Bulls roar on Dalal Street in early deals; Sensex surpasses 61,500 mark

Indian equity benchmarks made gap-up opening on Friday mirroring firm global cues. Markets are trading in fine-fettle with gains of around one and half a percent each in early deals on account of healthy buying in all the sector indices. Investors are looking forward to the Index of Industrial production (IIP) data for further cues. Foreign fund inflows supported domestic sentiments. Foreign institutional investors (FIIs) have net bought shares worth Rs 36.06 crore on November 10, as per provisional data available on the NSE. Also, strong rupee aided the market sentiments. The Indian rupee shot up to 80.71 against the US dollar on Friday vs Thursday's close of 80.81, claiming a fresh seven-week high. Adding more optimism, State Bank of India has pencilled in lower current account deficit at 3 per cent for this fiscal as against the minimum consensus of 3.5 per cent, citing rising software exports, remittances and a likely $5-billion jump in forex reserves via swap deals. Meanwhile, CRISIL in its latest study showed that the aggregate indebtedness of states - measured by debt1 to gross state domestic product (GSDP) - is expected to remain elevated at 30-31% this fiscal, almost similar to around 31.5% seen in fiscal 2022.

Global cues remained supportive with all the Asian markets trading higher following the broadly positive cues from global markets overnight, reflecting a positive reaction to the smaller-than-expected increase in US consumer price inflation in October, which helped increase optimism the US Fed will start slowing the pace of its monetary policy tightening measures as early as next month. Back home, tea industry stocks remained in watch as Indian Tea Association (ITA) said that tea exports from India are expected to increase to around 230 million kg during this calendar year from 196 million kg last year on the back of buoyancy in export markets and Sri Lanka’s loss of crop. In stock specific development, Zomato gained as its net loss narrowed to Rs 251 crore in Q2FY23 from loss of Rs 430 crore in Q2FY22, buoyed by strong top line and operating performance.

The BSE Sensex is currently trading at 61570.06, up by 956.36 points or 1.58% after trading in a range of 61311.02 and 61685.51. There were 29 stocks advancing against 1 stock declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.64%, while Small cap index was up by 0.49%.

The top gaining sectoral indices on the BSE were IT up by 3.87%, TECK up by 3.47%, Realty up by 1.32%, Metal up by 1.23%, Consumer Durables up by 1.18%, while there was no loser on the BSE sectoral front.

The top gainers on the Sensex were Infosys up by 4.19%, Wipro up by 4.15%, HCL Technologies up by 4.11%, TCS up by 4.04% and Tech Mahindra up by 4.01%. On the flip side, Dr. Reddy's Lab down by 0.87% was the sole loser.

Meanwhile, citing rising software exports, remittances and a likely USD 5-billion jump in forex reserves via swap deals, State Bank of India (SBI) in its latest report has said that the Current Account Deficit (CAD) may be come at 3 per cent for this fiscal as against the minimum consensus of 3.5 per cent. Soumyakanti Ghosh, the chief economic advisor at SBI in report stated that every USD 10 increase in crude prices impacts the CAD to the tune of 40 basis points while the same on fuel inflation is 50 bps and also results in 23 bps decline in growth. He added that CAD has a counter cyclical shock absorber.

Ghosh said exchange rate is the major contributor to software exports growth and 40 per cent of its variation is explained by exchange rates. He said ‘If we translated these numbers in actual terms, every Rs 1 fall against the dollar leads to an increase in software exports by USD 250 million’. He also said the strong remittances and software exports have lowered CAD by 60 bps in the June quarter, and added that if this trends continued in the September quarter, then CAD would be below 3.5 per cent in the second quarter and at 3 per cent in the full fiscal. Even otherwise, he said the chances of it exceeding 3.5 per cent of GDP are minimal.

According to Ghosh, forex reserves, which have declined from USD 642 billion in September 2021 to just about USD 531 billion last week, are expected to rise by USD 5 billion as swap transactions reverse. The biggest impact on CAD is oil imports, which form as much as 30 per cent of the country's import bills. Therefore, any increase in oil price has a direct impact on the trade deficit by increasing the import bill and consequently widening the CAD.

Software exports have been rising with the share of offsite mode of exports of software services by domestic IT services companies soaring to 88.8 per cent in FY22 from 82.8 per cent five years ago. He said that a positive shock to oil prices leads to immediate and sharp increase in CAD but the same dissipates completely in about eight quarters. In case of GDP, positive fall in oil prices leads to immediate decline which, however, starts reversing after three quarters and completely dissipates after the seventh quarter.

The CNX Nifty is currently trading at 18294.00, up by 265.80 points or 1.47% after trading in a range of 18259.35 and 18332.20. There were 46 stocks advancing against 4 stocks declining on the index.

The top gainers on Nifty were HCL Technologies up by 4.21%, TCS up by 4.19%, Infosys up by 4.17%, Wipro up by 4.15% and Tech Mahindra up by 3.86%. On the flip side, Eicher Motors down by 1.77%, Dr. Reddy's Lab down by 0.92%, Mahindra & Mahindra down by 0.12% and Britannia Industries down by 0.09% were the top losers.

Asian markets are trading in green; Nikkei 225 surged 754.89 points or 2.75% to 28,200.99, Straits Times rose 48.09 points or 1.52% to 3,221.27, Hang Seng jumped 866.92 points or 5.39% to 16,947.96, Taiwan Weighted soared 474.48 points or 3.51% to 13,978.24, KOSPI advanced 73.59 points or 3.06% to 2,475.82, Jakarta Composite added 83.50 points or 1.20% to 7,050.34 and Shanghai Composite was up by 45.72 points or 1.51% to 3,081.85.