Sensex, Nifty extend rally for second consecutive day

Indian equity benchmarks rallied for second session in a row on Monday wherein the Sensex rose as much as 592 points and Nifty 50 index moved above its important psychological level of 11,200, lifted by across-the-board gain amid positive cues from global markets. Domestic equities traded on a positive note since beginning, as traders took support with report that the Finance Ministry is likely to provide capital support from the Rs 20,000 crore fund approved by Parliament in recently concluded session to some Public Sector Banks (PSBs) in the third quarter (Q3) itself. Parliament approved Rs 20,000 crore for PSB capital infusion as part of the first batch of Supplementary Demands for Grants for 2020-21 which sought additional spending of a record Rs 2.35 trillion primarily to meet expenses for combating the Covid-19 pandemic. Some support also came in with the RBI data showing that bank credit grew 5.26 per cent to Rs 102.24 lakh crore while deposits rose 11.98 per cent to Rs 142.48 lakh crore in the fortnight ended September 11.

Trading sentiments remained optimistic as union Minister Pratap Chandra Sarangi has called for efforts by the local industry to capture the country's huge domestic market, in line with Prime Minister Narendra Modi's vision of 'Aatmanirbhar Bharat' or a self-reliant India. Traders overlooked S&P’s statement that India's economy may experience a record contraction in the current financial year mainly due to the global COVID-19 pandemic, and the real GDP growth is expected to recover from next fiscal onwards. The agency also affirmed its BBB- long-term and A-3 short-term foreign and local currency sovereign credit ratings on India. Market participants paid no heed towards Economic think-tank NCAER’s quarterly review of the economy stated that India’s gross domestic product (GDP) growth is likely to decline by 12.6 percent during the current financial year (FY21) on account of the impact of the coronavirus pandemic on the business activities.

On the global front, Asian Markets ended mostly higher on Monday, while European markets were trading higher as official data showed Profits at China's industrial firms grew for the fourth straight month in August, buoyed in part by a rebound in commodities prices and equipment manufacturing. Though gains were tempered by concerns over rising coronavirus cases and escalating tensions between Washington and Beijing. A cautious undertone prevailed as U.S. President Donald Trump and former vice-president Joe Biden prepare to square off in their first pre-election debate on Tuesday (local time). Back home, on the sectoral front, there was some buzz in the agriculture stocks as Care Ratings report stated that with yet another record food production at 301 million tonnes expected on the back of a bumper kharif crop this year, recent MSP hikes can leave the farmers with an additional liquidity of Rs 50,000 crore. Pharma stocks also were in watch as investment information agency ICRA said the global demand scenario for Indian pharmaceutical industry is largely expected to remain stable due to inelastic nature of prescription drugs. It also said though some impact on volume growth will be felt owing to Covid-19 lockdowns and lower economic growth, the impact will be felt more in less developed countries, which are additionally negatively impacted owing to low crude oil prices.

Finally, the BSE Sensex rose 592.97 points or 1.59% to 37,981.63, while the CNX Nifty was up by 177.30 points or 1.60% to 11,227.55.

The BSE Sensex touched high and low of 38,035.87 and 37,544.05, respectively and there 27 stocks advancing against 3 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 2.58%, while Small cap index was up by 2.50%.

The top gaining sectoral indices on the BSE were Power up by 3.40%, Bankex up by 3.31%, Auto up by 3.01%, Realty up by 2.92% and Finance up by 2.75%, while there were no losing sectoral indices on the BSE.

The top gainers on the Sensex were Indusind Bank up by 7.85%, Bajaj Finance up by 6.29%, Axis Bank up by 5.83%, Power Grid up by 4.51% and ONGC up by 4.35%. On the flip side, Hindustan Unilever down by 0.66%, Infosys down by 0.15% and Nestle down by 0.12% were the top losers.

Meanwhile, Economic think-tank National Council of Applied Economic Research (NCAER) in its quarterly review of the economy has said that India’s gross domestic product (GDP) growth is likely to decline by 12.6 percent during the current financial year (FY21) on account of the impact of the coronavirus pandemic on the business activities. The NCAER's May 2020 Quarterly Review of the Economy (QRE) and June 2020 QRE Update had assessed that the economy would contract by 26 percent in the first quarter of the fiscal.

As per the official estimates, India's economy has suffered its worst slump on record in April-June quarter of current fiscal year (Q1FY21), with the gross domestic product (GDP) contracting by 23.9% as the coronavirus-related lockdowns weighed on the already-declining consumer demand and investment. Therefore, it said ‘we are now forecasting that y-o-y growth will remain negative through Q2, Q3 and Q4 at (-) 12.7 per cent, (-) 8.6 per cent and (-) 6.2 per cent respectively. For the year as a whole, 2020-21 GDP will decline by (-) 12.6 percent.’

The NCAER review said that much will depend on how the spread of the disease plays out, how central and state governments respond to it and how workers and entrepreneurs respond to the disruption. All these factors are major unknowns at this time. It also noted that retail inflation has remained elevated at over 6 per cent, above the Reserve Bank of India's (RBI) target inflation band of 2-6 per cent. It added that elevated inflation along with the steep contraction of the economy requires macroeconomic policy to navigate its way between two competing goals of reviving the economy and containing inflation.

The CNX Nifty traded in a range of 11,239.35 and 11,099.85 and there were 46 stocks advancing against 4 stocks declining on the index.

The top gainers on Nifty were Indusind Bank up by 7.99%, Bajaj Finance up by 6.41%, Axis Bank up by 5.54%, ONGC up by 4.64% and Tata Motors up by 4.60%. On the flip side, Wipro down by 0.75%, Hindustan Unilever down by 0.53%, Nestle down by 0.11% and Infosys down by 0.05% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 89.11 points or 1.53% to 5,931.78, France’s CAC rose 98.86 points or 2.09% to 4,828.52 and Germany’s DAX was up by 344.55 points or 2.76% to 12,813.75.

Asian Markets ended mostly higher on Monday, despite escalating tensions between Washington and Beijing. In a major blow for China’s advanced tech ambitions, the US Commerce Department reportedly ordered US companies to seek permission before selling their technologies to Chinese semiconductor giant Semiconductor Manufacturing International Corp (SMIC). Renewed hopes of more US stimulus measures further buoyed sentiment, but a cautious undertone prevailed as US President Donald Trump and former vice-president Joe Biden prepare to square off in their first pre-election debate on Tuesday. However, some gains were capped by fears of resurgence of corona virus cases in Europe, which could dent the global economic recovery.