Benchmarks end February F&O expiry session with healthy gains

Indian equity benchmarks ended Thursday’s volatile session by over half percent higher each, with energy, oil and gas and metal stocks accounting for most of the gains, amid strong cues from global peers. The benchmarks staged a gap up opening, as traders took encouragement with a private report that India's economy is likely to have returned to growth in the December quarter due to the easing of restrictions on movement after the first wave of the coronavirus epidemic peaked. Some support also came in as the Reserve Bank of India (RBI) announced yet another round of Open Market Operations (OMO) or simultaneous purchase and sale of gilts on March 4. Under this, the RBI will buy Rs 15,000 crore worth bonds in four different papers and sell Rs 150,000 crore worth bonds in two different securities. However, the benchmarks came off intraday highs due to monthly expiry of February futures and option contracts. Some concern also came with Reserve Bank of India (RBI) Governor Shaktikanta Das’ statement that the central bank is concerned over the impact of cryptocurrencies may have on the financial stability in the economy and has conveyed the same to the government. He said ‘we have certain major concerns about cryptocurrencies.

But key indices managed to end session with over half percent gains each, as Moody's projected India's growth for the next financial year beginning April 1, to 13.7 percent, from 10.8 percent estimated earlier, on the back of normalisation of activity and growing confidence in the market with the rollout of COVID-19 vaccine. Some optimism also remained among traders with S&P Global Ratings’ statement that an improvement in macroeconomic conditions is likely to alleviate stress for India's banking sector. It said the Indian government's strong efforts to shield banks from the COVID-19 pandemic have largely been successful, but a hit from the pandemic is inevitable. Traders also took a note of private report stated that the number of ultra-high networth individuals (UHNWIs), with wealth of $30 million or more, is expected to rise 63 percent over the next five years to 11,198 in India, the second fastest growth in the world.

On the global front, Asian markets ended higher on Thursday, as bond yields eased and dovish comments by U.S. Federal Reserve chairman Jerome Powell soothed worries around inflation and interest rates. In his second day of testimony before Congress, Powell said the Fed plans to leave interest rates unchanged for a long time to come. Promising new data on Johnson & Johnson's coronavirus vaccine also boosted hopes for a faster economic recovery. European markets were trading mostly in green, as survey results from the market research group GfK showed German consumer confidence is set to improve in March. The forward-looking consumer sentiment index rose more-than-expected to -12.9 in March from revised -15.5 in the previous month. The expected level was -14.3.

Back home, on the sectoral front, pharma and IT hardware stocks were in focus as extending the Production-Linked Incentive (PLI) scheme to more sectors, the Union Cabinet approved Rs 15,000 crore for incentives to domestic manufacturing of pharmaceuticals and Rs 7,350 crore for production of laptops, tablets, all-in-one personal computers and servers in India. Aviation stocks ended in green despite global airline industry body IATA warned that the outlook for airlines had weakened since its December forecasts, and due to tightening travel restrictions it now expected the sector to still be bleeding cash by the fourth quarter of this year.

Finally, the BSE Sensex rose 257.62 points or 0.51% to 51,039.31, while the CNX Nifty was up by 115.35 points or 0.77% to 15,097.35.

The BSE Sensex touched high and low of 51,386.12 and 50,991.76, respectively and there were 18 stocks advancing against 12 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 1.42%.

The top gaining sectoral indices on the BSE were Energy up by 3.92%, Oil & Gas up by 3.52%, Metal up by 3.38%, Utilities up by 2.53% and Basic Materials up by 2.08%, while FMCG down by 0.24% and Capital Goods down by 0.01% were the only losing indices on BSE.

The top gainers on the Sensex were ONGC up by 4.66%, NTPC up by 4.55%, Reliance Industries up by 3.84%, Indusind Bank up by 3.70% and Axis Bank up by 2.94%. On the flip side, ICICI Bank down by 2.10%, Nestle down by 1.45%, Larsen & Toubro down by 1.20%, Kotak Mahindra Bank down by 0.98% and Titan Company down by 0.80% were the top losers.

Meanwhile, S&P Global Ratings has said that an improvement in macroeconomic conditions is likely to alleviate stress for India's banking sector. It said the Indian government's strong efforts to shield banks from the COVID-19 pandemic have largely been successful, but a hit from the pandemic is inevitable. It also stated that while the Indian economy is on a mend, the permanent GDP loss stemming from the brunt of the coronavirus is huge at 10 percent. It estimates the banking system's weak loans are at 12 percent of gross loans.

S&P further said that India's economic risk trend is stable and credit risk remains very high for Indian banks. It noted that these banks hold elevated levels of stressed corporate assets and, despite new foreclosure laws, progress on their resolution has been slow. It also said the pandemic-induced downcycle has delayed the improvement in asset quality for Indian banks. It added that Small and midsize enterprises (SME) have been hit hardest, followed by retail loans, especially unsecured loans.

It further stated that steps by the government and the Reserve Bank of India, including an emergency credit guarantee scheme for SMEs, are likely to lessen the stress. It expects earnings of Indian banks to gradually recover from the weak base of past few years.

The CNX Nifty traded in a range of 15,176.50 and 15,065.35 and there were 35 stocks advancing against 15 stocks declining on the index.

The top gainers on Nifty were Coal India up by 8.66%, UPL up by 7.32%, Adani Ports &SEZ up by 5.98%, Hindalco up by 5.17% and BPCL up by 5.15%. On the flip side, ICICI Bank down by 1.89%, Nestle down by 1.38%, Divis Lab down by 1.25%, Larsen & Toubro down by 1.09% and Kotak Mahindra Bank down by 0.99% were the top losers.

European markets were trading mostly in green; UK’s FTSE 100 increased 41.83 points or 0.63% to 6,700.80 and France’s CAC increased 30.71 points or 0.53% to 5,828.69, while Germany’s DAX decreased 6.81 points or 0.05% to 13,969.19.

Asian markets ended higher on Thursday as dovish comments by US Federal Reserve chairman Jerome Powell calmed worries around inflation and interest rates. Jerome Powell told lawmakers it might take more than three years to reach the central bank's inflation goals, a sign the Fed plans leave interest rates flat for a long time to come. Further, progress in the roll-out of corona virus vaccines after news that Johnson & Johnson’s one-shot corona virus vaccine appeared safe and effective in trials and paving the way for emergency authorization in the US also boosted market sentiments. Japanese shares settled higher on economic optimism after the Japanese government is considering lifting a state of emergency in five prefectures in central and western parts of the country. Moreover, South Korean shares ended up as foreign and institutional investors turned into net buyers following Wall Street rally overnight, while the Bank of Korea kept its benchmark lending rate flat at a historic low of 0.5% as expected and indicated it would maintain a most accommodative stance in the face of the corona virus pandemic.