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Benchmarks make optimistic start on good macro economic data

Extending previous session’s rally, Indian equity benchmarks have made an optimistic start and are trading  in fine fettle with frontline gauges recapturing their crucial 32,300 (Sensex) and 10,100 (Nifty) levels, as traders took encouragement from double dose of good economic news. While India's industrial production grew at a nine-month high of 4.3 percent in August due to good performance of mining, electricity and capital goods sectors, the retail inflation declined to 3.28 percent in September, compared to 4.39 percent during the same month last year and 3.36 percent in the previous month. Adding to the optimism, the International Monetary Fund lauding government’s recent efforts to lower the compliance burden under the Goods and Services Tax, but it also said that efforts should also be made to lower the tax slabs and minimise exemptions.

Global cues too remained supportive with Asian markets trading mostly in green at this point of time, as traders opted for value buying after a sluggish start. The US markets turned modestly lower in the last session after showing a lackluster performance, and the major averages pulled back off yesterday's record closing highs.

Back home, telecom stocks are ringing loud, as the Tata Group has agreed to sell its mobile business to Bharti Airtel for free, on a 'debt-free, cash-free basis, intensifying the consolidation process underway in the telecom industry. However, power stocks remained under pressure despite the Minister of State (Independent Charge) for Power and Renewable Energy, R K Singh stating that India’s energy needs are going to double in the next 6-7 years at the present rate of growth of the economy.

The BSE Sensex is currently trading at 32360.71, up by 178.49 points or 0.55% after trading in a range of 32247.74 and 32398.17. There were 21 stocks advancing against 10 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.26%, while Small cap index was up by 0.44%.

The top gaining sectoral indices on the BSE were Telecom up by 4.69%, TECK up by 1.39%, Metal up by 1.05%, IT up by 0.78% and Bankex was up by 0.68%, while FMCG down by 0.34%, Realty down by 0.13%, Utilities down by 0.03% and Power was down by 0.02% were the few losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 7.10%, Tata Steel up by 2.19%, TCS up by 1.39%, ICICI Bank up by 1.27% and HDFC Bank up by 1.03%. On the flip side, ITC down by 0.60%, NTPC down by 0.57%, Dr. Reddys Lab down by 0.57%, Sun Pharma down by 0.55% and Adani Ports down by 0.30% were the top losers.

Meanwhile, in a positive surprise, India’s industrial production growth accelerated to a nine-month high of 4.3% in August as against 4% in the same month previous year and 1.2% in July 2017, as companies stepped up production to restock warehouses ahead of the festival season after they reduced output in June and July, owing to uncertainties regarding implementation of the goods and services tax (GST). Robust performance of mining and power sectors coupled with higher capital goods output also supported the growth. The previous high in IIP growth was recorded at 5.7% in November 2016.

As per the data released by the Central Statistics Office of the Ministry of Statistics and Programme Implementation, Index of Industrial Production (IIP) with base 2011-12 for the month of August 2017, stood at 121.5, which is 4.3% higher as compared to the level in the month of August 2016. The cumulative growth for the period April-August 2017 over the corresponding period of the previous year stood at 2.2%.

On the sectoral basis however, the output growth in manufacturing sector, which constitutes 77.63% of the index, decelerated to 3.1% in August as compared to 5.5% in the same month last year, while the output of the mining and electricity sectors jumped to 9.4% and 8.3% from (-) 4.3% and 2.1%, respectively in August last year. The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of August 2017 stood at 92.7, 123.3 and 155.4 respectively. The cumulative growth in these three sectors during April-August 2017 over the corresponding period of 2016 has been 3.3%, 1.6% and 6.2% respectively.

As per Use-based classification, the growth rates in August 2017 over August 2016 are 7.1% in Primary goods, 5.4% in Capital goods, (-) 0.2% in Intermediate goods and 2.5% in Infrastructure/ Construction Goods.  The Consumer durables and Consumer non-durables have recorded growth of 1.6% and 6.9% respectively.

In terms of industries, 10 out of the 23 industry groups in the manufacturing sector showed positive growth during the month of August 2017 as compared to the corresponding month of the previous year. The industry group ‘Manufacture of computer, electronic and optical products’ showed the highest positive growth of 24.9% followed by 16.5% in ‘Manufacture of pharmaceuticals, medicinal chemical and botanical products’ and 11.1% in ‘Manufacture of other transport equipment’. On the other hand, the industry group ‘Manufacture of furniture’ showed the highest negative growth of (-) 16.0% followed by (-) 15.1% in ‘Manufacture of tobacco products’ and (-) 11.4% in ‘Printing and reproduction of recorded media’.

The CNX Nifty is currently trading at 10148.50, up by 52.10 points or 0.52% after trading in a range of 10120.10 and 10161.05. There were 34 stocks advancing against 16 stocks declining on the index.

The top gainers on Nifty were Bharti Airtel up by 7.03%, Bharti Infratel up by 3.89%, Tata Steel up by 2.31%, Ultratech Cement up by 1.56% and TCS up by 1.44%. On the flip side, ITC down by 0.73%, Dr. Reddys Lab down by 0.68%, BPCL down by 0.68%, NTPC down by 0.68% and Sun Pharma down by 0.66% were the top losers.

Asian markets were trading mostly in green; KOSPI Index rose 0.1 points to 2,474.86, Shanghai Composite increased 5.06 points or 0.15% to 3,391.16, Hang Seng gained 9.73 points or 0.03% to 28,468.76, Jakarta Composite added 11.8 points or 0.2% to 5,938.00 and Nikkei 225 was up by 226.57 points or 1.08% to 21,181.29.

On the flip side, Taiwan Weighted decreased 23.73 points or 0.22% to 10,687.71 and FTSE Bursa Malaysia KLCI was down by 0.96 points or 0.05% to 1,753.04.

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