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Indian equity benchmarks gained for second straight session on Friday, led by strength in Metal, Banking, Basic Materials and Telecom shares amid positive global cues. The benchmarks traded in a narrow band in the first half of trade and jumped in noon deals, as traders got some solace with Chief Economic Adviser K.V. Subramanian’s statement that food inflation is likely to moderate on account of the twin impact of opening up of economic activities and good monsoon and attributed the rise in food prices to restrictions imposed by several states during April-May to deal with the second wave of Covid-19. Traders found some support with Crisil’s report that States' revenues is set to cross the Pre-Covid pandemic level in the current fiscal (FY22), driven by higher tax buoyancy, rise in sales tax collections from petroleum products coupled with increase in grants following 15th Finance Commission recommendations. It noted that revenue of the top 10 states had plunged 600 basis points (bps) last fiscal.

Traders remain energized as industry body -- the National Association of Software and Service Companies (Nasscom) stating that India's share in the global engineering and research and development (ER&D) market is likely to grow at a compound annual growth rate (CAGR) of 12-13 per cent to reach $63 billion by 2025. Nasscom President Debjani Ghosh noted that the pandemic has altered the way consumers behave, interact with companies, and how businesses interact. She said ccontactless technologies, analytics, software-led systems are changing how products are designed, redesigned, engineered, and consumed. Meanwhile, asserting that continuous reforms make India a great place to do business, Finance Minister Nirmala Sitharaman invited global investors to take advantage of the recent FDI reforms, the privatisation policy and the performance linked incentive (PLI) scheme.

On the global front, Asian markets ended with strong note on Friday, as recent comments from U.S. government and Fed officials on the expected decline in inflation by the year-end and the assurance of no hurrying on interest rate increases continued to buoy stock market sentiment. European markets were trading mostly in red as anxiety over tapering and tightening selectively played out to deny a uniform direction or sentiment to the major regional bourses. Back home, on the sectoral front, NBFCs stocks were in focus as the Reserve Bank of India (RBI) tied down a non-banking financial company’s ability to pay dividend to certain factors, including how much bad debt it has in its book and whether it has declared it correctly. Telecom stocks were buzzing as Moody's Investors Service in a report said countries in the Asia-Pacific region, including India, that are late in adopting 5G technology will get insignificant revenue from the services.

Finally, the BSE Sensex rose 226.04 points or 0.43% to 52,925.04, while the CNX Nifty was up by 69.90 points or 0.44% to 15,860.35. 

The BSE Sensex touched high and low of 52,973.07 and 52,614.49, 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 1.03%, while Small cap index was up by 0.40%.

The top gaining sectoral indices on the BSE were Metal up by 2.79%, Bankex up by 1.52%, Basic Materials up by 1.33%, Telecom up by 1.24% and Finance up by 1.24%, while Energy down by 1.78%, Utilities down by 1.04%, Oil & Gas down by 1.04%, Consumer Durables down by 0.69% and FMCG down by 0.49% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 4.65%, Axis Bank up by 3.02%, SBI up by 2.79%, ICICI Bank up by 2.34% and Maruti Suzuki up by 1.52%. On the flip side, Reliance Industries down by 2.28%, NTPC down by 1.69%, Hindustan Unilever down by 1.64%, Titan Company down by 1.41% and Asian Paints down by 1.30% were the top losers.

Meanwhile, attributing the rise in food prices to restrictions imposed by several states during April-May to deal with the second wave of Covid-19, Chief Economic Adviser (CEA) K V Subramanian has said food inflation is likely to moderate on account of the twin impact of opening up of economic activities and good monsoon. Moreover, he asserted that high food inflation has not impacted a large section of population as they are being given free ration under the Pradhan Mantri Garib Kalyan Yojana.

He said ‘Some of the increase in food inflation in the recent print has been because of the restrictions that have been placed...we even saw last year when the lockdown happened and the supply side was affected, impacting food inflation, which in turn then led to an impact on CPI inflation. So I think that's a contributing factor and given that now a lot of the restrictions are getting eased, I do expect that food inflation should moderate.’

The retail inflation for May breached RBI's upper tolerance limit of 6 per cent, putting pressure on both the central bank and government to cool down food prices. Earlier this month, the government reduced the tariff value for import of edible oil, including palm oil, by up to USD 112 per tonne. Besides easing of restrictions, he said, a good monsoon will also have a benign impact on food prices. Talking about the effect of rising petrol and diesel prices on retail inflation, he said it will not be significant as the weightage of fuel and light category in the Consumer Price Index (CPI)-based inflation is just 7.94 per cent.

The CNX Nifty traded in a range of 15,870.80 and 15,772.30 and there were 34 stocks advancing against 16 stocks declining on the index.    

The top gainers on Nifty were Tata Steel up by 4.68%, Axis Bank up by 3.00%, SBI up by 2.78%, ICICI Bank up by 2.36% and Hindalco up by 1.86%. On the flip side, Reliance Industries down by 2.28%, Hindustan Unilever down by 1.67%, NTPC down by 1.65%, Titan Company down by 1.52% and Asian Paints down by 1.29% were the top losers.

European markets were trading mostly in red; France’s CAC decreased 5.63 points or 0.08% to 6,625.52 and Germany’s DAX decreased 21.01 points or 0.13% to 15,568.22, while UK’s FTSE 100 increased 10.92 points or 0.15% to 7,120.89.

Asian markets ended with strong note on Friday tracked by strong finish on Wall Street bourses overnight following President Biden's bipartisan Senate infrastructure deal and the earlier dovish comments by Treasury Secretary Janet Yellen and Fed Chair Powell. Janet Yellen said inflation should retreat by year end from its current elevated level, while Powel reassured that the central bank is in no hurry to raise interest rates. Hong Kong shares closed higher following continued buying from mainland investors, who purchased a net 5-billion-yuan worth of Hong Kong shares on Friday.

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