News Analysis

Indian indices maintain gaining momentum for third straight session

Updated on 15 April 2019 04:37 PM

Maintaining gaining momentum for third straight session, Indian equity bourses ended Monday’s trading session on cheerful note. The markets started the session with marginal gains, as India’s factory output, as measured in terms of the Index of Industrial Production (IIP), slowed down to 20-month low of 0.1% in February, mainly due to contraction in the manufacturing sector. It had grown by 6.9% in February 2018. Separately, India's retail inflation, measured in Consumer Price Index (CPI), continued rising trend for second straight month and increased marginally to 2.86% in March 2019 as compared to 2.57% in February 2019, on account of increase in prices of food articles and fuel. But, key indices managed to add gains during the session, aided by Former Niti Aayog vice chairman Arvind Panagariya’s statement that the Modi government has achieved 'major successes' in social sector programmes like Ayushmaan Bharat, PM-Kisan and rural electrification. Besides, he added that this government has made an 'unprecedented progress' in tackling corruption.

Upward rally continued during second half of the session, on the back of heavy buying coupled with positive cues from other Asian markets. The street took support with a report stating that foreign investors have pumped in a net sum of Rs 11,096 crore into the Indian capital markets in April so far, driven by global and domestic factors. Foreign portfolio investors (FPI) were net buyers for the previous two months as well, infusing a net sum of Rs 11,182 crore in February and Rs 45,981 crore in March. Adding more comfort among traders, a private report showed that financing deals for Indian infrastructure projects are surging on market expectations that the next government will come through with at least some of the spending that politicians are promising now during a heated election campaign. The market participants overlooked rising WPI inflation data report in late noon deals. India’s Wholesale price index (WPI) inflation has come in at 3.18% in the month of March as compared to 2.93% (provisional) for the previous month.

On the global front, European markets were trading in green, even though Eurozone's industrial production fell in February after rising in the previous month. The figures from the statistical office showed that industrial production fell 0.2 percent month-on-month in February, reversing a 1.9 percent rise in January. The latest decline was driven by 3.0 percent fall in energy production, followed by a 0.4 percent decline in the output of durable consumer goods and capital goods each and a 0.1 percent drop in manufacture of intermediate goods. Asian markets ended mostly in green, amid easing concerns about a slowdown in global growth and on hopes for a US-China trade deal. Strong Chinese exports as well as bank loan data helped ease investor worries over slowing global growth.

Back home, stocks related to the fertilizer sector remained in limelight, as the Cabinet Committee on Economic Affairs approved the proposal of the Department of fertilizers to extend the duration of New Urea Policy-2015 from April 1, 2019 till further orders, except for the provisions which stand already amended vide notification dated March 28, 2018. Besides, renewable energy sector stocks also remained in focus after the Union Cabinet gave its approval for a Cooperation Agreement between Ministry of New & Renewable Energy of India and Ministry for Energy, Utilities and Climate of the Kingdom of Denmark on strategic sector cooperation in the field of Renewable Energy with a focus on Offshore Wind Energy and a Letter of Intent to establish an Indo-Danish Centre of Excellence for renewable energy in India. 

Finally, the BSE Sensex gained 138.73 points or 0.36% to 38,905.84, while the CNX Nifty was up by 46.90 points or 0.40% to 11,690.35.

The BSE Sensex touched a high and a low of 38,976.58 and 38,780.08, respectively and there were 20 stocks advancing against 11 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index grew 0.49%, while Small cap index was up by 0.62%.

The top gaining sectoral indices on the BSE were Metal up by 2.24%, Realty up by 1.57%, Auto up by 1.43%, Basic Materials up by 1.19% and Industrials up by 0.89%, while Oil & Gas down by 0.42% and Energy down by 0.04% were the only losing indices on BSE.

The top gainers on the Sensex were Tata Motors - DVR up by 7.58%, Tata Motors up by 7.04%, TCS up by 4.78%, Coal India up by 4.30% and Tata Steel up by 3.42%. On the flip side, Infosys down by 2.83%, Sun Pharma down by 1.26%, Yes Bank down by 0.93%, ONGC down by 0.79% and HDFC down by 0.62% were the top losers.

Meanwhile, Reserve Bank of India (RBI) Governor Shaktikanta Das has observed that the global financial crisis are exposing several limitations of conventional and unconventional monetary policy tools. Therefore, he suggested that monetary economics in emerging markets needs a rethink. He noted that this includes challenging the conventional wisdom of modern central banks to hike or reduce their interest rates by 25 basis points or multiples thereof.

Das has stated that unconventional monetary policies of advanced economies have resulted in risks and spillovers for the emerging markets. According to him, monetary policy must touch the real economy, spur investments and maintain monetary and financial stability. Therefore, he said that the time has come to think out of the box, including challenging the conventional wisdom. Adding further, he said that modern central banks generally announce a stance of tightening, neutrality or accommodative to guide the markets and the public on the future course of policy along with any changes in the rate.

The RBI Governor said “one thought that comes to my mind is that if the unit of 25 basis points is not sacrosanct and just a convention, monetary policy can be well served by calibrating the size of the policy rate to the dynamics of the situation and the size of the change itself can convey the stance of policy.” He also explained that in a situation in which the central bank prefers to be accommodative but not overly so, it could announce a cut in the policy rate by 35 basis points if it has judged that the standard 25 basis points is too little, but its multiple, that is 50 basis points, is too much. He added that this approach can also be useful when the central bank is on a tightening mode and potentially help avoid policy turnaround from forward guidance via stance too far into the future, which in a highly volatile global scenario, may not even be a year.

The CNX Nifty traded in a range of 11,704.60 and 11,648.25. There were 30 stocks advancing against 20 stocks declining on the index.

The top gainers on Nifty were Tata Motors up by 7.43%, TCS up by 4.89%, Coal India up by 4.15%, Tata Steel up by 3.81% and Kotak Bank up by 2.42%. On the flip side, Infosys down by 2.61%, Bharti Infratel down by 1.67%, Sun Pharma down by 1.38%, GAIL down by 0.88% and Yes Bank down by 0.78% were the top losers.

European markets were trading in green; UK’s FTSE 100 increased 5.25 points or 0.07% to 7,442.31, France’s CAC increased 7.18 points or 0.13% to 5,509.88 and Germany’s DAX increased 7.90 points or 0.07% to 12,007.83.

Asian markets gave up most of their early gains but managed to end mostly higher on Monday as investors looked for further signs of a pick-up in global growth and progress in US-China trade talks. US Treasury Secretary Steven Mnuchin said he hoped US-China trade talks were approaching their final lap. Besides, easing fears of a slowdown in global growth on signs of stabilization in the Chinese economy further boosted investor sentiment. Meanwhile, Chinese data showing exports rebounded in March to a five-month high while new bank loans jumped by far more than expected. Japanese shares hit a four-month high, with sentiment lifted by a weaker yen and positive cues from global markets. However, Chinese shares gave up early gains to end lower.

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