 2.58%, Titan Co up by 2.17% and Mahindra & Mahindra up by 2.03%. On the flip side, Power Grid down by 1.97%, HCL Technologies down by 1.79%, Indusind Bank down by 1.22%, Infosys down by 0.68% and ICICI Bank down by 0.68% were the top losers.

Meanwhile, credit rating agency Fitch Ratings has said that it expects Indian automakers’ profitability to remain weak as the pandemic’s economic impact will weigh on demand in current financial year (FY21).  However, it said volumes are expected to partly recover in the second half of FY21 as sales gradually increase after the easing of lockdown measures since May.

Further, it stated that India’s automakers reported sharper volume declines and weaker profitability in the last quarter of the financial year ended March 31, 2020 (4QFY20) than in the earlier quarter. The agency cited factors such as slowing GDP growth and weak consumer sentiment to have reduced volumes and led to higher discounts by automakers. It said the implementation of BS6 - a more stringent emission framework - in April 2020 will increase production costs.

It mentioned sales in all key auto categories fell sharply in 4QFY20 from 3QFY20 when discounts offered by automakers during the festive season helped to slow the downtrend in sales that started in the beginning of 2019. Auto sales were affected by weak consumer sentiment as quarterly GDP growth slowed over FY20 and buyers’ preference to wait for newer, BS6-compliant models.

The CNX Nifty is currently trading at 10545.35, up by 74.35 points or 0.71% after trading in a range of 10497.95 and 10545.95. There were 35 stocks advancing against 14 stocks declining, while 1 stock remain unchanged on the index.

The top gainers on Nifty were Tata Motors up by 4.89%, Asian Paints up by 4.46%, ITC up by 4.33%, Hero MotoCorp up by 4.26% and Bajaj Auto up by 2.98%. On the flip side, HCL Technologies down by 1.65%, Power Grid down by 1.52%, Cipla down by 0.97%, Indusind Bank down by 0.90% and BPCL down by 0.84% were the top losers.

Asian markets were trading higher; Hang Seng increased 13.94 points or 0.06% to 24,921.28, Nikkei 225 surged 26.77 points or 0.12% to 22,575.82, Taiwan Weighted strengthened 41.32 points or 0.36% to 11,653.68, KOSPI rose 40.20 points or 1.89% to 2,171.44, Straits Times advanced 2.39 points or 0.09% to 2,637.31, Shanghai Composite gained 4.55 points or 0.15% to 2,975.17 and Jakarta Composite soared 88.25 points or 1.81% to 4,967.38.