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EQUITY
Markets stage recovery to settle in green
Jan-17-2019

Key Indian equity benchmarks took U-turn to settle Thursday’s trading session in green territory, with both Sensex and Nifty gaining around 0.15% each. After a firm start, the key indices remained positive for the most part of the day, as Reserve Bank of India (RBI) come out with a new policy for overseas borrowings, allowing all eligible entities to raise foreign funding under the automatic route and removing sectoral curbs. All eligible borrowers can now raise external commercial borrowings (ECB) up to $750m per fiscal under the automatic route. Traders got encouragement after a working group of the Commerce and Industry Ministry came out with a blueprint suggesting a host of long and short-term measures to increase the size of India's economy to $ 5 trillion by 2025. It also added that India’s potential to achieve a $5 trillion GDP by 2024-25 is within the realm of possibility. Some support also came with a report that Consumer Sentiment Index rebounded in January on account of easing inflation, increasing liquidity and stabilising US-China trade war. India Primary Consumer Sentiment Index has risen over the previous month of November, signalling rising optimism going ahead.

However, the markets turned volatile during the noon deals, after a US think tank claimed that H-1B workers are vulnerable to abuse and frequently placed in poor working conditions, seeking reforms like a substantial increase in wages to those holding the visa, popular among Indian IT professionals. Weak cues from global markets also hit the trading sentiments. But, the trade soon bounced back to end the session in green, amid reports that the government simplified process for seeking income tax exemption by startups on investments from angel funds and prescribed a 45-day deadline for a decision on such applications. Adding some optimism, a private report stated that India's growth to be the best in the Asian region in 2019. It is also positive on the market with a Nifty target of 12,170 for the year end which is a fourteen percent upside from current levels. Some comfort also came with ICRA’s latest report expressing confidence that mid-sized construction players are likely to see significant growth opportunities, with improving credit profiles and strengthening order book aided by the government's push towards infrastructure development projects.

On the global front, European markets were trading in red, even though German consumer price inflation eased for a second straight month in December to its lowest level in eight months. The latest figures from the Federal Statistical Office confirmed that the consumer price index rose 1.7 percent year-on-year following a 2.3 percent increase in November. The latest inflation figure was the lowest since April, when price growth was 1.6 percent, same as in March. Further, Britain's annual inflation dropped 2.1 percent in December, the least in almost two years, from 2.3 percent in November. Asian markets ended mixed, on worries about a likely increase in US-China tensions after reports suggested the US Justice Department is pursuing criminal charges against Chinese tech giant Huawei for alleged trade secrets theft. US authorities are in the advanced stages of a criminal probe that could result in an indictment of Huawei.

Back home, stocks related to aviation industry ended higher with a report stating that the aviation sector is going to be the growth engine for future progress and development. The civil aviation ministry anticipates that in the next two decades, air passenger traffic in India will grow to 1.12 billion passengers per year from the current 187 million passengers, while Auto Parts & Equipment industry stocks ended mostly lower, despite rating agency ICRA’s report that the domestic auto components industry is expected to grow at around 15 per cent in the next financial year despite a slowdown in demand in the automotive sector. The growth is supported by healthy volume growth in two-wheelers, commercial vehicles and tractor segment until November last year. Further, banking stocks remained in focus, amid reports that the government decided to recapitalize state-owned Exim Bank to the tune of Rs 6,000 crore and double its authorised capital to Rs 20,000 crore. The equity will be infused in two tranches -- Rs 4,500 crore in 2018-19 and Rs 1,500 crore in 2019-20.

Finally, the BSE Sensex gained 52.79 points or 0.15% to 36,374.08, while the CNX Nifty was up by 14.90 points or 0.14% to 10,905.20.

The BSE Sensex touched a high and a low of 36,468.42 and 36,170.80, respectively and there were 14 stocks advancing against 17 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.30%, while Small cap index was down by 0.33%.

