The Nifty continued its upward streak by gaining 1.14 percent to close the week at 10,390, supported by heavyweights like Infosys, RIL, HDFC Bank and ITC.
Market sentiment was boosted by important announcements by the government such as amendments to the Insolvency and Bankruptcy Code and conferring infrastructure status to logistics companies, and the telecom regulator’s recommendation for easing of spectrum holding norms. Moody’s upgrade of India’s sovereign rating and expectations of an S&P upgrade also kept the mood cheerful.
However, FIIs went on a selling spree again, offloading equities worth 18.7 billion rupees during the week. The rupee managed to hold on to its gains against the dollar as sentiment remained upbeat due to Moody’s upgrade.
Crude oil prices traded near two-year highs after a shutdown of the largest crude pipelines from Canada cut supply to the U.S. Market participants are looking forward to the OPEC meeting next week, where the cartel is expected to extend its production cut agreement with Russia and others. Russian oil companies are, however, objecting because higher crude prices are helping U.S. shale oil companies add production and gain market share.
Minutes of the U.S. central bank’s last policy meeting showed its members are largely optimistic about the economy, and expect that interest rates will have to be raised in the “near term”.
FMCG stocks were under the radar after the Board of Excise and Customs (CBEC) asked companies to revise their MRP list in line with the rate cut under GST. HUL, Godrej Consumer, Dabur and a few others reduced prices of their products by 5-10 percent.
The GST Council, in its 23rd meeting held on Nov 10, slashed tax rates for about 200 products, including 178 that fell in the highest tax bracket of 28 percent. The government expects input tax credit, the hallmark of GST, to result in reduction in cost of production, which in all fairness must be passed on to customers.
Telecom stocks were also in focus after TRAI’s recommendations to ease spectrum holding norms for telcos boosted investor confidence. This is expected to ease the ongoing consolidation in the sector by reducing the number of telecom operators in a service area.
Additionally, service providers are now free to use any technology of their choice in any band or using multiple bands. These recommendations, if accepted, are likely to provide relief to Idea Cellular and Vodafone in light of their impending merger. It is also expected to facilitate the acquisition of Reliance Communications’ spectrum by suitors like Reliance Jio.
In another development, the cabinet approved amendments to the insolvency and Bankruptcy Code to prevent its misuse. The move is expected to prevent wilful defaulters and promoters from buying stressed assets.
Cement makers were under pressure after the Supreme Court asked all states and union territories to consider prohibiting the use of pet coke and furnace oil by industries, stating that it was a cause of pollution not only for the National Capital Region (NCR) but the entire country.
It has already banned use of the fuel in Uttar Pradesh, Haryana and Rajasthan. Another setback came after the government said it is considering banning import of pet coke. Most cement companies have switched from coal to pet coke in the past few years given the cost advantage. On an average, more than 70 percent of the fuel requirement of cement makers is met through pet coke.
The government launched a draft of the new bio-ethanol policy that will promote production of bio-ethanol from lignocellulosic biomass, as against the conventional approach of using molasses to produce ethanol for India’s Ethanol Blending Programme (EBP). This is positive for Praj industries, a leader in ethanol technology.
Shares of logistics players like Allcargo Logistics, Blue Dart Express and TCI Express rose after the government granted infrastructure status to strengthen country’s logistic sector, which is likely to enable logistics companies to avail infrastructure lending at easier terms with enhanced limits.
On the macro front, the government is set to announce GDP data for Q2 FY18 on Thursday. The data will be of particular importance after growth had unexpectedly slowed to 5.7 percent in Q1 FY18, the slowest pace in three years. This was mainly attributed to the disruption caused by uncertainty related to the rollout of GST and the economic shock caused by demonetisation.
Another important macro data scheduled to be released on Thursday is IIP numbers for the month of October. Manufacturing PMI for November will be announced on Friday.
Meanwhile, the winter session of parliament will be held from December 15 to January 5, where three bills will be taken up to replace three ordinances - The Goods & Services Tax (Compensation to States) Ordinance, 2017, Insolvency & Bankruptcy Code (Amendment) Ordinance, 2017 and Indian Forest (Amendment) Ordinance, 2017.
After Moody’s surprised the market with an upgrade, all eyes were on S&P. However, the rating agency kept India’s ratings unchanged at BBB- with a “stable” outlook, although it lauded India’s fiscal consolidation drive and has favourable view on reforms undertaken.
Markets could witness a knee-jerk reaction on Monday as traders were expecting an upgrade from S&P. However, the next big trigger would be the Gujarat election, which may not be a cakewalk for the ruling BJP.