Sensex turns green, Nifty nears 8,200; realty stocks surge

Benchmark indices open on a positve note but later pared gains to turn red on 1st session of 2017

In a volatile trade, benchmark indices pared lossed to turn green again on Monday, the first trading session of 2017 after the market ended year 2016 on a positive note.

Lending rate cuts by the two biggest PSU banks and Narendra Modi's announcement of new sops to boost low-cost housing ahead of the Union Budget affected the sentiment despite India's December manufacturing PMI dropping for the first time in a year.
 
Globally, markets in Japan, China, Hong Kong, Singapore, the US and the UK, among others, are closed for the day on account of New Year's Day.
 
At 2:21 pm, the S&P BSE Sensex was trading at 26,646, up 19 points, while Nifty50 was ruling at 8,195, up 9 points. 

Broader markets outperformed the headline indices with BSE Midcap and BSE Smallcap gaining 0.75% and 1.13%, respectively.
 
"The last couple of days’ rallies has been strong and is capable of continuation. But, being in the vicinity of internal trend line resistance at 8,235, upside conviction could get tested today. If 8,147 holds early slippages, potential for upsides may remain intact. But slippage past the same should work the other way round, and a break past 8,100 could be taken as a sell signal aiming 7,900-7,800 again," said Geojit BNP Paribas in a note.
 
On Friday, foreign investors turned net sellers with net sale value of Rs 585.6 crore, while domestic investors bought equities worth Rs 725.26 crore, provisional data available with BSE showed.
 
SECTORS AND STOCKS
 
Auto sales for the month of December were a mixed bag. Maruti Suzuki fell 0.75% after it reported lowest sales since June 2016. Auto sector index fell 0.11% on mixed auto sales reports in December. 
 
SBI fell 1.5%, was the biggest laggard on BSE Sensex after the PSU slashed its benchmark lending rates by 90 basis points a day after Prime Minister Narendra Modi asked banks to priorities their lending towards the poor and middle class.

All the banking stocks were trading in red after various banks announced the cut. ICICI Bank, PNB, Bank of Baroda fell between 0.8-1%.

Coal India was the biggest gainer on BSE Sensex followed by NTPC, Dr Reddy's, Cipla and Wipro.

All OMCs were gaining after the goverment hiked petrol and diesel prices yesterday. BPCL , HPCL, IOC rose between 0.8-1.4%.

Shares of real estate and cement companies were trading firm in otherwise weak market after Prime Minister Narendra Modi announced a slew of incentives to boost rural and urban housing post demonetization.

UltraTech Cement, Ambuja Cements, ACC, Dalmia Bharat, JK Lakshmi Cement, India Cements, Heidelberg Cement, Prism Cement and JK Cements from the cement sector and Oberoi Realty, DLF, Housing Development & Infrastructure (HDIL), NBCC, Godrej Properties, Indiabulls Real Estate and J Kumar Infra from the real estate were up in the range of 2%-5% on the BSE.

Eicher Motors has rallied 5% to Rs 22,851 on the BSE in intra-day trade, extending its four-session long gains, after the company reported a 42% jump in December motorcycle sales at 57,398 units. It had sold 40,453 units during the same month last year.

INDIA PMI FALLS

The Nikkei/Markit Manufacturing Purchasing Managers' Index fell to 49.6 in December from November's 52.3, its first reading below the 50 mark that separates growth from contraction since December 2015.

It was also the biggest month-on-month decline since November 2008, just after the collapse of Lehman Brothers triggered a financial crisis and brought on a global recession.

 
HOUSING BOOST BY MODI
 
Narendra Modi announced a series of incentives to the poor, farmers, women and small businesses on Saturday in a New Year's address, and defended his recent decision to abolish high denomination bank notes.
 
PM’s push towards low-cost housing is good news for the retail portfolio of banks and non-banking financial companies, which are struggling to boost their business amid economic slowdown.  In his address to the nation, Prime Minister Narendra Modi offered 4% interest rate subvention for home loans up to Rs 9 lakh and 3% interest relief for loans up to Rs 12 lakh. This captures a large portion of ‘affordable housing’ segment, defined as housing under Rs 25 lakh. This also falls under priority-sector lending for banks.

“The Prime Minister has effectively made the EMI cheque smaller than the rent cheque for the affordable housing segment - a tremendously positive announcement coming on the back of many directed steps to realise the "Housing for All" objective. This with the Credit Guarantee for SMEs will ensure small business owner and the middle class salaried customer will be able to achieve progress in their business and move out of rented homes to own their own house,” said Gagan Banga, VC and MD, Indiabullls Housing Finance Limited.
 
LENDING RATES FALL
 
The country’s largest bank State Bank of India (SBI) announced a steep interest rate cut in several years on Sunday, by reducing its marginal cost of funds based lending rate (MCLR) by 90 basis points (bps) across all maturities.
 
With this cut, SBI has passed on benefit of 200 bps since January 2015 to customers, which is more than 175 bps reduction in the Reserve Bank of India’s (RBI) policy rate cut in the same period.

Union Bank of India and Punjab National Bank also announced cuts ranging from 60 to 90 basis points.
 
GLOBAL MARKETS
 
After a late-year rally fueled by the U.S. election pushed stocks to surprising new peaks, investors are wary that the market could be primed for a spill to start 2017.
 
The benchmark S&P 500 is set to post a roughly 10% price gain for 2016 and around 12% on a total return basis, including reinvested dividends. That tops the single-digit increase expected by market participants polled by Reuters a year ago, with more than half of the advance coming after Donald Trump's Nov. 8 presidential victory.
 
The Dow Jones Industrial Average was on pace to rise more than 13% for 2016, with a total return above 16%.
 
While globally, Japan, China, Hong Kong, Singapore, the US and the UK, among others, will be closed for the day on account of New Year's Day.