IGI Logo

Markets remain firm on sustained buying support

Mirroring their Asian peers, Indian equity markets were trading in fine fettle with Sensex and Nifty crossing 50,100 and 14,700 levels in the afternoon session due to heavy buying in consumer durables, energy and auto stocks. Gains in frontline blue chip stocks such as Bajaj Finserv, Bajaj Finance and Bajaj Auto also helped to lift the markets. Traders took note of private report stating that the India eyeing to start negotiations on an investment deal with the European Union simultaneously with a trade agreement in a renewed push to boost bilateral ties with the trade bloc. On sectoral front, solar stocks were in focus as government gave ex-post facto approval to a memorandum of understanding (MoU) between India and Uzbekistan for cooperation in the field of solar energy.

On the global front, most of the Asian markets were trading firm tracking US markets as investors hoped for more economic stimulus from newly inaugurated US President Joe Biden to offset damage wreaked by the Covid-19 pandemic. Back home, in scrip specific developments Future Retail, Future Enterprises touched roof after Sebi cleared Future Group's proposed multi-billion dollar deal with Reliance Industries. Based on this, the BSE also granted its ‘no adverse observation’ report to the Rs 24,713-crore deal.

The BSE Sensex is currently trading at 50133.89, up by 341.77 points or 0.69% after trading in a range of 49964.00 and 50149.49. There were 21 stocks advancing against 9 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.81%, while Small cap index was up by 0.60%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 2.58%, Energy up by 2.30%, Auto up by 2.01%, Industrials up by 1.75% and Capital Goods was up by 1.74%, while Metal down by 1.33%, Realty down by 0.67%, Utilities down by 0.43%, Telecom down by 0.31% and TECK was down by 0.15% were the top losing indices on BSE.

The top gainers on the Sensex were Bajaj Finserv up by 4.81%, Bajaj Finance up by 4.29%, Bajaj Auto up by 3.15%, Reliance Industries up by 2.97% and Axis Bank was up by 2.47%. On the flip side, HDFC down by 0.90%, TCS down by 0.79%, ONGC down by 0.71%, HDFC Bank down by 0.70% and Sun Pharma was down by 0.66% were the top losers.

Meanwhile, rating agency -- Crisil in its latest study report has stated that the combined fiscal deficit of the states will hit a peak of Rs 8.7 lakh crore or 4.7 per cent of their Gross Domestic Product (GDP) this fiscal (FY21) on the back of steep fall in tax collections owing to disruptions inflicted by the pandemic. it said revenue of the states have so badly fallen that as much as 70 per cent of the fiscal deficit is contributed by revenue deficit, which normally used to be only around 15 per cent. Economic activity slumped from late March last when the country was brought under a lockdown, and subsequently improved as the restrictions were eased.

As per the report, the pandemic has hit tax collections of the states and resulted in a near four-fold spike in their revenue deficits this fiscal over FY20. This will not only expand states' aggregate gross fiscal deficit to an all-time high of Rs 8.7 lakh crore, or 4.7 per cent of their gross state domestic product or GSDP but also skew its composition towards revenue deficit which is relatively less value-accretive towards future tax potential. Though tax collection may slowly recover with improving economic outlook, higher interest burden, because of the high debt funding of this year's gross fiscal deficit, coupled with sticky revenue expenditure, may keep revenue deficit high for the states and the deficit composition skewed over the next two-three years, the report said, adding that this will, in turn, increase their credit risk.

The agency said the analysis is based on the data from 18 large states, which account for over 90 per cent of aggregate gross state domestic product. The report noted that revenue expenditure may also remain sticky as these are either committed (related to salaries, pension and interest cost), making it difficult to cut or have been necessitated by the pandemic (such as grants-in-aid, medical and labour welfare-related expenses). High revenue deficit will also compel states to moderate their Capex so that they remain within fiscal borrowing limits, thus aggravating gross fiscal deficit. To fill the gap, states will be forced to borrow more this year, further increasing their indebtedness. Revenue collections are expected to reach close to the pre-pandemic level next fiscal, factoring in unlocking that began in July 2020 and a real GDP growth forecast of 10 per cent in FY22.

The CNX Nifty is currently trading at 14740.10, up by 95.40 points or 0.65% after trading in a range of 14695.25 and 14745.20. There were 33 stocks advancing against 17 stocks declining on the index.

The top gainers on Nifty were Tata Motors up by 7.48%, Bajaj Finserv up by 4.45%, Bajaj Finance up by 4.19%, Reliance Industries up by 3.02% and Bajaj Auto was up by 2.99%. On the flip side, Tata Steel down by 1.72%, JSW Steel down by 1.62%, GAIL India down by 1.41%, Coal India down by 1.17% and TCS was down by 0.90% were the top losers.

Most of the Asian markets were trading firm KOSPI rose 46.29 points or 1.49% to 3,160.84, Jakarta Composite soared 13.40 points or 0.21% to 6,443.16, Shanghai Composite gained 37.05 points or 1.03% to 3,620.14, Nikkei 225 surged 233.60 points or 0.82% to 28,756.86, Taiwan Weighted strengthened 347.59 points or 2.2% to 16,153.77 and Straits Times was up by 16.25 points or 0.54% to 3,015.02. On the other side, Hang Seng was down by 76.08 points or 0.25% to 29,886.39.

For More  LKP Securities Ltd Disclaimer  http://www.lkpsec.com/

Views express by all participants are for information & academic purpose only. Kindly read disclaimer before referring below views. Click Here For Disclaimer