Bourses continue upward rally in late afternoon session

The Indian equity benchmarks continued their upward rally in late afternoon session, breaching their crucial above 57,800 (Sensex) and 17,200 (Nifty) levels. Among heavy-weights Hindustan Unilever, Dr Reddy's Lab and Ultratech Cement exhibited a smart performance. The sentiment remained largely positive, as Jayanth R Varma, who is a member of the Monetary Policy Committee (MPC) of the Reserve Bank, has said that the ongoing economic recovery will quickly take India above the pre-pandemic levels in most sectors of the economy except contact-intensive services. He noted that the improved health of the Indian financial sector is also a positive factor for economic growth. Meanwhile, GST collection topped the Rs 1-lakh-crore mark for the second straight month in August at Rs 1.12 lakh crore. The tax collections in August on goods sold and services rendered was 30 per cent higher than Rs 86,449 crore collected in August 2020, and 14 per cent higher than Rs 98,202 crore collected in August 2019.

On the global front, Asian markets were trading mixed after soft U.S. jobs surveys fueled optimism the Federal Reserve might feel less pressure to wind down stimulus. European markets were trading higher amid positive earnings reports and dealing-making, while traders focused on new additions to the region’s benchmarks and awaited U.S. jobless data.

The BSE Sensex is currently trading at 57,823.65, up by 485.44 points or 0.85% after trading in a range of 57287.79 and 57794.54. There were 22 stocks advancing against 7 stocks declining on the index, while 1 stock remain unchanged.

The broader indices were trading in green; the BSE Mid cap index gained 0.89%, while Small cap index was up by 0.76%.

The top gaining sectoral indices on the BSE were FMCG up by 1.40%, Consumer Durables up by 1.34%, IT up by 1.34%, TECK up by 1.23% and Basic Materials was up by 1.07%, while Auto down by 0.22% and Oil & Gas was down by 0.02% were the only losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 2.61%, Dr. Reddy's Lab up by 2.40%, Ultratech Cement up by 1.62%, TCS up by 1.55% and Titan Company up by 1.55%. On the flip side, Mahindra & Mahindra down by 1.30%, Bajaj Auto down by 0.90%, Maruti Suzuki down by 0.51%, Tech Mahindra down by 0.46% and Infosys down by 0.16% were the top losers.

Meanwhile, Jayanth R Varma, who is a member of the Monetary Policy Committee (MPC) of the Reserve Bank, has said that the ongoing economic recovery will quickly take India above the pre-pandemic levels in most sectors of the economy except contact-intensive services. He noted that the improved health of the Indian financial sector is also a positive factor for economic growth. He said that high and persistent inflation is a major constraint on monetary policy. He added that beyond that point, the challenge is to reverse the slowdown that began around 2018 and achieve sustained robust growth.

Talking on the prices front, he said that inflation was above 6 percent in 2020-21, is likely to be above 5.5 percent in 2021-22, and is projected to be above 5 percent even in the first quarter of 2022-23. Elevated inflation for such a long period creates the risk that households and businesses will start expecting high inflation in the future as well. He said such entrenchment of inflation expectations makes the task of monetary policy more difficult. According to him, it is usually much easier to nip high inflationary expectations in the bud than it is to change these expectations after they have become entrenched. '

Varma pointed out that one key factor that dampens inflation expectations is the credibility of the central bank. To maintain this credibility, he said the Monetary Policy Committee has to respond decisively to inflationary pressures as they begin to take root in the economy. Asked when the private investment will pick up in India, he said the capital investment will pick up when capacity utilization rises to a significantly higher level than what is observed at present. On the positive side, he noted that capacity utilization is gradually improving in many industries.

The CNX Nifty is currently trading at 17,228.40, up by 152.15 points or 0.89% after trading in a range of 17059.70 and 17217.90. There were 36 stocks advancing against 14 stocks declining on the index.

The top gainers on Nifty were HDFC Life Insurance up by 5.10%, Shree Cement up by 4.71%, TCS up by 3.24%, Cipla up by 2.95% and Hindustan Unilever up by 2.46%. On the flip side, Mahindra & Mahindra down by 1.89%, Coal India down by 1.77%, ONGC down by 0.96%, Bajaj Auto down by 0.89% and Tata Motors down by 0.66% were the top losers.

Asian markets were trading mixed, Taiwan Weighted dropped 154.23 points or 0.88% to 17,319.76, KOSPI fell 31.17 points or 0.97% to 3,175.85, Jakarta Composite lost 12.70 points or 0.21% to 6,078.23 and Straits Times was down by 0.94 points or 0.03% to 3,086.90. On the flip side, Shanghai Composite gained 29.94 points or 0.84% to 3,597.04, Hang Seng increased 62.14 points or 0.24% to 26,090.43 and Nikkei 225 was up by 92.49 points or 0.33% to 28,543.51.

European markets were trading higher, UK’s FTSE 100 increased 2.00 points or 0.03% to 7,151.84, France’s CAC increased 17.44 points or 0.26% to 6,776.13 and Germany’s DAX was up by 48.07 points or 0.3% to 15,872.36.