Sen­sex ekes out small gains

Money Times - - Market Review - By Deven­dra A Singh

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.

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