Benchmarks extend gains for second straight session

Indian equity benchmarks extended gains for a second straight session on Wednesday, with the Nifty ended 112 points higher while the Sensex was up by 390 points. Recovery in most of the Asian markets and positive start in European equity exchanges added to the momentum. After making a cautious start, key gauges gained traction as foreign institutional investors turned net buyers of domestic shares, breaking their longest selling streak in six months. FIIs snapped a 17-day sales run, purchasing Rs 211 crore worth of equity shares on a net basis on January 17. Traders took a note of Former RBI governor Raghuram Rajan’s statement that it is too premature to think that India will replace China when it comes to influencing global economic growth. However, the situation may change going forward as India is already the world's fifth largest economy, it is growing and has the potential to keep expanding.

Key gauges added more gains in late morning deals, as sentiments got boost with a private report stating that the government is likely to increase the allocation for the ongoing Production-Linked Incentive (PLI) schemes by as much as 20-30 per cent in the next Budget to spur domestic manufacturing and boost exports. Traders remained optimistic with IMF Deputy Managing Director Gita Gopinath’s statement that there's a lot of positive sentiment towards India. She highlighted areas that need more reforms to attract more manufacturing FDI. Additional support also came with the Department for Promotion of Industry and Internal Trade (DPIIT) Secretary Anurag Jain’s statement that several other steps are underway on further improving ease of doing business in India, including on the labour laws front.

On the global front, European markets were trading mostly in green, while Asian markets ended mostly in green with Japanese markets leading regional gains as the yen plunged on dovish signals from the Bank of Japan. Fears of a global recession and caution ahead of speeches by four Federal Reserve officials due later in the day served to cap regional gains to some extent.

Back home, infrastructure industry stocks were in watch as rating agency ICRA said that toll road projects in the country are likely to see moderate to high single-digit growth in FY24 with moderation in the Wholesale Price Index (WPI) inflation. India's toll road projects saw a 17-20 per cent growth in FY23. Sugar industry stocks were in limelight as industry body ISMA said sugar mills have entered into contracts to export 55 lakh tonne of sweetener so far in current marketing year ending September and out of that, 18 lakh tonne have been shipped already.

Finally, the BSE Sensex rose 390.02 points or 0.64% to 61,045.74 and the CNX Nifty was up by 112.05 points or 0.62% to 18,165.35.

The BSE Sensex touched high and low of 61,110.25 and 60,569.19, respectively. There were 23 stocks advancing against 7 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.46%, while Small cap index was up by 0.17%.

The top gaining sectoral indices on the BSE were Metal up by 2.44%, Capital Goods up by 1.46%, Industrials up by 1.24%, Telecom up by 0.92% and Consumer Durables up by 0.67%, while Utilities down by 0.45%, Auto down by 0.07%, Power down by 0.06% and Realty down by 0.06% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 2.72%, Larsen & Toubro up by 2.41%, Wipro up by 1.78%, HDFC Bank up by 1.76% and HDFC up by 1.74%. On the flip side, Tata Motors down by 1.65%, Ultratech Cement down by 1.28%, Indusind Bank down by 0.67%, Nestle down by 0.53% and Bajaj Finserv down by 0.46% were the top losers.

Meanwhile, credit rating agency, India Ratings and Research (Ind-Ra) in its latest report has said that credit growth in the banking system is likely to have hit an air pocket in the last fortnight of December 2022 with the growth slowing down to 14.9% as of December 30, 2022 from a high of 17.4% year on year (YoY) on December 16, 2022, after rising over 15% YoY since September 2022.

Ind-Ra further noted that credit growth in FY23 is likely to be in high teens of around 17%, an absolute expansion of Rs 6.1 trillion quarter on quarter (QoQ) will be required in 4QFY23 (3QFY23: Rs 6.7 trillion). It said this does not seem like a stretch goal, given the level of economic activity in the system.

As per the report, the non-bank finance companies (NBFCs) and retail segments contributed significantly to the growth in 3QFY23. Continuing inflationary pressures, rising interest rates, and slower deposit growth however could weigh down on credit growth in FY24 as borrowings become costlier.

The CNX Nifty traded in a range of 18,183.75 and 18,032.45. There were 35 stocks advancing against 14 stocks declining, while 1 stock remained unchanged on the index.

The top gainers on Nifty were Hindalco up by 2.93%, Tata Steel up by 2.39%, Larsen & Toubro up by 2.35%, UPL up by 1.92% and Wipro up by 1.79%. On the flip side, Tata Motors down by 1.57%, Adani Enterprises down by 1.50%, HDFC Life Insurance down by 1.49%, Ultratech Cement down by 1.33% and BPCL down by 0.72% were the top losers.

European markets were trading mostly in green; UK’s FTSE 100 increased 15.75 points or 0.2% to 7,866.78 and France’s CAC rose 9.67 points or 0.14% to 7,086.83, while Germany’s DAX lost 10.52 points or 0.07% to 15,176.55.

Asian markets settled mostly higher on Wednesday, with Japanese markets leading regional gains as the yen plunged after the Bank of Japan maintained its ultra-low interest rates, despite data that showed Japan's core machinery orders fell more than expected in November. Chinese shares traded almost flat after experts cautioned that a massive spike in Covid-19 cases and fatalities is expected to hit China post the holiday season. Although, South Korean shares declined driven by growing fears of a potential recession this year.