Gaining momentum continues over Dalal Street

Gaining momentum continued over the Dalal Street in late morning deals, with both Sensex and Nifty holding strong gains, on the back of positive cues from other Asian markets. Traders were positive, as activity in India's dominant services sector grew at its fastest pace in five months in April on strong demand, prompting firms to add jobs for the first time since November, a private survey showed, but sky-rocketing inflation remained a major concern. The S&P Global India Services Purchasing Managers' Index rose to 57.9 in April from 53.6 in March.

Domestic sentiments remained optimistic, amid a private report stating that low leverage effects, earnings beat and nascent signs of improving investment cycle are providing confidence on sustainable growth in corporate profits. Adding more comfort among traders, SBI chairman Dinesh Khara said that the surprise rate hike by RBI accompanied with tightening of the cash reserve ratio illustrates the flexibility with which the central bank operates, and the move will support the markets.

On the global front, Asian markets were trading mostly in green, after the private sector in Hong Kong moved back into expansion territory in April, the latest survey from S&P Global showed on Thursday with a PMI score of 51.7. That's up from 42.0 in March, and it moves above the boom-or-bust line of 50 that separates expansion from contraction. This marked a renewal of private sector growth following three consecutive months of contraction, with the rate of improvement the sharpest since November 2021.

The BSE Sensex is currently trading at 56507.68, up by 838.65 points or 1.51% after trading in a range of 55976.39 and 56566.80. There were 24 stocks advancing against 6 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 1.06%, while Small cap index was up by 1.06%.

The top gaining sectoral indices on the BSE were Metal up by 2.36%, Capital Goods up by 2.21%, TECK up by 2.16%, IT up by 2.03% and PSU up by 2.02%, while there were no losing sectoral indices on the BSE.

The top gainers on the Sensex were Tata Steel up by 3.31%, Tech Mahindra up by 3.20%, Infosys up by 3.14%, SBI up by 2.98% and ICICI Bank up by 2.57%. On the flip side, Nestle down by 1.30%, Titan Co down by 0.77%, Ultratech Cement down by 0.22%, Power Grid down by 0.21% and Indusind Bank down by 0.10% were the top losers.

Meanwhile, Crisil in its latest report has said that states have done off-balance-sheet borrowings through various entities in FY22, resulting in a 1 percentage point increase in such hidden loans to 4.5 per cent of Gross State Domestic Product (GSDP). The report by Crisil, based on an analysis of 11 states accounting for three-quarters of GSDP, warned that this will impact the badly-needed capital expansion measures by the states as resources will be ploughed to service debt.

The Indian economy has revived to touch the pre-Covid levels after one year of a decline in the GDP due to the impact of the Covid-19 pandemic. Policymakers are betting on capital expansion to accelerate the revival through various measures. The Centre has been trying to decrease its hidden borrowings and show a truer picture of the finances for the last few years.

It stated ‘These borrowings have been raised by entities owned by states, which also guarantee the loans. Around 4-5 per cent of the revenue of states will go towards servicing such guarantee obligations this fiscal, partially reducing the ability of state governments to fund capital expenditure.’ It attributed this behaviour by the states to constrained revenue growth due to the pandemic-induced slowdown, and increasing revenue expenditure. It added these two reasons have led to their fiscal deficits rising to close to 4 per cent of GSDP, well above the historical level of 2-3 per cent seen earlier in the last decade.

The CNX Nifty is currently trading at 16920.40, up by 242.80 points or 1.46% after trading in a range of 16778.85 and 16945.70. There were 40 stocks advancing against 10 stocks declining on the index.

The top gainers on Nifty were Hero MotoCorp up by 4.38%, Tata Steel up by 3.32%, Tech Mahindra up by 3.24%, Infosys up by 3.17% and ONGC up by 3.08%. On the flip side, Tata Consumer Products down by 2.49%, Nestle down by 1.12%, Titan Co down by 0.93%, Britannia down by 0.50% and Apollo Hospital Ent. down by 0.28% were the top losers.

Asian markets were trading mostly in green; Hang Seng gained 132.06 points or 0.63% to 21,001.58, Taiwan Weighted rose 115.58 points or 0.70% to 16,681.41 and Shanghai Composite was up by 33.71 points or 1.11% to 3,080.77, while Straits Times fell 3.92 points or 0.12% to 3,345.35.