Financials rally triggers Indian markets to garner notable gains

A financials rally triggered Indian equity markets to garner notable gains on Tuesday, with further support from positive global cues, bolstered by expectations that US Fed Chair Jerome Powell will provide clear signals on the potential size of a rate cut in September during the upcoming Jackson Hole Symposium this week. The start of the day was on a positive note, after the latest data released by the Reserve Bank of India (RBI) showed that net foreign direct investment (FDI) during the April-June period of the current financial year was $6.9 billion, compared to $4.7 billion in the year-ago period. The increase was due to an improvement in gross inward FDI, which grew by 26.4 per cent year-on-year (Y-o-Y) to $22.5 billion during Q1 of 2024-25. 

Firm trade persisted over the Dalal Street till the end, as domestic sentiments remained upbeat with the RBI’s latest monthly Bulletin stating that in India, aggregate demand conditions are gathering momentum with revival in rural consumption on the back of growing incomes. This stimulus to demand is expected to reinvigorate the hitherto subdued participation of the private sector in total investment. Headline inflation moderated from its spike in June to 3.5 per cent in July, but this was primarily due to the downward statistical pull of base effects. Besides, Finance minister Nirmala Sitharaman asked public sector banks, or PSBs, to make concerted efforts to mobilise deposits by conducting special drives to sustainably fund credit growth.

On the global front, European markets were trading mostly in green, as Italy's current account surplus increased in June from the previous year. The Bank of Italy reported that the current account surplus rose to EUR 4.88 billion from EUR 1.24 billion last year. The goods trade surplus increased to EUR 5.44 billion from EUR 4.01 billion. Data showed that the service surplus rose to EUR 989 million from EUR 466 million. Asian markets settled mostly higher on Tuesday, even after China's central bank left its benchmark lending rates unchanged after cutting the rates unexpectedly by 10 basis points last month. The People's Bank of China kept its one-year loan prime rate unchanged at 3.35 percent. Similarly, the five-year LPR, the benchmark for mortgage rates, was retained at 3.85 percent. 

Back home, metal & mining sector stocks were in focus as Fitch Ratings said Indian metal and mining companies' operating costs are likely to rise significantly if state governments impose additional mining taxes in the wake of a Supreme Court ruling. Besides, airline stocks were also in watch, as the Directorate General of Civil Aviation (DGCA) in its latest data has showed that India's domestic air passenger traffic grew 7.3 per cent to 129.87 lakh in July 2024 from 121 lakh in the same month last year. However, the air traffic in July was lower compared to 132.06 lakh people carried by the domestic airlines in June this year. 

Finally, the BSE Sensex jumped 378.18 points or 0.47% to 80,802.86, and the CNX Nifty was up by 126.20 points or 0.51% to 24,698.85.    

The BSE Sensex touched high and low of 80,942.96 and 80,517.95 respectively. There were 24 stocks advancing against 6 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index gained by 0.98%, while Small cap index was up by 0.52%.

The top gaining sectoral indices on the BSE were Utilities up by 1.07%, Bankex up by 0.84%, Power up by 0.80%, IT up by 0.76% and Auto up by 0.75%, while Capital Goods down by 0.01% and FMCG down by 0.01% were the only losing indices on BSE.

The top gainers on the Sensex were Bajaj Finserv up by 3.25%, Indusind Bank up by 2.29%, Tech Mahindra up by 2.12%, Bajaj Finance up by 1.57% and Kotak Mahindra Bank up by 1.42%. On the flip side, Bharti Airtel down by 1.37%, ITC down by 0.46%, Adani Ports & SEZ down by 0.27%, JSW Steel down by 0.21% and Ultratech Cement down by 0.16% were the top losers.

Meanwhile, CRISIL Ratings in its latest report has said that India’s aim to blend 20 per cent ethanol in petrol by Ethanol Supply Year (ESY) 2025 or around 990 crore litre annually, will require effective utilisation of both grain and sugarcane feedstock to increase its supply. This will also help optimise sugar inventory, particularly considering the high carry-over stock expected at the end of the current season owing to the government restriction on diversion for ethanol production and exports.

As per the report, annual ethanol production from grains is expected to witness a significant increase to approximately 600 crore litre by the next season. This season’s production estimate is around 380 crore litre. The balance will have to be produced by processing ethanol from sugarcane, which is viable given the substantial capacity in place. Blending ethanol helps reduce India’s dependence on crude oil imports. The ethanol blending rate has steadily risen 200-300 basis points each season since ESY 2021. While grain utilisation for producing ethanol is not controlled, the government determines the quantum of sugarcane utilisation based on its estimation of demand-supply balance of sugar for the year ahead.

The report stated that the sugarcane production this year is expected to have been impacted by last year’s erratic rainfall. Consequently, ethanol production from the sugarcane route is expected to be restricted to around 250 crore litre (equivalent of 2.5 million tonne of sugar) this season. In the upcoming season 2025, gross sugar production is expected to be around 33.5 million tonne, with consumption at around 29.5 million tonne. Additionally, sugar inventories are projected to be healthy by the end of this season. Hence, allowing sugarcane - equivalent to the quantity required to produce 4 million tonne of sugar - for ethanol supply (around 390 crore litre) can be considered, while the larger remaining share will be sourced from grain-based route.

The CNX Nifty traded in a range of 24,734.30 and 24,607.20. There were 39 stocks advancing against 11 stocks declining on the index.

The top gainers on Nifty were SBI Life Insurance up by 5.37%, HDFC Life Insurance up by 3.63%, Bajaj Finserv up by 3.29%, Shriram Finance up by 2.74% and Indusind Bank up by 2.50%. On the flip side, ONGC down by 1.55%, Bharti Airtel down by 1.39%, Adani Enterprises down by 1.03%, Cipla down by 0.80% and Apollo Hospital down by 0.77% were the top losers.

European markets were trading mostly in green; France’s CAC rose 11.6 points or 0.15% to 7,513.61 and Germany’s DAX gained 2.13 points or 0.01% to 18,423.82, while UK’s FTSE 100 decreased 54.49 points or 0.65% to 8,302.45.

Asian markets settled mostly higher on Tuesday tracking Wall Street’s gains overnight on dovish Fed expectations. In recent days, Fed speakers have signalled a potential easing in September. Meanwhile, investors were awaiting minutes of the Federal Reserve's July policy meeting and a speech from Chair Jerome Powell at Jackson Hole for more cues on the possibility of an interest rate cut in the September policy meeting. Japanese shares gained followed by a softer yen and gains in technology shares following US economic optimism. However, Chinese shares declined after the People's Bank of China left its benchmark lending rates unchanged as expected.