Benchmarks end higher for second day in row

Extending northward journey for second straight session, Indian equity benchmarks staged a strong rally on Thursday and ended with gains of over one and half percent each, on the back of a broad-based buying interest led by gains in banking, financial services, telecom and private banking shares. Investor sentiment was boosted as the government's move to allow opening of multiplexes incited hopes of a faster economic recovery. Key gauges made gap-up opening, taking support from the Reserve Bank of India’s (RBI) statement that India’s current account balance (CAB) recorded a surplus of $19.8 billion -- 3.9 percent of GDP -- in the June quarter of FY21, up from the surplus of $0.6 billion in the preceding quarter (Q4FY20), on the back of lower trade deficit. Trading sentiments remained optimistic with Commerce and Industry Minister Piyush Goyal’s statement that the government is opening up the economy for greater participation of the private sector and has been working in different ways to remove entry barriers for new investments. He said the government has opened up defence manufacturing for the domestic industry in a much bigger way and coal mining for commercial engagement.

Markets extended their upward momentum in second half of the session, as the survey report showed India's manufacturing sector activity improved for the second straight month in September and touched an over eight-and-a-half-year high supported by accelerated increases in new orders and production, even as firms reduced staff numbers. The headline seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index (PMI) increased from 52.0 in August to 56.8 in September -- highest since January 2012. Additional support also came with the RBI’s report stated that India's external debt stood at $554.5 billion at end-June, recording a decrease of $3.9 billion over its level at the end of March 2020. A sharp appreciation in the rupee against the US dollar added to the momentum. Indian rupee settled at 73.13 against the US dollar, registering a surge of 63 paise over its previous close. Traders overlooked data showed that the growth of eight core infrastructure industries contracted by 8.5 percent in August 2020 as compared to same period of last year, mainly due to a decline in the production of steel, refinery products and cement. 

On the global front, Asian markets end mixed on Thursday amid optimism over a new stimulus package in the U.S. and positive ADP jobs data helping underpin investor sentiment. Meanwhile, the latest survey from Jibun Bank showed the manufacturing sector in Japan continued to contract in September, albeit at a slower pace, with a seven-month high manufacturing PMI score of 47.7. The Bank of Japan's quarterly Tankan Survey on business sentiment showed large manufacturing in Japan weakened again in the third quarter of 2020, with a diffusion index score of -27. European markets were trading higher, as investors cheered signs of progress in new U.S. fiscal stimulus and the pound dropped against the euro and the dollar amid reports the EU was poised to take legal action against the U.K. over its behavior in Brexit negotiations. Meanwhile, the seasonally adjusted IHS Markit/CIPS UK Manufacturing Purchasing Managers' Index (PMI) has dipped to 54.1 in September from August's two-and-a-half year high of 55.2. Back home, on the sectoral front, stocks related to banking sector were trading higher despite rating agency ICRA revised down its credit growth outlook for banks to 2-3 percent for the current fiscal, and said the coronavirus pandemic-driven stress may leave 3.1-3.7 percent of assets into bad loan list by March. Earlier, it had forecast credit growth for banks at 6-7 percent. Oil & gas sector stocks were in limelight with report that natural gas price in India touched the lowest rate on record after the government slashed the price by 25 per cent to $1.79, denting revenues of producers like ONGC.

Finally, the BSE Sensex rose 629.12 points or 1.65% to 38,697.05, while the CNX Nifty was up by 169.40 points or 1.51% to 11,416.95.

The BSE Sensex touched high and low of 38,738.89 and 38,410.20, respectively and there 25 stocks advancing against 5 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.73%, while Small cap index was up by 0.69%.

The top gaining sectoral indices on the BSE were Bankex up by 3.73%, Finance up by 3.03%, Telecom up by 2.02%, Realty up by 1.85% and TECK up by 1.19%, while Energy down by 0.31% and Consumer Durables down by 0.21% were the few losing indices on BSE.

The top gainers on the Sensex were Indusind Bank up by 12.41%, Bajaj Finance up by 5.09%, Axis Bank up by 4.44%, ICICI Bank up by 4.02% and Tech Mahindra up by 3.91%. On the flip side, ITC down by 0.52%, NTPC down by 0.47%, Reliance Industries down by 0.39%, Titan Company down by 0.26% and ONGC down by 0.22% were the top losers.

Meanwhile, the Reserve Bank of India (RBI) has said that India's current account surplus increased to $19.8 billion or 3.9 percent of GDP in Q1 (April-June) of FY21. It noted that the surplus in the current account in Q1FY21 was on account of a sharp contraction in the trade deficit to $10.0 billion due to steeper decline in merchandise imports relative to exports on a year-on-year basis. The current account surplus stood at $0.6 billion or 0.1 percent of GDP in the March quarter while there was a current account deficit of $15 billion or 2.1 percent of GDP in the year-ago period. The current account balances, which represents the net of the country's export and import of goods and services and also payments made to foreign investors or inflows from them, are considered as an important indicator of a country's external sector.

According to the central bank, net services receipts remained stable at $20.5 billion, as against $20.1 billion in the year-ago period, primarily on the back of net earnings from computer services. Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $18.2 billion which is a decline of 8.7 percent from their level a year ago. Net outgo from the primary income account, primarily reflecting net overseas investment income payments, increased to $7.7 billion from $6.3 billion a year ago.

RBI further said in the financial account, net foreign direct investment recorded outflow of $0.4 billion as against inflows of $14.0 billion in Q1 of 2019-20. Net foreign portfolio investment was $0.6 billion as compared to $4.8 billion in Q1 of 2019-20 as net purchases in the equity market were offset by net sales in the debt segment. With repayments exceeding fresh disbursals, external commercial borrowings to India recorded net outflow of $1.1 billion in Q1 of 2020-21, as against an inflow of $6.0 billion a year ago. Net inflow on account of non-resident deposits increased to $3 billion in the June quarter, as against $2.8 billion in Q1 of 2019-20.

The CNX Nifty traded in a range of 11,428.60 and 11,347.05 and there were 39 stocks advancing against 11 stocks declining on the index.

The top gainers on Nifty were Indusind Bank up by 12.44%, Bajaj Finance up by 5.04%, Axis Bank up by 4.10%, Bajaj Auto up by 4.09% and ICICI Bank up by 3.88%. On the flip side, Dr. Reddys Lab down by 1.31%, ONGC down by 0.51%, ITC down by 0.47%, NTPC down by 0.41% and Titan Company down by 0.40% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 51.39 points or 0.88% to 5,917.49, France’s CAC rose 29.33 points or 0.61% to 4,832.77 and Germany’s DAX was up by 9.66 points or 0.08% to 12,770.39.

Asian markets ended mixed on Thursday as renewed optimism over new stimulus package in the United States with encouraging private payrolls data supported investors sentiment. Japan’s Tokyo Stock Exchange was suspended trading in all listed stocks for a whole day after the system was hit by one of its worst ever glitches, kept gains in check. The manufacturing sector in Japan continued to contract in September, albeit at a slower pace, the latest survey from Jibun Bank showed today with a seven-month high manufacturing PMI score of 47.7. Markets in Taiwan, China and Hong Kong were closed for the Mid-Autumn Festival, while the South Korea market was closed for the Chuseok Festival.