Benchmarks trade firm in early deals ahead of inflation data

Indian equity benchmarks made optimistic start on Monday following gains in Asian peers. Markets are trading firm, with over half a percent gains each, in early deals supported by buying in all the sector indices led by realty, consumer durables up and IT. Investors are eyeing CPI and WPI inflation data which are scheduled to be release later in the day. Sentiments got a boost as Chief Economic Adviser K V Subramanian exuded confidence that retail inflation will come down in the days ahead with the easing of lockdowns, attributing the rise in inflation to supply-side frictions. Some support also came in as the finance ministry said banks have sanctioned loans worth over Rs 1.63 lakh crore to more than 42 lakh business units under the Rs 3-lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector. Market participants overlooked report that India’s industrial output contracted 10.4% in July as against a 4.9% growth year-on-year. Meanwhile, with over 93,215 new cases, India's coronavirus tally has reached 4,845,003. The death toll has risen by 1,140 to 79,754.

On the global front, all the Asian markets were trading higher, as positive news on the coronavirus vaccine front boosted sentiment. Drug maker AstraZeneca said it has resumed the late-stage trial of its coronavirus vaccine candidate in the UK after the trial was suspended last week following an adverse reaction in a trial participant. Meanwhile, Japan will release final July numbers for industrial production as well as July figures for its tertiary industry index.

Back home, DTH companies stocks were in focus with Crisil’s report that people staying indoors due to the COVID-19 pandemic has proved to be a bonanza for direct-to-home (DTH) broadcasters as the industry is all set to post a growth of up to 6 per cent in its topline to Rs 22,000 crore in FY21. In scrip specific developments, HCL Technologies jumped as in a mid-quarter update, the company said it expects the revenue and the operating margin for the current quarter (September'20) to be meaningfully better than the top end of the guidance it had provided in July 2020.

The BSE Sensex is currently trading at 39149.39, up by 294.84 points or 0.76% after trading in a range of 39073.51 and 39230.16. There were 20 stocks advancing against 10 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 1.45%, while Small cap index was up by 3.14%.

The top gaining sectoral indices on the BSE were Realty up by 2.95%, Consumer Durables up by 2.69%, IT up by 2.13%, TECK up by 1.74%, Industrials up by 1.61%, while there were no losers on BSE sectoral front.

The top gainers on the Sensex were HCL Technologies up by 6.48%, Tech Mahindra up by 2.41%, TCS up by 1.95%, Reliance Industries up by 1.47% and Infosys up by 1.20%. On the flip side, Maruti Suzuki down by 1.02%, Asian Paints down by 0.70%, Hindustan Unilever down by 0.64%, Bajaj Finance down by 0.57% and Power Grid down by 0.43% were the top losers.

Meanwhile, domestic rating agency CARE Ratings has said India’s Gross Domestic Product (GDP) is likely to see a sharper contraction of 8-8.2 percent in the current financial year (FY21) under the assumption of there being no fiscal stimulus from the government. It said this would imply that there would be no increase in capital expenditure (capex) during the year beyond what is provided in the Budget. Earlier, it had a projection of 6.4 percent de-growth in GDP for FY21, based on the expected progress of the lockdown and unlock processes which were prevalent in the country at that time.

According to the report, the decline in GDP growth by around 8 percent would also be associated with a decline in the gross fixed capital formation. It said the same would hold for consumption growth that will be affected by lower growth in income across all categories of consumers. However, it said the sharp fall in GDP growth in FY21 would provide the cushion of a faster pace of growth in FY22 depending on the rate at which various sectors get back on track. It noted that the GDP fall of about 24 percent in the first quarter was slightly higher than its expectations of a 20.2 percent contraction. The element which came in as a surprise was the growth in the public administration, defence and other services segments at (-) 10.3 percent.

The rating agency further stated that the factors that are working well in the economy are more in the agricultural sector as well as the financial domain where a good monsoon as well as the efforts of the government and the RBI to enhance the flow of credit have shown some positive tendencies. It also said the unlock process has been gradual, and it needs to be seen whether there is continuity in the approach which will have a bearing on the resumption of some services and the attainment of minimum capacity utilisation in these sectors.

The CNX Nifty is currently trading at 11540.30, up by 75.85 points or 0.66% after trading in a range of 11528.55 and 11563.35. There were 31 stocks advancing against 19 stocks declining on the index.

The top gainers on Nifty were HCL Technologies up by 5.89%, Tech Mahindra up by 2.24%, TCS up by 1.82%, Wipro up by 1.69% and Reliance Industries up by 1.52%. On the flip side, Sun Pharma down by 1.07%, Maruti Suzuki down by 0.96%, BPCL down by 0.85%, HDFC Life Insurance down by 0.82% and Hero MotoCorp down by 0.76% were the top losers.

All the Asian markets were trading higher; Nikkei 225 surged 156.25 points or 0.67% to 23,562.74, Straits Times added 0.20 points or 0.01% to 2,490.29, Hang Seng jumped 161.21 points or 0.66% to 24,664.52, Taiwan Weighted rose 88.96 points or 0.70% to 12,764.91, KOSPI soared 24.38 points or 1.02% to 2,421.07, Jakarta Composite advanced 122.78 points or 2.45% to 5,139.49 and Shanghai Composite was up by 18.33 points or 0.56% to 3,278.68.