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Indian equity benchmarks ended higher for a third straight session on Monday, following positive global cues due to China easing Covid curbs. Some local factors helping the mood include early arrival of monsoon in Kerala raising hopes of a favourable impact on agri crops. After the gap-up start, the benchmarks inched gradually higher, as traders took encouragement with RBI data showing that India’s forex reserves increased by $4.23 billion to $597.509 billion for the week ended May 20 on the back of a high accretion of core currency assets. Some support also came in with report that State finances showed improvement in 2021-22 as the consolidated gross fiscal deficit (GFD) of 26 states was lower by 31.5 per cent than a year ago. Sentiments were positive, after Prime Minister Narendra Modi said his government has tried to ensure that farmers in the country are not affected even though the prices of fertilisers in international markets have soared due to the pandemic and ongoing war in Ukraine.

Sentiments remained up-beat in late afternoon deals, taking support from minister of state for commerce and industry Anupriya Patel’s statement that India is fast-tracking negotiations for proposed free trade agreements with certain developed countries like the UK as well as with the European Union, and maybe by this year end, the government would be able to give a final shape to few of these pacts. The markets also took support from the annual report data showed the size of the Reserve Bank's balance sheet, which is reflective of activities carried out by it in pursuance of currency issue function as well as monetary policy and reserve management, has increased by 8.46 per cent during 2021-22. It said the increase on the asset side was due to rise in foreign investments, domestic investments, gold, and loans and advances by 4.28 per cent, 11.67 per cent, 30.07 per cent and 54.53 per cent, respectively.

On the global front, Asian markets settled mostly higher on Monday amid signs that U.S. inflation may have peaked. China's easing of COVID-19 curbs also boosted sentiment ahead of a meeting of European Union countries to agree on Russian oil import sanctions. European markets were trading mostly in green after Shanghai authorities rolled out a total of 50 stimulus measures to support the local economy, which has been hit hard by the restrictions. Back home, stocks related to coal industry were in focus as V K Tiwari, Additional Secretary, Ministry of Coal, said the Government of India has set a target to increase coal gasification to 100 million tonnes (MT) by 2030. He said coal gasification is the future and it is considered a cleaner option compared to the burning of coal. Gasification facilitates utilization of the chemical properties of coal. Banking stocks also were in watch as the Reserve Bank said the banks would need to support growth while being watchful of the credit behaviour of entities whose loans were restructured during the pandemic period to arrest slippages.

Finally, the BSE Sensex rose 1041.08 points or 1.90% to 55,925.74 and the CNX Nifty was up by 308.95 points or 1.89% to 16,661.40.  

The BSE Sensex touched high and low of 56,082.65 and 55,466.30, respectively. There were 26 stocks advancing against 4 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 2.28%, while Small cap index was up by 2.23%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 4.41%, Realty up by 3.96%, IT up by 3.75%, TECK up by 3.53% and Capital Goods up by 2.92%, while there were no losing sectoral indices on the BSE.

The top gainers on the Sensex were Titan Company up by 4.94%, Mahindra & Mahindra up by 4.69%, Infosys up by 4.57%, Larsen & Toubro up by 3.77% and Tech Mahindra up by 3.59%. On the flip side, Kotak Mahindra Bank down by 2.23%, Sun Pharma down by 1.75%, Dr. Reddy's Lab down by 0.73% and ITC down by 0.04% were the top losers.

Meanwhile, amid rising inflationary pressure, Reserve Bank of India (RBI), in its annual report, has pitched for structural reforms for sustained economic growth, and asked banks to remain watchful of possible slippages in restructured loans. It also said the number of Rs 2,000 denomination notes fell to 1.6 per cent of the total currencies in circulation as on March 2022 from 2 per cent in the year-ago period. It stressed that the future path of growth would be conditioned by addressing supply-side bottlenecks, calibrating monetary policy to bring down inflation and boosting capital spending.

The central bank said ‘Undertaking structural reforms to improve India’s medium-term growth potential holds the key to secure sustained, balanced and inclusive growth, especially by helping workers adapt to the after-effects of the pandemic by reskilling and enabling them to adopt new technologies for raising productivity’.  It added that the escalation of geopolitical tensions into war from late February 2022 has delivered a brutal blow to the world economy, battered as it has been through 2021 by multiple waves of the pandemic, supply chain and logistics disruptions, elevated inflation and bouts of financial market turbulence, triggered by diverging paths of monetary policy normalisation.

The report said ‘The immediate impact of geopolitical aftershocks is on inflation, with close to three-fourths of the consumer price index at risk. The elevation in international prices of crude, metals and fertilisers has translated into a term of trade shock that has widened trade and current account deficits’. Due to the ongoing Russia-Ukraine war, global commodity prices have moved northwards as supply lines have been severely impacted leading to a rise in worldwide inflation. On the price situation, the report said there is a risk of high Wholesale Price Inflation (WPI) putting pressure on the retail inflation, albeit with a lag.

The CNX Nifty traded in a range of 16,695.50 and 16,506.15. There were 45 stocks advancing against 5 stocks declining on the index.

The top gainers on Nifty were Mahindra & Mahindra up by 4.95%, Titan Company up by 4.92%, Infosys up by 4.63%, Adani Ports &SEZ up by 4.54% and Larsen & Toubro up by 3.89%. On the flip side, Kotak Mahindra Bank down by 2.01%, JSW Steel down by 1.95%, Sun Pharma down by 1.65%, Dr. Reddy's Lab down by 0.60% and ITC down by 0.07% were the top losers.

European markets were trading mostly in green,  France’s CAC increased 43.42 points or 0.67% to 6,559.17 and Germany’s DAX increased 93.52 points or 0.65% to 14,555.71, while UK’s FTSE 100 decreased 4.80 points or 0.06% to 7,580.66.

Asian markets settled mostly higher on Monday, boosted by optimism that the US central bank would slow the pace of monetary policy tightening in the second half of the year. Moreover, Shanghai's stimulus measures and decision to ease Covid-19 curbs also supported market sentiments. Japanese shares gained on upbeat risk sentiment following a surge on Wall Street late last week after inflation worries ebbed. The core US personal consumption expenditure price index closely watched by the US Federal Reserve slowed to 4.9 percent in April from 5.2 percent in March. Seoul shares extended gains on hopes for economic recovery in China, while the South Korean won rose to the highest in over one month to the US dollar.

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