Bulls return on Dalal Street; Sensex reclaims 46k mark

Indian equity benchmarks made smart recovery on Tuesday, after witnessing massacre in the previous session, led by gains in information technology heavyweights like HCL Technologies, Tech Mahindra and Infosys. Soon after making a positive start, key gauges entered into red terrain as traders turned pessimistic amid reports of new strains of coronavirus in the UK. Rising corona virus cases too dampened sentiments with increase in Covid-19 cases, India's caseload now stands at 10,075,422 and the country's death toll has mounted to 146,145. Cautiousness also crept in on report that Maharashtra government imposed a curfew from 11 pm to 6 am in all municipal corporations from December 22 till January 5, 2021.

Markets took U-turn in second half of the trade to end near intraday highs, as traders opted to buy beaten down but fundamentally strong stocks. Traders took encouragement with CRISIL’s report that corporate profits rose 15 per cent to touch an all-time high in the September quarter as margins widened on softer input costs and better utilistaion levels. Some support also came as economic think-tank NCAER, in its mid-year review of the Indian economy, has said that India's Gross Domestic Product (GDP) growth is likely to turn positive at 0.1 per cent in the October-December (Q3) quarter, after witnessing a contraction in the first half of the current financial year. It also forecast 2 per cent growth in the fourth quarter (January-March 2021). It noted that the overall contraction in the current fiscal is likely to be contained at 7.3 per cent. Adding to the optimism, Ministry of Finance has released the 8th weekly installment of Rs 6,000 crore to the states. Out of this, an amount of Rs 5,516.60 crore has been released to 23 states and an amount of Rs 483.40 crore has been released to the 3 Union Territories (UT) with Legislative Assembly (Delhi, Jammu & Kashmir & Puducherry) who are members of the GST Council.

Positive trade in European counters too aided sentiments with most of the European counters were trading in green attempting to recover from a brutal sell-off in the previous session, as investors sentiment was shaken by a new coronavirus strain in the U.K. Asian markets ended lower on Tuesday, even after Taiwan's export orders rose more than expected in November. The data from the Ministry of Economic Affairs showed that export orders grew 29.7 percent year-on-year in November.

Back home, Agriculture Minister Narendra Singh Tomar has said the government is focusing on farm mechanisation and asked the industry to provide small machines and equipment to farmers with less landholding to boost their income. He highlighted the government's target to double farm mechanization per hectare in 10 years and said it was only possible with the support from industry. The minister said the government's emphasis is on providing large advanced agricultural equipment to farmers for their field. Meanwhile, aviation stocks edged lower after the government banned flights from the UK till December 31 over a new fast-spreading strain of the coronavirus in that country.

Finally, the BSE Sensex rose 452.73 points or 0.99% to 46,006.69, while the CNX Nifty was up by 137.90 points or 1.03% to 13,466.30.

The BSE Sensex touched high and low of 46,080.18 and 45,112.19, respectively and there were 25 stocks advancing against 5 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 1.09%, while Small cap index was up by 0.95%.

The top gaining sectoral indices on the BSE were IT up by 3.37%, TECK up by 3.01%, Utilities up by 2.56%, Telecom up by 1.85% and Metal was up by 1.74%, while there was no losing index on the BSE sectoral front.

The top gainers on the Sensex were HCL Tech up by 5.09%, Tech Mahindra up by 4.33%, Infosys up by 3.78%, Power Grid up by 2.67% and Sun Pharma up by 2.64%. On the flip side, Kotak Mahindra Bank down by 0.94%, Bajaj Finance down by 0.56%, HDFC down by 0.45%, Reliance Industries down by 0.16% and Indusind Bank down by 0.13% were the top losers.

Meanwhile, the economic think-tank NCAER, in its mid-year review of the Indian economy, has said that India's Gross Domestic Product (GDP) growth is likely to turn positive at 0.1 per cent in the October-December (Q3) quarter, after witnessing a contraction in the first half of the current financial year. It also forecast 2 per cent growth in the fourth quarter (January-March 2021). It noted that the overall contraction in the current fiscal is likely to be contained at 7.3 per cent. Besides, India's economy contracted by 23.9 per cent in the first quarter of the current fiscal on the account of the impact of the coronavirus pandemic. The contraction narrowed to 7.5 per cent in the second quarter.

The mid-year review report said ‘The sharp recovery of GDP in Q2, the bowstring effect, was a welcome surprise. We have accordingly revised our forecast of annual contraction to (-) 7.3 per cent. The revised growth forecasts for Q3 and Q4 are 0.1 per cent and 2 per cent respectively’. Earlier, the NCAER had estimated the GDP contraction for the full year at 12.6 per cent. It further said the ongoing recovery notwithstanding, the long term effect of sharp contraction in 2020-21 is likely to be long-lasting.

The think-tank said the economy will have to grow at more than the previous trend rate for it to catch up with its pre-pandemic growth path. It also said ‘Conventional macroeconomic policies alone will not do. These will have to be supported by deep and wide ranging reforms, especially in the financial sector, power and foreign trade’. it noted ‘Additional reforms in health, education, labour and land are also urgent, but these will require close coordination between the Centre and states in a spirit of cooperative federalism since these are in the main State subjects in the 7th Schedule of the Constitution’.

NCAER also estimated that the combined fiscal deficit of the Centre plus states will amount to over 14 per cent of GDP for the full financial year after factoring in the projected 7.3 per cent economic contraction. It said ‘Taken together with RBI liquidity infusion of well over 6 per cent of GDP, this translates to a very significant total stimulus that compares well with most emerging market economies’. It added nevertheless, the fiscal stimulus could have been much more effective on several counts.

The CNX Nifty traded in a range of 13,192.90 and 13,492.05 and there were 43 stocks advancing against 7 stocks declining on the index.

The top gainers on Nifty were Adani Ports up by 5.55%, HCL Tech up by 5.35%, Tech Mahindra up by 4.10%, Infosys up by 3.62% and GAIL India up by 3.18%. On the flip side, Kotak Mahindra Bank down by 1.03%, HDFC down by 0.68%, Bajaj Finance down by 0.63%, Ultratech Cement down by 0.40% and Indusind Bank down by 0.35% were the top losers.

European markets were trading mostly in green; France’s CAC rose 39.24 points or 0.73% to 5,432.58 and Germany’s DAX was up by 118.35 points or 0.89% to 13,364.65. However, UK’s FTSE 100 was down by 2.74 points or 0.04% to 6,413.58.

Asian markets ended lower on Tuesday as investors concerns over new highly transmissible corona virus strain identified in the United Kingdom dented appetite for riskier assets. The new Covid-19 strain led to a shut-down of much of Britain and set off tighter restrictions in Europe. That overshadowed by $900 billion corona virus relief package from US Congress. Chinese shares closed down on concerns over persisting Sino-US tensions as the United States issued additional visa restrictions on Chinese officials over alleged human rights abuses. Japanese shares declined on profit-taking ahead of year-end holidays.