Benchmarks trade firm in early deals

Indian equity benchmarks made optimistic start on Thursday taking leads from Asian peers amid a rally in US markets overnight. Markets are trading firm in early deals aided by buying in metal, basic materials and baking stocks. Traders took encouragement as the Cabinet approved the development of affordable rental housing complexes (ARHCs) for urban migrants and poor as a sub-scheme under the Pradhan Mantri (PM) Awas Yojana. This initiative was first announced by Finance Minister Nirmala Sitharaman as part of the Atmanirbhar Bharat package in May. Some support also came in with a private report that hiring activities in June remained muted on a year-on-year basis, but registered an increase over the previous month amid nationwide relaxations of coronavirus-induced lockdown norms. Meanwhile, the government data showed that India's total number of Covid-19 cases has now jumped to 768,206, and the death toll stands at 21,144, with over 24,000 new cases.

On the global front, most of the Asian markets are trading higher following the positive lead overnight from Wall Street, reflecting gains by technology stocks and optimism about an economic recovery. However, gains are modest amid worries about the surge in coronavirus cases in the US and other parts of the world. Meanwhile, the Cabinet Office said that the total value of core machine orders in Japan was up a seasonally adjusted 1.7 percent on month, coming in at 765.0 billion yen. That beat expectations for a drop of 5.4 percent following the 12.0 percent slide in April.

Back home, auto stocks were in focus with ratings agency Crisil’s statement that two consecutive years of double-digit decline in sales volume and a 50-100 basis points moderation in already thin operating profitability are expected to materially dent the credit metrics of automotive dealers this fiscal. On the sectoral front, insurance stocks were in focus as the government, post a cabinet meeting, said that the merger process of three ailing public sector general insurance companies has been stopped and instead the focus will be on their profitable growth.  In scrip specific development, traders are looking ahead to Tata Consultancy Services’ Q1 results scheduled to later in the day.

The BSE Sensex is currently trading at 36510.66, up by 181.65 points or 0.50% after trading in a range of 36422.30 and 36541.53. There were 22 stocks advancing against 8 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.40%, while Small cap index was up by 0.43%.

The top gaining sectoral indices on the BSE were Metal up by 2.87%, Basic Materials up by 1.14%, Bankex up by 0.92%, Realty up by 0.88%, Healthcare up by 0.78%, while Auto down by 0.25%, Consumer Durables down by 0.11% were the only losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 3.07%, Indusind Bank up by 1.46%, Hindustan Unilever up by 1.19%, Infosys up by 1.12% and NTPC up by 0.99%. On the flip side, Maruti Suzuki down by 1.30%, Titan Company down by 0.74%, Tech Mahindra down by 0.51%, TCS down by 0.49% and ONGC down by 0.31% were the top losers.

Meanwhile, State Bank of India (SBI) in its research report – Ecowrap has stated that India needs a calibrated approach to reduce its import dependency on China as the neighbouring country has slowly and steadily built a solid base in both high and low-value imports into India. It noted that China has spread out in all other categories, including low value manufacturing to high-value capital and electrical goods imports to India. It added that the government’s decision to restrict access to 59 Chinese apps from India will provide space to the domestic IT sector to develop its own capabilities.

According to the report, the data on services and merchandise trade exports shows that India can definitely compete with China on the services front. It also said India exports a far greater amount of telecommunications, computer, and information services than China. However, it said China is rapidly catching up and India needs to buckle up and there is now a huge clamour about banning imports from China, after the border standoff. It also stated that ideally, India must go for imposing restrictions on certain products in which it has a Revealed Comparative Advantage over China, and which will provide support to MSMEs.

However, the report said ‘demanding to curtail all imports at one go from a country which is so entrenched in our economic system is unreasonable and might disrupt the local supply chain when looked at, either from the producers' side or consumers' side’. As per the report, India is dependent on China for a lot of products at the lower end of manufacturing. It said with its huge IT base, India can focus more on services while building capabilities in goods exports to improve its overall trade balance with China. It added that China is already coming under fire due to its aggressive stance and it gives other Asian nations an opportunity to look at the share that China has captured in services exports of telecommunications, computer, and information services. 

The CNX Nifty is currently trading at 10762.20, up by 56.45 points or 0.53% after trading in a range of 10733.00 and 10767.00. There were 38 stocks advancing against 12 stocks declining on the index.

The top gainers on Nifty were Hindalco up by 4.23%, Tata Steel up by 3.23%, JSW Steel up by 2.82%, Vedanta up by 2.72% and Indusind Bank up by 1.77%. On the flip side, Hero MotoCorp down by 1.52%, Maruti Suzuki down by 1.38%, UPL down by 0.86%, Titan Company down by 0.60% and Tech Mahindra down by 0.40% were the top losers.

Asian markets are trading mostly in green; Nikkei 225 jumped 180.42 points or 0.80% to 22,619.07, Hang Seng advanced 123.18 points or 0.47% to 26,252.36, Taiwan Weighted increased 46.07 points or 0.38% to 12,216.26, KOSPI rose 15.55 points or 0.72% to 2,174.43, Jakarta Composite gained 14.43 points or 0.28% to 5,090.60 and Shanghai Composite surged 35.17 points or 1.03% to 3,438.61, while Straits Times inched down by 6.70 points or 0.25% to 2,661.46.