Markets gain for second consecutive day

Indian equity benchmarks, swinging between gains and losses throughout the day, managed to close Wednesday’s session with decent gains for the second day in a row, tracking gains in M&M, Power Grid and Tata Steel amid a largely positive trend in global markets. After opening on a muted note, markets were trading marginally higher as traders took some support with CII-IBA survey report stating that the financial conditions are looking up in the current quarter (Q2FY21) due to policy decisions and steps the government and Reserve Bank of India have taken to support economy. But, Indian benchmarks erased those gains to turn highly volatile in morning deals, with the Finance Ministry’s statement that the gross GST collection in August stood at Rs 86,449 crore, down from Rs 87,422 crore collected in July.

Trading sentiments remained in lackluster mood in afternoon session, as Moody's Investors Service said India will be among the large emerging market sovereigns to have highest debt burden by 2021. Also, rising coronavirus cases is likely to dampen the sentiments in the markets. Though, markets reversed trend in late afternoon deals and ended on a bullish note, taking support from Union Minister of Commerce and Industry Piyush Goyal’s statement that the whole package of the US-India trade deal is almost ready and it can be finalised when the local political situation in the United States is conducive. Traders also took note of the Directorate Generate of Foreign Trade (DGFT) latest notification has said that a limit has been imposed on total rewards under the Merchandise Exports from India Scheme (MEIS). The total reward which may be granted to an IEC (Import Export Code) holder under the scheme shall not exceed Rs 2 crore per IEC of exports made in the period September 1, 2020 to December 31, 2020.

On the global front, Asian markets ended mostly higher on Wednesday, as investors digested upbeat economic data from the U.S. and China and reacted to the comments from U.S. House Speaker Nancy Pelosi suggesting serious differences over the coronavirus (Covid-19) aid package. Meanwhile, Statistics Korea said consumer prices in South Korea were up 0.6 percent on month in August. That exceeded expectations for an increase of 0.2 percent following the flat reading in July. On a yearly basis, consumer prices climbed 0.7 percent - again beating forecasts for 0.4 percent and up from 0.3 percent in the previous month. European markets were trading higher, as investors pin hopes on a swift economic recovery and react to the latest news on the coronavirus front. Texas Gov. Greg Abbott said he hopes to provide the next steps on coronavirus restrictions in the state sometime next week. However, preliminary data showed German retail sales fell 0.9 percent month-on-month in July, defying expectations for a 0.5 percent increase.

Back home, on the sectoral front, auto stocks traded actively in the trade after data showed automobile sales for most companies in India rose at a brisk pace in August over the same month last year. Stocks related to telecom sector ended mixed amid ICRA’s report that the relatively shorter timeframe granted to telcos for payment of AGR dues will exert additional pressure on the cash flows, necessitates sizeable ARPU hike, and may have longstanding impact on industry structure. Besides, power stocks were in focus with report that the slump in overall power consumption has narrowed to just 0.85 percent in August at 110.57 billion units (BU) amid considerable rise in economic activities and raised hopes that it would surpass normal level this month.

Finally, the BSE Sensex gained 185.23 points or 0.48% to 39,086.03, while the CNX Nifty was up by 64.75 points or 0.56% to 11,535.00.

The BSE Sensex touched high and low of 39,141.84 and 38,736.22, respectively and there were 18 stocks advancing against 12 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 1.26%, while Small cap index was up by 1.66%.

The top gaining sectoral indices on the BSE were Energy up by 1.80%, Industrials up by 1.70%, Power up by 1.60%, Metal up by 1.49% and Telecom up by 1.34%, while there were no losers on BSE sectoral front.

The top gainers on the Sensex were Mahindra & Mahindra up by 5.77%, Power Grid up by 3.21%, Tata Steel up by 2.30%, Indusind Bank up by 2.08% and Reliance Industries up by 1.97%. On the flip side, Bajaj Auto down by 2.62%, Asian Paints down by 1.63%, Sun Pharma down by 1.48%, HDFC down by 1.25% and Nestle down by 1.12% were the top losers.

Meanwhile, Moody's Investors Service has said India will be among the large emerging market sovereigns to have highest debt burden by 2021. It stated that the coronavirus pandemic-induced deterioration in growth and fiscal dynamics will leave most large emerging market sovereigns with higher debt burdens over the next few years. Further, it said in India, increased stress within the financial system, among banks and non-bank financial companies, raises contingent liability risks to the sovereign.

It stated despite steps toward the resolution of high non-performing loans, the banking system continues to suffer from weak asset quality, and low loan-loss coverage and capital adequacy. This is especially the case for state-owned banks, which account for around 70 per cent of total banking system assets. It added lingering fragilities in the sector are likely to be compounded by a prolonged period of subdued economic activity compared to pre-coronavirus levels.

Besides, It said ‘we expect government debt in the large emerging market sovereigns to rise by almost 10 percentage points of GDP on average by the end of 2021 from 2019 levels, driven primarily by wider primary deficits, although some are likely to see higher interest payments contributing to higher debt. It mentioned debt burdens in Brazil, India and South Africa will rise to among the highest across the large emerging market sovereigns by 2021.

The CNX Nifty traded in a range of 11,554.75 and 11,430.40 and there were 37 stocks advancing against 13 stocks declining on the index.

The top gainers on Nifty were Zee Entertainment up by 7.46%, Mahindra & Mahindra up by 6.13%, Tata Motors up by 5.11%, Bharti Infratel up by 3.84% and Adani Ports &SEZ up by 3.84%. On the flip side, Bajaj Auto down by 2.38%, Hero MotoCorp down by 1.45%, Asian Paints down by 1.40%, HDFC down by 1.30% and Nestle India down by 1.25% were the top losers.

European markets were trading higher;  UK’s FTSE 100 increased 98.94 points or 1.69% to 5,960.99, France’s CAC increased 117.31 points or 2.38% to 5,055.41 and Germany’s DAX increased 300.18 points or 2.31% to 13,274.43.

Asian markets ended mostly higher on Wednesday as investors were cheered by upbeat manufacturing data from major economies and that fueling expectations of a global recovery, even though the corona virus pandemic has regions around the globe battling recessions. Japanese shares ended up as Chief Cabinet Secretary Yoshihide Suga gathered support to be the next prime minister at a leadership election on September 14. Bank of Japan Deputy Governor Masazumi Wakatabe said the central bank must maintain its strong commitment to achieve its 2 percent inflation target and consider ways to improve its monetary policy as the corona virus pandemic stokes fears of deflation. However, Chinese shares ended lower after US Secretary of State Mike Pompeo said the Trump administration would take further moves in the coming days and weeks to restrict the activities of Chinese companies for the benefit of the US economy.