Published on 3/06/2020 6:17:51 PM | Source: LKP Securities Ltd

Bulls Continue To Roar On Dalal Street; Nifty Reclaims 10K Mark - LKP Securities

Posted in Market Outlook| #Market Outlook #LKP Securities Ltd

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Extending their northward journey for sixth straight session, Indian equity benchmarks reclaimed their crucial 34,100 (Sensex) and 10,050 (Nifty) levels on Wednesday. Markets started the session on an optimistic note as traders took encouragement with Prime Minister Narendra Modi’s assurance to India Inc that growth in the economy will return soon as the government continues to pursue multiple reforms. He added that with unlock phase-1 India has already begun getting its growth back. Some support also came as the World Bank urged countries to go for comprehensive policies to boost long-term growth along with short term measures to address health emergencies and secure core public services in the wake of the coronavirus crisis, amid indications that 60 million people could be pushed into extreme poverty in 2020.

Markets continued their bull run even after business activity across India's service sector fell drastically during May as the unfavourable economic effects of the coronavirus disease 2019 (COVID-19) pandemic impaired business operations, restricted consumer footfall and led demand to collapse. While most measures came off the unprecedented lows seen in April, survey data still pointed to extreme month-to-month declines in output and new orders. However, key gauges gave up some of their gains in final hour of trade after Former finance secretary Subhash Chandra Garg’s statement that the Indian economy will shrink by 10 percent or Rs 20 lakh crore in current financial year (FY21), the first contraction in over 40 years, due to a faulty COVID lockdown. Meanwhile, the data compiled by Worldometer showed that India has seen a surge of over 8,500 cases in a day, taking its total number of coronavirus cases to 207,191. The country's death toll now stands at 5,829.

Global cues too remained supportive with European counters were trading in green at this point of time, while Asian markets ended higher as China’s service sector expanded for the first time in four months in May amid an easing of measures implemented to curb the spread of coronavirus, or Covid-19. The survey results from IHS Markit showed that the services Purchasing Managers' Index advanced to 55.0 in May from 44.4 in April. A score above 50 indicates expansion.

Back home, the sugar stocks were in focus with industry body ISMA’s statement that with further relaxations in COVID-19 lockdown rules, sugar demand in India has started picking up and will further improve with opening of hotels and restaurants. However, steel sector stocks traded mixed with India Ratings’ (IndRa) statement that as construction activities were impacted due to the extended lockdown, onset of monsoon and mass migration of labourers, operating profit or EBITDA of steel producers is expected to decline by 20-30 percent in the current fiscal due to lower demand and price realisation.

Finally, the BSE Sensex gained 284.01 points or 0.84% to 34109.54, while the CNX Nifty was up by 82.45 points or 0.83% to 10,061.55.

The BSE Sensex touched high and low of 34488.69 and 34027.50, respectively and there were 18 stocks advancing against 12 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.31%, while Small cap index was up by 1.24%.

The top gaining sectoral indices on the BSE were Realty up by 3.07%, Bankex up by 2.07%, Capital Goods up by 1.59%, Oil & Gas up by 1.51% and Industrials up by 1.33%, while Telecom down by 0.95%, Power down by 0.85%, TECK down by 0.56%, IT down by 0.42% and Utilities down by 0.40% were the top losing indices on BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 5.51%, Kotak Mahindra Bank up by 3.31%, Bajaj Finance up by 2.83%, Nestle up by 2.81% and SBI up by 2.70%. On the flip side, NTPC down by 1.96%, Indusind Bank down by 1.62%, Maruti Suzuki down by 1.13%, Bharti Airtel down by 1.13% and Hero MotoCorp down by 0.95% were the top losers.

Meanwhile, India’s service sector saw extreme slide in business activity once again in the month of May, as the unfavourable economic effects of the coronavirus disease 2019 pandemic impaired business operations, restricted consumer footfall and led demand to collapse. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index was at 12.6 in May from 5.4 in April. The latest reading pointed to another substantial decline in the health of the Indian service sector, albeit one that was slightly softer than recorded in April. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services - was at 14.8 in May from 7.2 in April.

The report also noted that output sank sharply due to extended business shutdowns and very weak demand conditions, while new business from overseas markets collapsed on an unprecedented scale once again during May. With many businesses remaining shut down during May, the extent to which spare capacity grew slowed markedly as a number of firms reported a build-up in unfinished work due to idle operations. Nevertheless, backlogs of work declined overall.

Further, prices data showed deflationary trends across both input costs and output charges midway through the second quarter. However, while the rate at which output price fell slowed, operating expenses dropped at the fastest rate in the survey history. Besides, aggregate employment fell further during May, although a weaker decline at services companies contrasted with a steeper drop at goods producers.

The CNX Nifty traded in a range of 10,176.20  and 10,035.55 and there were 34 stocks advancing against 16 stocks declining on the index.

The top gainers on Nifty were Mahindra & Mahindra up by 5.43%, Bajaj Finance up by 3.15%, Kotak Mahindra Bank up by 3.11%, Nestle India up by 2.68% and ICICI Bank up by 2.61%. On the flip side, Zee Entertainment down by 1.99%, NTPC down by 1.96%, Bharti Infratel down by 1.95%, Wipro down by 1.74% and Indusind Bank down by 1.51% were the top losers. 

European markets were trading in green; UK’s FTSE 100 increased 80.90 points or 1.30% to 6,301.04, France’s CAC rose 101.90 points or 2.10% to 4,960.87 and Germany’s DAX was up by 288.74 points or 2.80% to 12,310.02.

Asian markets ended higher on Wednesday amid hopes for a global economic recovery from the corona virus pandemic and reduced tensions between the world's largest economies. Sentiments were also bolstered after the South Korea government unveiled a 35.3 trillion won ($28.8 billion) supplementary budget, raising the total stimulus to 270 trillion won to counter the economic fallout from the corona virus. Chinese shares ended marginally higher after China's service sector bounced back strongly in May, recording growth for the first time since January as it recovers from a corona virus-induced slowdown. The services Purchasing Managers' Index advanced to 55.0 in May from 44.4 in April, signalling a recovery in the sector. Moreover, the pace of expansion was the steepest since October 2010. Japanese shares ended up as a rapidly weakening yen boosted shares of automakers and other cyclical sectors. Investors also cheered data showing that services sector activity in Japan contracted at a slower rate in May.

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