Markets extend gains to fifth day; Nifty ends near 11,750 mark

Extending their gaining streak into the fifth session in a row, Indian equity benchmarks ended over half a percent higher on Wednesday, led by buying in consumer durables, energy and auto stocks. Markets made a cautious start, amid reports that workers in India are facing increased burnout due to lack of separation between work and personal life as well as concerns of contracting COVID-19. Close to one-third of workers in India cited increased rates of burnout over the past six months with the lack of separation between work duties and personal obligations as negatively impacting their well-being. However, key gauges soon gained ground and traded in fine fettle throughout the day, as traders found support with report that companies garnered more than Rs 1 lakh crore from the capital markets in August, a surge of 64 percent from the preceding month, with private placement of debt instruments emerging as the most preferred route for financing business needs. The funds have been mopped-up mainly for business expansion plans, loan repayments and working capital requirements.

Domestic indices held on to their firm undertone in late afternoon trading, taking support from Fitch Ratings’ report that IT services sector is likely to resume high single-digit revenue growth in 2021-2022 on the back of higher demand for digital transformation after a flattish 2020. However, further up-move got restricted as traders awaited corporate earnings from heavyweights and the outcome of a policy review by the RBI due in the coming days. The Reserve Bank of India's Monetary Policy Committee will to begin a three-day review later in the day. The central bank is widely expected to hold key interest rates at existing levels in the upcoming policy statement, due on October 9, in a bid to tackle high inflation. Tata Consultancy Services (TCS) - the country's largest IT company - will kick of the earnings season by reporting its financial results for the July-September period.    

On the global front, Asian markets ended mostly higher on Wednesday, despite Trump halted talks for an additional stimulus package, raising fears of a slower economic recovery from the coronavirus crisis. European markets were trading lower, as data from Destatis revealed that German industrial production dropped 0.2 percent on a monthly basis in August, in contrast to a 1.4 percent rise posted in July. On a yearly basis, industrial production decreased 9.6 percent following a 10 percent drop in July. Back home, on the sectoral front, stocks related to textile sector were in focus as India Ratings and Research (Ind-Ra) said the US withhold release order on cotton and apparel imports from specific producers in Xinjiang Uygur Autonomous Region (XUAR) may escalate global trade tensions and thus have negative implications on Indian textile sector in the short run. However, it could be beneficial in the medium term. There was some reaction in aviation stocks with IATA’s report that the global airline industry will burn through $77 billion in cash during the second half of 2020 despite the resumption of flight services amid the coronavirus pandemic.

Finally, the BSE Sensex rose 304.38 points or 0.77% to 39,878.95, while the CNX Nifty was up by 76.45 points or 0.66% to 11,738.85.

The BSE Sensex touched high and low of 39,968.04 and 39,450.82, respectively and there 16 stocks advancing against 14 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.61%, while Small cap index was down by 0.40%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.74%, Energy up by 1.57%, Auto up by 1.37%, Consumer Discretionary up by 0.66% and IT up by 0.64%, while Metal down by 2.97%, Realty down by 1.60%, Power down by 1.41%, Utilities down by 1.27%, Capital Goods down by 0.98% were the top losing indices on BSE.

The top gainers on the Sensex were Titan Company up by 4.44%, Bajaj Auto up by 3.55%, Maruti Suzuki up by 2.28%, Reliance Industries up by 2.13% and Ultratech Cement up by 1.79%. On the flip side, Bajaj Finance down by 4.12%, Power Grid down by 2.24%, Sun Pharma down by 1.76%, Tata Steel down by 1.74% and NTPC down by 1.60% were the top losers.

Meanwhile, Fitch Ratings in its new report titled `Spotlight: Indian IT Services Sector' has said that IT services sector is likely to resume high single-digit revenue growth in 2021-2022 on the back of higher demand for digital transformation after a flattish 2020. It said the impact of the coronavirus pandemic is seen to be only moderate and short term, as customers focus on transforming their businesses digitally, moving services and work platforms online, and minimize spending on legacy services.

According to the report, pandemic will accelerate digital IT spends. It also said most companies have reported robust deal wins that should support growth in 2021-2022, despite the revenue decline in the second quarter of 2020. It expected the Indian industry to continue to take advantage of its low-cost operations and maintain its strong foothold in the global IT landscape. It added that the industry will continue to remain export-driven as it mainly serves US and Europe-based clients.

The report further said that the industry has seen an average growth rate of about 8 percent during 2014-2019. It also said the impact from the US ban on new H1B and L1B visa applications is manageable. It noted that profitability -- as measured by Earnings Before Interest Tax Depreciation and Amortisation or EBITDA margins -- is likely to remain stable. It also stated that strong demand for the services, Indian rupee depreciation and cost-control measures, such as salary freezes during downturns, support the stable profitability.

The CNX Nifty traded in a range of 11,763.05 and 11,629.35 and there were 26 stocks advancing against 24 stocks declining on the index.

The top gainers on Nifty were Titan Company up by 4.50%, Bajaj Auto up by 3.63%, Hero MotoCorp up by 2.86%, Maruti Suzuki up by 2.32% and Reliance Industries up by 2.22%. On the flip side, Bajaj Finance down by 4.07%, BPCL down by 2.78%, Hindalco down by 2.66%, Tata Motors down by 2.49% and Power Grid down by 2.27% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 0.02 points or 0% to 5,949.92, France’s CAC decreased 10.17 points or 0.21% to 4,885.29 and Germany’s DAX decreased 44.78 points or 0.35% to 12,861.24.

Asian markets ended mostly higher on Wednesday, despite US President Donald Trump ending negotiations with Democrats over another Covid-19 stimulus package until the November 3 presidential election. Meanwhile, investors are waiting minutes from the US Federal Reserve’s September meeting for guidance as to how the central bank plans to push inflation higher and how long it might let it run above 2 percent before tightening its ultra-loose monetary policy. Though, Hong Kong’s private sector economy contracted at a slower pace in September than in August, the latest survey from IHS Markit showed on Wednesday with a PMI score of 47.7. Meanwhile, Chinese markets are closed for holidays until October 9.