Benchmarks end higher for second straight day

Indian equity benchmarks ended higher for a second straight day on Thursday as investors were relieved from the likelihood of Narendra Modi being given a third term as the Prime Minister of the country. Trading was volatile due to the expiry of weekly index options on the NSE. Markets witnessed a gap up opening and extended gains as the day progressed, as traders got support after India Ratings and Research (Ind-Ra) projects that India's current account balance (CAB) will achieve a surplus of approximately $6 billion (0.6 per cent of GDP) in the fourth quarter of the fiscal year 2024 (Q4FY24). This marks the first surplus since the first quarter of fiscal year 2022 (1QFY22), a significant turnaround from the previous quarter's deficit of $10.5 billion (1.2 per cent of GDP). Besides, a day after the 18th Lok Sabha elections delivered a surprising outcome, Fitch Ratings reinforced its ‘positive’ outlook on India's medium-term economic growth. Once again, this outlook has been supported by substantial government capital expenditure and strengthened corporate and bank balance sheets.  

However, markets trimmed most of their gains in afternoon deals, as traders got anxious with Moody's Ratings’ report stating that the BJP-led National Democratic Alliance's (NDA) slim majority in Lok Sabha may delay more far-reaching economic and fiscal reforms that could impede progress on fiscal consolidation. Traders also remained on sidelines ahead of Reserve Bank of India’s interest rate decision due on June 07. Investors were hoping that the central bank is likely to maintain the status quo on repo rate at 6.50%. But, markets regained some traction in final minutes of trade and ended the session on a strong note, with support from Realty, PSU and Industrials stocks. 

On the global front, European markets were trading higher as investors remained optimistic ahead of the European Central Bank's decision on key interest rates. Asian markets settled mostly higher on Thursday following the broadly positive cues from global markets, amid optimism about the outlook for U.S. interest rates after a report showed US private sector job growth slowed by more than expected in the month of May. 

Finally, the BSE Sensex rose 692.27 points or 0.93% to 75,074.51, and the CNX Nifty was up by 201.05 points or 0.89% points to 22,821.40.   

The BSE Sensex touched high and low of 75,297.73 and 74,474.94 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 2.28%, while Small cap index was up by 3.06%.

The top gaining sectoral indices on the BSE were Realty up by 4.85%, PSU up by 3.71%, Industrials up by 3.69%, Capital Goods up by 3.42% and Power up by 2.87%, while there were no losing sectoral indices on the BSE.

The top gainers on the Sensex were Tech Mahindra up by 4.07%, HCL Technologies up by 4.04%, SBI up by 3.46%, Infosys up by 2.95% and NTPC up by 2.65%. On the flip side, Hindustan Unilever down by 2.04%, Asian Paints down by 1.88%, Mahindra & Mahindra down by 1.57%, Nestle down by 1.36% and Indusind Bank down by 1.25% were the top losers. 

Meanwhile, Moody's Ratings in its latest report has said that the BJP-led National Democratic Alliance's (NDA) slim majority in Lok Sabha may delay more far-reaching economic and fiscal reforms that could impede progress on fiscal consolidation. It also expects policy continuity, especially with regards to budgetary emphasis on infrastructure spending and boosting domestic manufacturing, to support robust economic growth. 

According to the report, India's fiscal outcomes will remain weaker than Baa-rated peers, even as the final budget for the fiscal year ending March 2025 (fiscal 2024-25) to be released in the next few weeks provides some indications of India's fiscal policy over the course of the term of the incoming government through 2029. In fiscal 2023-24, India's real GDP accelerated to 8.2 per cent from 7.0 per cent in the previous year, driven by gains in gross fixed capital formation as the government's infrastructure programme gained further traction even as private consumption remained subdued. It said ‘our assessment of India's economic strength incorporates real GDP growth of around 7 per cent over the three-year period between fiscal 2023-24 through 2025-26, while factoring potential upside over the medium-term resulting from improvements in productivity and potential growth on the back of traction on infrastructure development and digitalization’.

The rating agency said although it projects India to grow faster than all other economies in the G20 through fiscal 2025-26, near-term economic momentum masks structural weaknesses that pose risks to long-term potential growth. It noted that high levels of youth unemployment across all sectors and weakness in productivity growth in the sovereign's large agriculture sector continue to constrain its growth potential. While it expects the incoming government to carry over its focus on fiscal consolidation, material improvements in its debt ratios and interest servicing have yet to materialize.

The CNX Nifty traded in a range of 22,910.15 and 22,642.60. There were 38 stocks advancing against 12 stocks declining on the index.

The top gainers on Nifty were Tech Mahindra up by 4.43%, HCL Technologies up by 3.89%, Shriram Finance up by 3.71%, SBI Life Insurance up by 3.48% and SBI up by 3.45%. On the flip side, Hindalco down by 2.37%, Hero MotoCorp down by 2.18%, Hindustan Unilever down by 1.83%, Asian Paints down by 1.75% and Mahindra & Mahindra down by 1.53% were the top losers. 

European markets were trading higher; UK’s FTSE 100 increased 25.18 points or 0.31% to 8,272.13, France’s CAC rose 36.37 points or 0.45% to 8,042.94 and Germany’s DAX gained 133.47 points or 0.72% to 18,709.41. 

Asian markets settled mostly higher on Thursday after a gain in US technology stocks and with growing expectations for an earlier-than-expected start to the US Federal Reserve's policy easing cycle after multiple reports signalled slowing growth in the United States. Investors are awaiting this week’s US jobs report to gauge the Federal Reserve's next moves on interest rates. Japanese shares gained on tracking Wall street’s gains overnight, even with caution ahead of global central bank meetings. Meanwhile, South Korean market is closed for the Memorial Day holiday.