Post Session: Quick Review

Indian markets ended the first day of August F&O series at record high levels, as traders opted for value buying at lowest levels. Markets’ mood remained upbeat throughout the session and their appeared not even an iota of profit booking, as investors continued hunting fundamentally strong stocks. The market dismissed all concerns relating to elections and the Budget. All the sectoral indices on the BSE ended in green on Friday. Now, traders were braced for HSBC Manufacturing PMI Final. 

Bourses made positive start and remained in green as signs of cooling inflation in the world's largest economy, US, boosted hopes for Fed rate cuts. Domestically, traders took encouragement as Reserve Bank of India Deputy Governor M Rajeshwar Rao said Indian financial system looks stronger than in the past and the country's economy is an outlier even as strong headwinds globally. Investors continue keeping close eye on earning reactions. Some support also came with DIPAM Secretary Tuhin Kanta Pandey's statement that the focus of the government will be to improve the performance of CPSEs with a view to maximise wealth creation and not to push disinvestment just to meet targets. He said the market capitalisation of 77 listed public sector entities, which include banks, insurance companies and Central Public Sector Enterprises (CPSEs), has jumped 4 times in the last three years to about Rs 73 lakh crore. In afternoon session, indices sustained their gaining momentum, as investors continued to hunt for fundamental strong stocks. Sentiments remained upbeat, as the government eased certain norms for licence holders of the Export Promotion Capital Goods scheme as part of its ease of doing business efforts. The EPCG scheme facilitates import of capital goods for producing quality goods and services and enhances India's manufacturing competitiveness. It allows import of capital goods for pre-production, production and post-production at zero customs duty. In late afternoon session, markets reached at day’s high levels and ended with gains of over one and half a percent.

On the global front, European markets were trading higher as strong U.S. GDP growth and signs of cooling inflation paved the way for the Federal Reserve to cut interest rates soon. Earlier this week, a former Fed hawk said waiting for September to cut rates 'unnecessarily increases the risk' of recession. Asian markets ended mixed as strong U.S. GDP data and cooling inflation suggested a soft landing is in sight for the world's largest economy. Back home, the Automotive Component Manufacturers Association of India (ACMA) has said that the turnover of India’s automotive component industry registered a growth of 9.8 per cent to Rs 6.14 lakh crore in the financial year 2023-24 (FY24).

The BSE Sensex ended at 81,332.72, up by 1292.92 points or 1.62% after trading in a range of 80,013.60 and 81,427.18. There were 29 stocks advancing against 1 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index gained 2.12%, while Small cap index was up by 1.00%. (Provisional)

The top gaining sectoral indices on the BSE were Telecom up by 3.36%, Metal up by 3.19%, TECK up by 2.76%, Auto up by 2.35% and Basic Materials was up by 2.26%. (Provisional)

The top gainers on the Sensex were Bharti Airtel up by 4.25%, Adani Ports &Special up by 3.61%, Tata Steel up by 3.27%, JSW Steel up by 2.96% and Infosys up by 2.93%. On the flip side, Nestle down by 0.07% were the top losers. (Provisional)

Meanwhile, expressing optimism over India’s financial system, Reserve Bank of India Deputy Governor M Rajeshwar Rao has said that Indian financial system looks stronger than in the past and the country's economy is an outlier even as strong headwinds globally. He also highlighted that India has achieved the highest climate change performance index (CCPI) score among G20 members in 2024, which reflects the country's unwavering commitment to this cause. He said ‘This also shows that by aligning economic policies with climate action, we can spur green investments, enhance energy efficiency, and foster sustainable development across the sectors’.

Rao said the global financial system is facing strong headwinds from various quarters, including high levels of public debt, stretched asset valuations, economic and financial fragmentation, geopolitical tensions, and risks arising from increasing cyber threats. He added ‘Amidst these global challenges, the Indian economy is an outlier which shows strong macroeconomic fundamentals. Economic activity is growing steadily, supported by a financial system that looks stronger than in the past’. He further said the Indian banking sector, in particular, has demonstrated significant improvement in key metrics such as capital adequacy, asset quality, and profitability, supported by robust macroeconomic fundamentals and business confidence. There has been sustained growth in credit expansion, primarily driven by personal loans and loans to services sector.

He said ‘however, despite the financial system exhibiting strong performance and healthy financials, as a regulator and supervisor, we need to remain vigilant to the risks on the horizons. We have been flagging our concerns on strong credit growth in certain segments of unsecured retail loans. Increase in use of technology has also increased threat of cyber risks’. On climate risks and the leadership challenge, he said from an Indian perspective, the country's diverse topography, with snow-clad mountains, fertile plains, deserts and a long coastline with different temperature and precipitation patterns, generates diverse set of risks with attendant challenges for growth and inflation.

The agricultural sector, heavily reliant on monsoon rains, plays a critical role in India's economy and food security. The El Nino event of 2023-24 exemplifies this vulnerability, leading to hotter summers, reduced productivity, inadequate monsoons affecting reservoir levels, and lower agricultural production. He said these factors have cascading effect on inflation due to food price fluctuations. An added element is the dependence on agriculture that has bearing on their spending patterns and resultantly impact the country's growth. He said ‘Climate-related events also adversely impact the credit quality and loan-repayment capabilities of the borrowers. They can wipe out the assets created from institutional finance thereby impacting health of financial institutions’.

The CNX Nifty ended at 24,834.85, up by 428.75 points or 1.76% after trading in a range of 24,410.90 and 24,861.15. There were 48 stocks advancing against 2 stocks declining on the index. (Provisional)

The top gainers on Nifty were Shriram Finance up by 9.18%, Divi's Lab up by 5.36%, Cipla up by 5.00%, Bharti Airtel up by 4.50% and Apollo Hospital up by 4.37%. On the flip side, ONGC down by 1.25% and Nestle down by 0.15% were the top losers. (Provisional)

European markets were trading higher; UK’s FTSE 100 increased 51.92 points or 0.63% to 8,238.27, France’s CAC rose 60.55 points or 0.82% to 7,487.57 and Germany’s DAX was down by 34.62 points or 0.19% to 18,333.34. 

Asian markets settled mixed on Friday after data showed the US economy grew at an estimated 2.8% annual rate from April through June, double the rate from the prior quarter, while investors were awaiting the release of the PCE index and the Fed's policy meeting next week. Japanese shares declined, and the yen stabilized near a 12-week high against the US dollar ahead of next week's Bank of Japan policy meeting, where a 10-bps interest rate hike may be on the table. Taiwan shares tumbled as markets reopened from a two-day typhoon market closure.