Sensex ekes out small gains
The BSE Sensex advanced 71.38 points to settle at 31,596.06 and the CNX Nifty closed at 9,857.05 up 19.65 points for the week ending Thursday, 24 August 2017.
On the macro-economic front, the Consumer Index or retail inflation quickened to 2.36% in July 2017 compared to 1.46% in June 2017 as a decline in food prices slowed sharply. The July inflation number is higher than the market’s expectation.
Indian companies raised $1.89 billion from overseas markets last month, 57.5% more than a year ago, the Reserve Bank data showed. They had, in comparison, borrowed $1.20 billion from overseas markets in July 2016. The RBI data showed that $1.24 billion was raised via the automatic route last month while the rest of $650 million came through the approval route.
Rural Electrification Corporation adopted the ECB approval route to raise $450 million and $200 million in separate tranches of 10 years and 5 years respectively for the purpose of on-lending.
As for the automatic route, Hindustan Petroleum Corporation raised $500 million for modernization of project, while Reliance Utilities and Power garnered $300 million for refinancing of earlier ECB.
Besides, Idea Cellular raised $155.08 million for refinancing an earlier ECB, while Export-Import Bank of India borrowed $75 million for sub-lending. According to a report by Morgan Stanley, India’s forex reserves are expected to hit $400 billion by September 2017 driven by robust capital inflows and weak credit off-take. Indian forex reserves are at an all-time high and have risen at the fastest pace since 2015, says Morgan Stanley. As of August 4, forex reserves hit a record high of $393 billion. If the pace of forex reserves is similar to that of the past four weeks, forex reserves would hit $400 billion by 8 September 2017. The gain in India’s forex reserves has been one of the strongest within the Asia, ex-Japan region, over the past 12 months.
The report however, noted that as capital flows remained buoyant it would put appreciation pressures on the Rupee and could lead to excess liquidity, which in turn would create challenges for the Reserve Bank of India (RBI) to manage its monetary policy.
However, the RBI is not likely to cut policy rates and lower real rates to prevent further currency appreciation as the central bank is following a flexible inflation targeting regime, the report said. Hence, RBI monetary policy will only take into account the impact of currency appreciation on inflation into its policy decision rather than tackle currency appreciation per se, it said.
The RBI has already intervened in the currency markets in both the spot and forward markets to the tune of $3 billion and $17 billion respectively as of June 2017. The report noted that as the excess liquidity challenge looks set to persist, the RBI will need more tools to manage the excess liquidity.
This was primarily due to the absence of big ticket transactions this month. As compared to June 2017, deal activity in July 2017 remained stable with 2% increase in deal values, while volumes remained muted, the report said. The advent of GST last month appears to have kept deal makers busy with transactions declining y-o-y to $1.6 billion across 93 deals, the report said.
Tepid M&A activity led to an over 67% y-o-y decline in deal values, while slow traction in P/E investment volumes led to deal volumes declining by over 30%.
In a couple of months, we should see an M&A bounce back. Cross-border continues to be on a decline because instead of outbound the focus seems to have shifted to domestic activity and inbound is further delayed because of GST implementation, the report added.
As per the report, during July 2017, banking sector led the deal activity by contributing over 26% of total deal value. Increasing consolidation drove deal volumes in the start-up sector capturing 25% of volumes with the highest activity witnessed in the enterprise application and infrastructure space, it said.
Key index dipped on Monday, 21 August 2017 on selling of stocks. The Sensex plunged 265.83 points (-0.84%) to settle at 31,258.85.
Key index registered modest gains on Tuesday, 22 August 2017 on fresh buying. The Sensex was up 33 points (+0.11%) to settle at 31,291.85.
Key index gained on Wednesday, 23 August 2017 on further buying of stocks. The Sensex ended higher 276.16 points (+0.88%) to close at 31,568.01.
Key index edged up on Thursday, 24 August 2017. The Sensex was up 28.05 points (+0.09%) to close at 31,596.06. Indian stock markets remained closed on Friday, 25 August 2017, on account of Ganesh Chaturthi.