The top gaining sectoral indices on the BSE were Realty up by 1.13%, Oil & Gas up by 0.80%, IT up by 0.49%, Consumer Durables up by 0.38% and TECK up by 0.32%, while Healthcare down by 0.91%, Basic Materials down by 0.28%, Industrials down by 0.19%, Metal down by 0.14% and PSU down by 0.13% were the top losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 1.91%, HCL Tech up by 1.77%, HDFC up by 1.51%, TCS up by 1.34% and Kotak Mahindra Bank up by 1.24%. On the flip side, Sun Pharma down by 5.78%, Yes Bank down by 3.31%, SBI down by 1.78%, Bajaj Finance down by 1.45% and Hindustan Unilever down by 1.12% were the top losers.

Meanwhile, traders' body Confederation of All India Traders (CAIT) has urged the government not to accede to e-commerce players' demand for changes or delayed implementation of revised foreign direct investment (FDI) norms for e-commerce. It warned that any move to amend the policy will be opposed by the trading community ‘tooth and nail’ and demanded a probe into the business activities of large e-commerce players. It said 'we want the government to institute a probe into the business activities of major e-commerce players over the last two-three years. Those found violating the policy should be strongly punished.”

According to CAIT, another provision states that the inventory of a vendor will be seen as controlled by a marketplace if over 25 per cent of the vendor's purchases are from the marketplace entity, including the latter's wholesale unit. It also said that some large online marketplaces have favoured an extension of the February 1 deadline for the new and tighter rules. It demanded that a comprehensive e-commerce policy be brought about at the earliest, and underlined the need for an effective regulator, that is armed with enforcement and adjudicatory powers to enforce e-commerce policy.

It further said that restrictions imposed in FDI policy in e-commerce should also be made applicable on domestic e-commerce players to ensure a level playing field and fair competition. It also demanded that the government should make it mandatory for the e-commerce companies to obtain compliance certificate by March 31, 2019 and the companies that has not complied should be restricted from operating their e-commerce portals.

The CNX Nifty traded in a range of 10,930.65 and 10,844.65. There were 23 stocks advancing against 27 stocks declining on the index.

The top gainers on Nifty were GAIL up by 2.23%, BPCL up by 1.99%, Bharti Infratel up by 1.78%, Axis Bank up by 1.64% and TCS up by 1.55%. On the flip side, Sun Pharma down by 6.61%, Yes Bank down by 3.70%, Zee Entertainment down by 2.50%, Eicher Motors down by 1.93% and SBI down by 1.90% were the top losers.

European markets were trading in red; UK’s FTSE 100 fell 33.76 points or 0.49% to 6,828.92, France’s CAC declined 17.01 points or 0.35% to 4,793.73 and Germany’s DAX was down by 68.30 points or 0.62% to 10,862.94.

Asian markets ended mixed on Thursday as a strong start to the US earnings season and hopes for progress on the Brexit front helped investors shrug off worries about US-China trade relations. The pound held steady after British Prime Minister Theresa May's government survived a vote of no confidence in parliament. Safe-haven assets such as gold and the yen rose after media reported that US federal prosecutors are investigating Chinese tech giant Huawei Technologies for allegedly stealing trade secrets from US companies. Chinese stocks ended lower as investors braced for GDP data release on January 21. Growth worries resurfaced after Premier Li Keqaing said the country is facing a challenging environment. Further, Japanese shares finished lower as automakers sagged on worries about US tariff hikes on imports.

Asian Indices

Last Trade           

Change in Points

Change in %

Shanghai Composite

2,559.64
-10.78
-0.42

Hang Seng

26,755.63
-146.47
-0.54

Jakarta Composite

6,423.78
10.42
0.16

KLSE Composite

1,682.97

9.89

0.59

Nikkei 225

20,402.27
-40.48
-0.20

Straits Times

3,214.44
-14.67
-0.45

KOSPI Composite

2,107.06
0.96
0.05

Taiwan Weighted

9,789.15
25.34
0.26
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