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Markets extend gains for fifth straight day; Sensex reclaims 36,200 mark
Dec-17-2018

Monday turned out to be Marvelous day for the Indian equity benchmarks, as Sensex and Nifty ended the trading day in green for fifth straight session. The key indices made a great start of the week, aided by commerce ministry’s latest data report showing that India’s exports grew by a meager 0.80% to $26.5 billion in November, even as the trade deficit widened to $16.67 billion. Exporters attributed the marginal export growth in November to high base effect, as the foreign shipments in the comparable month of the previous fiscal were quite high at $26.29 billion. Besides, imports rose by 4.31% to $43.17 billion during the month. Adding some enthusiasm, the Finance Minister Arun Jaitley said that the government will stick to the 3.3% fiscal deficit target in the current financial year. He also said India will clock a growth rate of 7-8% despite global uncertainties and will retain the tag of the world’s fastest growing major economy. Some comfort also came with deputy governor Viral Acharya’s statement that the Reserve Bank prefers fundamental changes to smoothen loan flow to micro-businesses through a public credit registry, rather than doling out forbearances.

Rally continued on the street in late noon deals, as traders took encouragement with credit rating agency, Care Ratings’ latest report stating that the investment climate in India has improved amid factors like improved gross fixed capital formation and higher government expenditure. It also highlighted rising government’s spending in the sectors like infrastructure, housing and defence. Domestic sentiments also got boost, with the Electronics and IT Minister Ravi Shankar Prasad’s statement that the Indian government will focus on manufacturing of medical electronics, defence electronics and scaling up the manufacturing capacity of automobile electronics, as part of its plan to grow Indian digital economy to $1trillion. Traders paid no heed towards a report showing that as many as 369 infrastructure projects, each worth Rs 150 crore or above, have shown cost overruns to the tune of over Rs 3.58 lakh crore owing to delays and other reasons.

On the global front, European markets were trading in red, as Eurozone private sector grew at the slowest pace in more than four years during December, suggesting that the 19-nation economy is set to end this year with a whimper. The flash Composite purchasing managers' index, or PMI, which combines manufacturing and services, fell to a 49-month low of 51.3 from 52.7 in November. Besides, Germany's private sector expanded at the slowest pace in four years during December amid slower growth in manufacturing and services. As per survey data from IHS Markit, the flash Composite Purchasing Managers' Index fell to a 48-month low of 52.2 from 52.3 in November. Asian markets ended mostly in green, despite South Korea trimmed economic growth forecasts for both this year and next year, citing weak investment and global trade disputes, and pledged to employ aggressive fiscal policy to cushion the impact. The finance ministry said Asia's fourth-largest economy would post annual growth of between 2.6 and 2.7 percent this year and next year, down from the July predictions of 2.9 percent for this year and 2.8 percent for next year.

Back home, agri stocks remained under pressure, as the Agriwatch Agri Commodities Index dipped 0.19% to 107.96 during the week ended December 15, 2018, from 108.16 the previous week, while airlines stocks ended lower, as IATA chief Alexandre de Juniac said that competitive air ticket prices are a strong stimulator for demand in India but a pricing policy that makes airlines lose too much money is a problem. Further, stocks related to hospitality industry remained buzzing with Icra’s report that the hospitality industry is expected to grow annually by 9-10% over the next four years, mainly due to robust domestic demand and a muted supply pipeline, while stocks related to auto industry remained in focus, amid reports that auto companies have proposed a one-time incentive in the form of rebate in taxes for replacing pre-2000 registered vehicles to facilitate taking them off the roads. Besides, power stocks remained in limelight with a private report that showing record coal supply has helped power plants to replenish dwindling stockpile even after pumping up generation as electricity demand spiked 14% during the October festive season and continued to grow apace at 5.5% in November.

Finally, the BSE Sensex surged 307.14 points or 0.85% to 36,270.07, while the CNX Nifty was up by 82.90 points or 0.77% to 10,888.35.

The BSE Sensex touched a high and a low of 36,312.31 and 36,123.62, respectively and there were 22 stocks advancing against 9 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.43%, while Small cap index was up by 0.26%.

