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Benchmarks make optimistic start
May-22-2019

Indian equity benchmarks have made an optimistic start and are trading in green with marginal gain on Wednesday, as traders took encouragement with the Organisation for Economic Co-operation and Development (OECD) in its Economic Outlook stating that India’s economic growth will regain strength and approach 7.5% by 2020 buoyed by rural consumption and subdued inflation. It added that this growth will come from higher domestic demand due to improved financial conditions, fiscal and quasi-fiscal stimulus, including new income support measures for rural farmers, and recent structural reforms. Further, sentiments remained upbeat with the private report that land and labour reforms, privatisation and export promotion would be at the top of agenda of the new government irrespective of which party or coalition takes charge after the poll results on May 23. However, gains remained capped with traders remained on sidelines ahead of final results of the 2019 Lok Sabha elections to be declared on May 23.

On the global front, the US markets ended higher on Tuesday following reports that the US temporarily eased restrictions on Chinese telecom giant Huawei. Asian Markets are trading mostly in green following overnight gains on Wall Street as Washington’s temporary relaxation of curbs against China’s Huawei Technologies overshadowed deeper worries about trade tensions.

Back home, reality stocks had a gap up opening after RBI’s data showed that Bank credit to infrastructure sector grew by 18.5 per cent to Rs 10.55 lakh crore as of 2018-19, the highest since 2012-13 fiscal. In scrip specific developments, NMDC gained on creating separate department for global activities.

The BSE Sensex is currently trading at 39072.20, up by 102.40 points or 0.26% after trading in a range of 38903.87 and 39160.22. There were 16 stocks advancing against 15 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index slipped 0.60%, while Small cap index was down by 0.18%.

The top gaining sectoral indices on the BSE were Realty up by 1.47%, Energy up by 0.87%, Oil & Gas up by 0.75%, IT up by 0.42% and TECK was up by 0.36%, while FMCG down by 0.60%, Consumer Durables down by 0.60%, Healthcare down by 0.40%, Metal down by 0.39% and Auto was down by 0.38% were the top losing indices on BSE.

The top gainers on the Sensex were HCL Tech up by 1.45%, ONGC up by 1.29%, Infosys up by 1.09%, Reliance Industries up by 0.91% and ICICI Bank was up by 0.91%. On the flip side, Yes Bank down by 2.52%, Indusind Bank down by 2.29%, ITC down by 1.23%, Hindustan Unilever down by 1.18% and Bajaj Finance was down by 0.64% were the top losers.

Meanwhile, expressing optimism over India’s growth, the Organisation for Economic Co-operation and Development (OECD) in its latest Economic Outlook has said that the country’s economic growth will regain strength and approach 7.5% by 2020. The new income scheme for small farmers will support rural consumption. Investment growth will accelerate as capacity utilisation rises, interest rates decline, and geopolitical tensions and political uncertainty are assumed to wane. Lower oil prices and the recent appreciation of the rupee will reduce pressures on inflation and the current account.

The intergovernmental agency has said reducing the high public debt-to-GDP ratio would require improving the collection of the Goods and Services Tax (GST) and broadening the personal income tax base. Ensuring a swift resolution of bankruptcy processes would help contain non-performing loans and boost productivity by promoting the reallocation of resources to more productive firms and sectors. It added that India has the fastest growth among G20 economies. Besides, fiscal policy is supporting consumption demand.

As per the report, with inflation well below the mid-band point target, inflation expectations adjusting down, and existing slack, there is room for a cut in policy rates. With banks’ health gradually improving, as evidenced by the recent decline in stressed assets, lending rates should adjust more swiftly, and support the revival of business investment. To avoid a new build-up of non-performing loans, public banks’ governance should be improved to ensure sound portfolio decisions.

On the global front, the OECD has cut its forecast for the world economy, urging governments to resolve their trade disputes as the latest flare-up in the China-US trade war threatens to crimp global growth. It said as it pared back its forecast for global growth to 3.2% this year from 3.3% earlier. It notched up its forecast for US growth this year by 0.2 percentage point to 2.8%, but predicted a slowdown to 2.3% next year. Chinese growth is projected to slow to 6.2% this year and 6.0% next year. The outlook for the euro area growth unchanged at 1.2% this year.

The CNX Nifty is currently trading at 11722.70, up by 13.60 points or 0.12% after trading in a range of 11682.40 and 11753.90. There were 25 stocks advancing against 25 stocks declining on the index.

The top gainers on Nifty were BPCL up by 1.66%, HCL Tech up by 1.55%, Infosys up by 1.13%, ONGC up by 1.06% and Reliance Industries was up by 0.99%. On the flip side, Yes Bank down by 3.55%, Indusind Bank down by 2.49%, Indiabulls Housing down by 2.42%, JSW Steel down by 1.84% and Tech Mahindra was down by 1.82% were the top losers.

Asian Markets are trading mostly in green; Hang Seng increased 82.71 points or 0.3% to 27,739.95, Nikkei 225 surged 63.61 points or 0.3% to 21,336.06, Taiwan Weighted strengthened 33.05 points or 0.32% to 10,497.55, Straits Times advanced 7.06 points or 0.22% to 3,190.32 and KOSPI was up by 5.30 points or 0.26% to 2,066.55. On the flip side, Shanghai Composite declined 0.57 points or 0.02% to 2,905.40 and Jakarta Composite was down by 12.86 points or 0.22% to 5,938.51.

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