Markets start Samvat 2076 on a positive note; Sensex gains 192 points

Samvat 2076 started on a positive note for the equity markets with the benchmark Sensex ending the ceremonial one-hour-long trading session with a gain of nearly 200 points on Sunday. Across-the-board buying was seen with the broader market mid- and small-cap indices outperforming the benchmarks. After gaining as much as 344 points, the Sensex settled at 192 points, or 0.5 per cent, higher at 39,250, while the Nifty 50 index logged gains of 0.38 per cent, or 44 points, to end at 11,628.

A lot of individual stocks witnessed high trading activity, reacting to news flow over the weekend. Shares of Tata Motors rallied 16.5 per cent, the most among Sensex components, buoyed by promoter Tata Sons’ decision to infuse Rs 6,500 crore into the company by way of rights issue.

YES Bank gained 5 per cent — extending the monthly gain to 70 per cent — to end at Rs 55. Shares of Reliance Industries ended with gains of only 0.24 per cent even as the company announced the plan to make its telecom venture Jio debt-free by transferring liabilities of Rs 1.08 trillion to a new entity.

The move is seen as a precursor to listing Jio. Shares of Infosys gained nearly 2 per cent as concerns around corporate governance lapses eased. Overall, 23 Sensex stocks ended with gains and only eight ended with losses.

On the BSE, the advance-decline ratio was three-to-one in favour of the gainers.

The Nifty Midcap 100 and Smallcap 100 added 0.64 per cent and 1.22 per cent, respectively. The outperformance triggered hopes among investors present at the BSE that the New Year could lead to a reversal in prospects of stocks outside the large-cap universe. In Samvat 2075, the small index had hugely underperformed the Sensex, with the former dropping 10 per cent and the latter gaining 12 per cent. “After tough two years, we will have a much broader-based rally this year,” said Ramesh Damani, member, BSE.

The return expectations remain modest stepping into the new Hindu calendar year.

“The markets are likely to remain range-bound in near term till economic recovery is visible. The economy and earnings are showing early signs of improvement as we step into new Samvat,” said Motilal Oswal, managing director and chief executive officer, Motilal Oswal Financial Services.

During mid-September, the benchmark indices had dropped to seven-month lows amid concerns over low economic growth, corporate defaults and stress in the financial sector. However, the surprise reduction in corporate tax proved to be a short in the arm for the markets. Currently, the Sensex is only 2.5 per cent of its previous all-time highs of 40,268 made in early June. “In spite of all the issues, the market is near the all-time highs, which suggests many believe a turnaround is around the corner. There are expectations of a pick-up in the economy, supported by adequate rainfall and steps taken by the government to revive growth,” said U R Bhat, director, Dalton Capital India.

Many believe more bold steps are needed. “The key driver for the markets domestically over the next 12 months will be the privatisation of public sector units,” said Damani.

“Leading up to the budget, the markets could be buoyant because there is a hope in markets that the government is understanding of its problems and will do the needful to address the concerns,” he added.

Shares of many state-owned companies have been gaining in recent months of hope of some government action.

Also, global factors will be big drivers. “The other significant factor is foreign flows which will depend on how the trade wars develop and how the crisis in the middle-east pans out,” said Bhat.

Street thumbs up to RIL’s ‘debt-free Jio’

The Reliance Industries (RIL) stock gained 0.4 per cent in Mahurat trading, as the Street cheered the company’s plans of a new structure that will make its telecom arm Reliance Jio debt-free, which could be followed by its potential listing. Sunday’s reaction was the first following Friday's announcement.

As part of the plan, RIL will transfer its telecom business and other digital initiatives to a wholly-owned subsidiary. While Jio’s debt — worth Rs 1.08 trillion — will move to RIL, the ownership of all telecom and digital businesses will be transferred to the arm.

The latter will receive Rs 1.08 trillion in investment from RIL as well as its Rs 65,000-crore equity holding in Jio. RIL’s consolidated debt will remain unchanged.