The top gaining sectoral indices on the BSE were Metal up by 2.03%, Energy up by 1.54%, Utilities up by 1.35%, Oil & Gas up by 1.34% and Power up by 1.31%, while IT down by 0.35%, Realty down by 0.33%, Consumer Durables down by 0.27%, Telecom down by 0.26% and TECK down by 0.24% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors - DVR up by 4.42%, Tata Motors up by 4.10%, Power Grid Corporation up by 3.77%, HDFC up by 2.89% and Vedanta up by 2.21%. On the flip side, Kotak Mahindra Bank down by 2.50%, Infosys down by 1.71%, Bharti Airtel down by 1.30%, Hero MotoCorp down by 0.87% and Hindustan Unilever down by 0.29% were the top losers.

Meanwhile, credit rating agency, ICRA in its latest report has said that the hospitality industry is expected to show a strong annual growth of 9-10 percent over the next four years, on the back of robust domestic demand and a muted supply pipeline. It also said that the domestic demand will continue to be driven by increased air connectivity, and higher appetite for domestic leisure travel in FY19. That apart, it expects domestic demand to get a boost from the robust corporate performance which has witnessed the strongest top line growth in the last 10 quarters in the September quarter of the current fiscal year.

However, ICRA warned that the supply side is likely to lag demand over the medium term and grow at a subdued 3.6 percent over the next five years. But, it said that the situation is set to improve given the inventory and the number of premium rooms across 12 key cities is likely to go up from 82,800 in FY18 to 98,900 by FY23. It also pointed out that this low supply growth is expected to be the backbone for the current up-cycle, as demand is expected to grow at a much faster rate. It noted that the demand-supply gap is expected to go up from around 1 percent in FY18 to 5 percent in FY23. It added that margins are likely to expand due to operating leverage, with return of stronger revenue growth.

According to the report, interest and debt cover are likely to improve gradually over the medium term but the return on capital employed is expected to remain at sub-cost of capital at least till FY20. It also noted that the total debt for the industry is set to improve to 1.2 times in FY23 from 3.9 times in FY18 and 3.1 times in FY19. It also stated that the debt reduction measures undertaken by some large industry participants have resulted in sizable reduction in leverage levels as of March 2018 as a result return on capital employed is expected to improve upwards of 15 per cent in FY23 from 6.3 per cent in FY18.

The CNX Nifty traded in a range of 10,900.35 and 10,844.85. There were 34 stocks advancing against 16 stocks declining on the index.

The top gainers on Nifty were Tata Motors up by 4.52%, Power Grid Corporation up by 3.69%, HDFC up by 3.09%, Coal India up by 2.37% and Hindalco up by 2.29%. On the flip side, Kotak Mahindra Bank down by 2.70%, Infosys down by 1.88%, Bharti Airtel down by 1.71%, Bajaj Finserv down by 1.42% and Indiabulls Housing Finance down by 1.37% were the top losers.

All European markets were trading in red; UK’s FTSE 100 declined 28.14 points or 0.41% to 6,817.03, France’s CAC shed 26.14 points or 0.54% to 4,827.56 and Germany’s DAX was down by 20.08 points or 0.18% to 10,845.69.

Asian markets ended mostly in green on Monday, as investors picked up beaten-down shares after two weeks of losses, driven by concerns over trade and growth outlook. However, gains remained capped as traders remained on sidelines ahead of the US Federal Reserve's key policy meeting which is scheduled for December 18 and 19, with many expecting an increase in the benchmark interest rate by 25 bps to between 2.25 percent and 2.5 percent. Chinese shares ended slightly higher, as investors awaited cues from the closely watched annual Central Economic Work Conference later this week. Japanese shares ended notably higher despite lingering concerns over global growth.

Asian Indices

Last Trade           

Change in Points

Change in %

Shanghai Composite

2,597.97
4.23
0.16

Hang Seng

26,087.98
-6.81
-0.03

Jakarta Composite

6,089.30
-80.54
-1.31

KLSE Composite

1,641.62

-20.34

-1.22

Nikkei 225

21,506.88
132.05
0.62

Straits Times

3,114.25
37.16
1.21

KOSPI Composite

2,071.09
1.71
0.08

Taiwan Weighted

9,787.53
13.37
0.14
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