Benchmarks trade tad higher in early deals; Services PMI eyed

Indian equity benchmarks continued their previous session’s bull run with positive start on Friday tracking firm global cues. Markets are trading higher with marginal gains in early deals on account of buying in Capital Goods, Power and Industrials stocks. Some support came in with the Centre for Monitoring Indian Economy’s statement that the index of consumer sentiment for rural India inched up by 0.3% for the week ended November 28 while the index for consumer expectation went up by 1.3%, a much lower jump compared to weeks before the announcement of the repeal of farm laws. However, upside remained capped amid uncertainty surrounding the Omicron variant. India reported its first two cases of the Omicron coronavirus variant on Thursday. Also, continued foreign fund outflow weighted down on market sentiments. Provisional data on the NSE showed that foreign portfolio investors (FPIs) remained net sellers for Rs 2765.84 crore in the Indian markets. Investors are looking ahead to the Services PMI data to be out later in the day for further cues.

Most of the Asian markets traded higher following the broadly positive cues overnight from Wall Street, even as investors remained cautious and continue to monitor the spread of the new coronavirus Omicron variant and vaccine efficacy against it. There are concerned the variant could derail the global economic recovery. However, the WHO's chief scientist suggested that the vaccines are likely to hold some protection against the new Covid-19 mutation. Back home, aviation industry stocks were in limelight as International Air Transport Association said the sudden emergence of Covid-19's Omicron variant may force countries to re-impose extensive travel restrictions. In scrip specific development, Reliance Capital traded lower as RBI now moved to National Company Law Tribunal (NCLT) for the insolvency and bankruptcy proceeding of the company, after superseding the board.

The BSE Sensex is currently trading at 58512.83, up by 51.54 points or 0.09% after trading in a range of 58465.51 and 58757.09. There were 14 stocks advancing against 16 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.36%, while Small cap index was up by 0.66%.

The top gaining sectoral indices on the BSE were Capital Goods up by 1.87%, Power up by 1.05%, Industrials up by 1.00%, Utilities up by 0.86%, Realty up by 0.86%, while Healthcare down by 0.46%, Energy down by 0.37%, Telecom down by 0.34%, FMCG down by 0.28%, Metal down by 0.04% were the top losing indices on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 2.68%, Axis Bank up by 0.98%, Infosys up by 0.96%, Kotak Mahindra Bank up by 0.62% and ICICI Bank up by 0.48%. On the flip side, Bharti Airtel down by 1.24%, Sun Pharma down by 1.11%, Asian Paints down by 0.89%, Nestle down by 0.87% and Dr. Reddy's Lab down by 0.83% were the top losers.

Meanwhile, crisil in its latest report stated that the public Capex cycle has turned the corner with the Central and states capital expenditure nearly crossing FY20 levels, growing faster than the gross domestic product rate. It added that this indicating durable recovery to the pre-pandemic levels. While the Central Capex has already crossed the pre-pandemic trendline, states too should do so if the budgetary targets are met, which implies that the pandemic did not cause a major permanent loss in the government Capex in terms of trend.

It said if the budgetary targets for Capex are met by both the Centre and states this fiscal, the pre-pandemic decadal trend for the overall Capex will be revisited, and added that despite a tight fiscal position, the Central Capex grew 31 per cent over the last fiscal and if the trend is maintained, it is set to overshoot by 12 per cent pre-pandemic trend level, and for the states it expects them to meet 80-85 per cent of their Capex target. The budget targets a 26 per cent increase over the revised estimates of the last fiscal and if this is met, Central Capex could outpace the pre-pandemic decadal trend by 12 per cent. Put another way, Central Capex will have to grow 19 per cent in the second half year-on-year to achieve that.

The report noted the pandemic-related spending and the simultaneous decline in their revenue have led to higher fiscal deficits and debt levels, with the Central fiscal deficit widening to 9.4 per cent of GDP in fiscal 2021 from 4.6 per cent in fiscal 2020. The combined deficit had crossed the 13 per cent mark in FY21. Despite this, the Central Capex was 31 per cent higher than that of fiscal 2021, while the states saw a modest rise in fiscal 2020. It can be noted that the state Capex is typically 1.4 times higher than Central Capex, thereby playing the predominant role in infrastructure building. In the first half of the current fiscal, the Centre spent 41 per cent of its budgeted target for the entire year.

On the other hand, the states spent 29 per cent of their targets (based on data available for 16 major states -- Andhra, Bihar, Chhattisgarh, Gujarat, Haryana, Jharkhand, Karnataka, Kerala, MP, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Telangana, and UP -- which account for 80 per cent of state Capex). The Central Capex during April-October was Rs 2.5 lakh crore, or 28 per cent higher year-on-year, and represented 46 per cent of the budgeted spend for the full fiscal. Notably, it is 26 per cent higher than the pre-pandemic level or fiscal 2020. Sector-wise, the Capex was higher over H1 of fiscals 2020 and 2021, in road transport and highways, railways, housing, telecommunication and health.

The CNX Nifty is currently trading at 17421.25, up by 19.60 points or 0.11% after trading in a range of 17403.95 and 17489.80. There were 23 stocks advancing against 27 stocks declining on the index.

The top gainers on Nifty were Larsen & Toubro up by 2.83%, BPCL up by 2.01%, IOC up by 1.62%, UPL up by 1.59% and ONGC up by 1.56%. On the flip side, Nestle down by 1.26%, Bharti Airtel down by 1.22%, Cipla down by 0.99%, Dr. Reddy's Lab down by 0.94% and Divi's Lab down by 0.90% were the top losers.

Asian markets are trading mostly in green; Nikkei 225 gained 108.80 points or 0.39% to 27,862.17, Straits Times rose 10.51 points or 0.34% to 3,102.62, Taiwan Weighted added 10.37 points or 0.06% to 17,735.25, KOSPI advanced 23.16 points or 0.79% to 2,968.43 and Shanghai Composite was up by 20.80 points or 0.58% to 3,594.64. On the other hand, Hang Seng fell 185.81 points or 0.78% to 23,603.12 and Jakarta Composite declined 28.13 points or 0.43% to 6,555.69.