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Indices settle at record closing high on Thursday

Indian equity benchmarks continued the winning streak on the fourth straight session and settled at record closing high on Thursday, led by advances in Power, FMCG, Metal and Banking stocks. Initially, weak global cues led to a muted start in the benchmarks. Some concern also came with rating agency Moody's statement that India's fiscal deficit projections are higher than expected and slower consolidation will constrain its fiscal strength over the medium term. It also expects India's nominal GDP growth to rise to closer to 17 percent in fiscal 2021, higher than 14.4 percent projected in the Budget. However, the markets turned positive from weak start and traded near lifetime highs following a recovery in banking stocks.

Sentiments remained up-beat as the Corporate Affairs Ministry has revised the definition of small companies under the Companies Act by increasing their thresholds for paid-up capital from 'not exceeding Rs 50 lakh' to 'not exceeding Rs two crore' and turnover from 'not exceeding Rs two crore' to 'not exceeding Rs 20 crore'. A Ministry release said the step, in line with the government's vision, is expected to benefit more than two lakh companies in terms of lesser compliances, lesser filing fees and lesser penalties in the event of any defaults. Additional support also came as the Finance Ministry has released the 14th installment of Rs 6,000 crore to states to meet the GST compensation shortfall, taking the total amount of fund released so far to Rs 84,000 crore. Till now, 76 per cent of the total estimated GST compensation shortfall has been released to states and 3 UTs. Out of this, an amount of Rs 76,616.16 crore has been released to 23 states and Rs 7,383.84 crore to the 3 UTs with Legislative Assembly (Delhi, J&K, Puducherry).

On the global front, Asian markets ended mostly in red, following the lackluster cues overnight from Wall Street as the release of some upbeat U.S. economic data raised concerns lawmakers will feel less pressure to provide additional stimulus. Investors also turned cautious as they digested local corporate earnings results. European markets were trading mostly in green, on hopes of a swifter global economic recovery. Sentiment was also underpinned after former European Central Bank chief Mario Draghi agreed to help form a new Italian government. The monetary policy announcement and the quarterly economic and inflation projections are due from the Bank of England later in the day. The central bank is expected to keep its interest rate unchanged near zero, avoiding a reduction to negative territory at the February meeting.

Finally, the BSE Sensex rose 358.54 points or 0.71% to 50,614.29, while the CNX Nifty was up by 105.70 points or 0.71% to 14,895.65.

The BSE Sensex touched high and low of 50,687.51 and 49,926.45, respectively and there were 19 stocks advancing against 11 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 1.45%, while Small cap index was up by 1.21%.

The top gaining sectoral indices on the BSE were Power up by 2.56%, FMCG up by 2.26%, Metal up by 1.98%, Bankex up by 1.61% and Capital Goods up by 1.57%, while Telecom down by 0.63%, TECK down by 0.41%, IT down by 0.27% and Consumer Durables down by 0.27% were the top losing indices on BSE.

The top gainers on the Sensex were ITC up by 6.11%, SBI up by 5.73%, Bajaj Finance up by 4.85%, ONGC up by 4.72% and Mahindra & Mahindra up by 4.02%. On the flip side, Asian Paints down by 2.08%, Indusind Bank down by 1.68%, Bharti Airtel down by 1.39%, Tech Mahindra down by 1.28% and Titan Company down by 1.00% were the top losers.

Meanwhile, Rating agency Moody's has said that India's fiscal deficit projections are higher than expected and slower consolidation will constrain its fiscal strength over the medium term. It expects India's nominal gross domestic product (GDP) growth to rise to closer to 17 percent in fiscal 2021, higher than 14.4 percent projected in the Budget.

The US-based agency has stated that the budget's focus on higher capital spending, financial sector reform and asset sales will help stimulate growth, but implementation risks remain and slower fiscal consolidation will constrain fiscal strength over the medium term. It noted that as per the glide path for fiscal consolidation announced in Budget, the government plans to bring down the fiscal deficit to 4.5 per cent of GDP by 2025-26 fiscal.

Moody's said greater transparency on off-balance-sheet food subsidy expenditure and more conservative revenue assumptions have contributed to the government's higher deficit number for fiscal 2020. India has budgeted a fiscal deficit of 9.5 per cent of GDP for the current fiscal ending March. It also said the financial sector will undergo some credit positive reform under the new budget. Banks will benefit from the establishment of an asset reconstruction company to resolve legacy problem loans, and public sector banks additionally from a Rs 20,000 crore capital infusion.

The CNX Nifty traded in a range of 14,913.70 and 14,714.75 and there were 28 stocks advancing against 22 stocks declining on the index.

The top gainers on Nifty were SBI up by 6.55%, ITC up by 6.14%, Bajaj Finance up by 4.96%, Shree Cement up by 4.83% and ONGC up by 4.77%. On the flip side, Asian Paints down by 1.94%, UPL down by 1.67%, Cipla down by 1.65%, Indusind Bank down by 1.58% and Bharti Airtel down by 1.49% were the top losers.

European markets were trading mostly in green; France’s CAC increased 12.24 points or 0.22% to 5,575.29 and Germany’s DAX rose 25.11 points or 0.18% to 13,958.74, while UK’s FTSE 100 decreased 2.56 points or 0.04% to 6,505.26.

Asian markets finished mostly lower on Thursday, with the hefty profit booking after previous session gains amid optimism earnings results and signs of economic recovery. Shanghai shares retreated with the worries over liquidity tension ahead of the upcoming Lunar New Year holiday. Short-term funding cost in China started to pick up last week as the central bank refrained from making its usual substantial liquidity injections to meet high demand for cash ahead of the week-long Lunar New Year holidays, which starts on February 11 this year. While, Japan’s Nikkei reported first loss after three straight session gains.

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