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Markets rally on US debt deal hopes, normal monsoon
May-26-2023

Indian equity benchmarks rallied around a percent with Sensex recapturing 62,500 mark and nifty ending just shy of 18,500 mark, after reports suggested that U.S. lawmakers are inching closer to an agreement that would raise the debt limit for about two years and cap federal spending at the same level as fiscal 2023 for two years. Report that India will have normal monsoon this year too aided sentiments. Markets made a positive start supported by sharp fall in oil prices overnight coupled with continued FII inflows aided the domestic sentiments. The provisional data from the National Stock Exchange showed foreign institutional investors (FIIs) bought shares worth Rs 589.10 crore on May 25. The investors’ mood remained up-beat throughout the day and there appeared not even an iota of profit booking, as investors continued hunt for fundamentally strong stocks.

Markets gained strength as traders took encouragement with report that India’s services exports are expected to overtake merchandise exports in the next five years on the back of above-par growth in emerging areas of service economy. Traders also took note of Chief Economic Adviser V Anantha Nageswaran’s statement that there are signs of private sector investment cycle unfolding and sectors like steel and cement have reached a stage where greenfield investment will take place. Markets extended gains and ended near intraday high levels as traders cheered reports of Normal Monsoon this year. India has reconfirmed its expectation of a normal monsoon this year, alleviating concerns regarding weather-related impacts on inflation. During the June-September season, the rainfall is projected to be around 96 percent of the long-term average. Sentiments also got boost with foreign brokerage expressing confidence in India’s enduring structural narrative and believes that it is only a matter of time before the BSE benchmark Sensex crosses the remarkable 1,00,000 milestone.

On the global front, European markets were trading lower as investors fret about slowing economic growth. Asian markets ended mixed. Back home, S&P Global Ratings has said Indian banking sector profitability will stabilise at a healthy level, and asset quality will continue to improve. It said a strong recovery is underway in the Indian banking sector, and lenders have just reported their best results in a decade.

Back home, expressing optimism over the India’s economic situation, the SBI Research in its latest report ‘Ecowrap’ has said that the country’s economy is on track to surpass 7 per cent growth rate in Fiscal Year 2023 (FY23) with manufacturing being the key driver. As per the report, India's growth in the fourth quarter of FY23 is likely to be 5.5 per cent, which would lead to the country's growth for FY23 at 7.1 per cent. On the sectoral front, metal stocks remained in focus with report that around 40 million tonne (MT) of new steel-making capacity will be commissioned by 2025-26. 

Finally, the BSE Sensex surged 629.07 points or 1.02% to 62,501.69 and the CNX Nifty was up by 178.20 points or 0.97% to 18,499.35.  

The BSE Sensex touched high and low of 62,529.83 and 61,911.61, respectively. There were 27 stocks advancing against 3 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index was up by 0.82%, while Small cap index up by 0.49%.

The top gaining sectoral indices on the BSE were IT up by 1.34%, Realty up by 1.31%, FMCG up by 1.29%, TECK up by 1.12% and Metal was up by 1.05%, while Utilities down by 0.52%, Power down by 0.04% and Oil & Gas down by 0.03% were the few losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 2.79%, Sun Pharma up by 2.75%, HCL Tech up by 2.02%, Hindustan Unilever up by 2.00% and Wipro up by 1.85%. On the flip side, Bharti Airtel down by 0.63%, Power Grid down by 0.36% and NTPC down by 0.03% were the few losers.

Meanwhile, expressing optimism over the India’s economic situation, the SBI Research in its latest report ‘Ecowrap’ has said that the country’s economy is on track to surpass 7 per cent growth rate in Fiscal Year 2023 (FY23) with manufacturing being the key driver. As per the report, India's growth in the fourth quarter of FY23 is likely to be 5.5 per cent, which would lead to the country's growth for FY23 at 7.1 per cent. According to Ecowrap, the variegated patterns of growth emerging across the globe is bringing forth unprecedented challenges before policymakers, regulators and economists in assessing the real rates of projected growth, not only during the current year -- 2023 -- but continuing through 2024 and 2025 as the inflation trajectory management for central banks has been elongated after the surprising turn of events last year. 

Amidst this global hullabaloo, the SBI Research report said India is expected to continue its showdown in pursuing a different pathway of zeroing in on drivers of growth, looking for a renewed surge in resilient manufacturing while supporting services sector to embrace enhanced efficiency. Locally, domestic consumption and investment stand to benefit from stronger prospects for agricultural and allied activities, strengthening business and consumer confidence, and strong credit growth while supply responses and cost conditions are poised to improve as inflationary pressure is easing.

Besides, it said India Inc continues to front lead the economic turnaround while embracing better operational and financial efficiency. It added in Q4FY23, around 1,700 listed entities reported top line growth of 12, while PAT grew by around 19 per cent as compared to the same period previous year. It also said the same set of companies reported earnings before interest, taxes, depreciation, and amortization (EBITDA) growth of around 23 per cent in Q4FY23.

SBI research report said green shoots are also emerging on foreign capital inflows in capital markets with year-to date (YTD) foreign institutional investors (FIIs) inflows in FY24 touching $6 billion, a reversal of trend from 2022. It also added that start-ups financing has been hit due to banking turmoil in the US, in particular failure of niche banks though it also offers a gearing up pedestal to domestic FIs to ring fence the financial needs of these changelings internally to ensure the sweet spot enjoyed by India grows in a disruptive and disproportionate manner.

The CNX Nifty traded in a range of 18,508.55 and 18,333.15. There were 44 stocks advancing against 5 stocks declining on the index.

The top gainers on Nifty were Reliance Industries up by 2.73%, Sun Pharma up by 2.63%, Hindalco up by 2.30%, Divi’s Lab up by 2.28% and Hindustan Unilever up by 2.12%. On the flip side, ONGC down by 1.36%, Grasim Industries down by 0.77%, Bajaj Auto down by 0.60%, Bharti Airtel down by 0.58% and Power Grid down by 0.27% were the top losers.

European markets were trading in red; UK’s FTSE 100 lost 3.13 points or 0.04% to 7,567.74 and France’s CAC fell 7.43 points or 0.10% to 7,221.84 and Germany’s DAX was down by 41.95 points or 0.26% to 15,751.85.

Asian markets settled mostly higher on Friday after Wall Street saw a tech rally followed by a blowout forecast from chipmaker Nvidia, while US lawmakers appeared to be nearing a deal to cut spending and raise the government's $31.4 trillion debt ceiling limit. Japanese shares rose as a weaker yen lifted export-oriented firms, while softer than expected Tokyo inflation data also supported market sentiments. Chinese shares gained as Chinese authorities have been rushing to push out vaccines to fight the fresh wave of the Covid-19 infection that is expected to peak in June. Meanwhile, Hong Kong's share market was closed for Buddha's Birthday.

Asian Indices          

Last Trade            

Change in Points   

Change in %     

Shanghai Composite

3,212.50

11.24

0.35

Hang Seng

--

--

--

Jakarta Composite

6,687.00

-17.23

-0.26

KLSE Composite

1,402.98

0.50

0.04

Nikkei 225

30,916.31

115.18

0.37

Straits Times

3,207.39

-0.33

-0.01

KOSPI Composite

2,558.81

4.12

0.16

Taiwan Weighted

16,505.05

213.05

1.29
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