Key benchmark indices hovered in positive zone in morning trade. At 10:18 IST, the barometer index, the S&P BSE Sensex, was up 115.96 points or 0.41% at 28,194.31. The Nifty 50 index was currently up 31.95 points or 0.37% at 8,715.10. Gains in Asian stocks aided the upmove on the domestic bourses. Asian stocks rose after upbeat US job data for July 2016.
The Sensex rose 148.03 points or 0.53% at the day's high of 28,226.38 in early trade, its highest level since 1 August 2016. The barometer index rose 76.14 points or 0.27% at the day's low of 28,154.49 in early trade. The Nifty rose 40.35 points or 0.46% at the day's high of 8,723.50 in early trade, its highest level since 16 April 2015. The index rose 16.95 points or 0.2% at the day's low of 8,700.10 in early trade.
The market breadth indicating the overall health of the market was strong. On BSE, 1,291 shares rose and 708 shares fell. A total of 77 shares were unchanged. The BSE Mid-Cap index was currently up 0.39%, underperforming the Sensex. The BSE Small-Cap index was currently up 0.58%, outperforming the Sensex.
In overseas stock markets, Asia markets were trading higher with sentiment underpinned by a stronger-than-expected US jobs report released on Friday, 5 August 2016. The US economy is the world's largest economy. In Japan, the Nikkei 225 index was up 2.12% as the yen weakened amid the dollar's broad strength driven up upbeat job data. Chinese shares shrugged off weak trade data. In mainland China, the Shanghai Composite was currently up 0.26%. In Hong Kong, the Hang Seng index was currently up 1.24%. China's exports continued to fall in dollar terms in July 2016 from a year earlier, as global demand for goods from the world's second-largest economy remained sluggish. Exports slid 4.4% in July 2016 from a year earlier, following a decline of 4.8% in June 2016. Imports fell 12.5% in July 2016, compared with an 8.4% decrease in June 2016.
US stocks edged higher during the previous trading session on Friday, 5 August 2016, with the S&P 500 index and the Nasdaq Composite index settling at all-time closing highs, after a stronger-than-expected jobs report. The US economy added 255,000 jobs in July 2016, which follows a stellar gain in June, demonstrating that the economy is still healthy, despite relatively muted gross domestic product. The unemployment rate was unchanged at 4.9% even as the labor-force participation rate edged up to 62.8%, suggesting the labor market is tightening.
Metal and mining stocks rose on renewed buying. Vedanta (up 1.72%), JSW Steel (up 0.73%), Tata Steel (up 0.58%), Steel Authority of India (Sail) (up 1.25%), National Aluminium Company (up 1.42%), Hindustan Zinc (up 1.03%), Jindal Steel & Power (up 1.39%) and NMDC (up 0.78%) rose. Hindustan Copper shed 0.08%.
Hindalco Industries jumped 5.35% to Rs 151.50. The stock hit a high of Rs 151.90 in intraday trade so far, which is 52-week high for the counter. The stock hit a low of Rs 145.70 so far during the day.
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Copper edged higher in the global commodities market. High Grade Copper for September 2016 delivery was currently up 0.93% at $2.174 per pound on the COMEX.
Auto stocks gained. Tata Motors (up 0.35%), Maruti Suzuki India (up 0.87%), TVS Motor Company (up 1.09%), Eicher Motors (up 0.15%) and Ashok Leyland (up 0.45%) gained. Mahindra & Mahindra (M&M) shed 0.07%.
Hero MotoCorp gained 0.72% ahead of its Q1 June 2016 results today, 8 August 2016.
Bajaj Auto rose 1.54% to Rs 2,904. The stock hit a high of Rs 2,917.40 in intraday trade so far, which is record for the counter. The stock hit a low of Rs 2,874.95 so far during the day.
Meanwhile, the amendments made by Rajya Sabha in the constitutional amendment bill on Goods and Services Tax (GST) will be taken up for its passage by the Lok Sabha this week. The amended GST constitutional amendment bill was passed by the Rajya Sabha last week. The passage of the constitutional amendment bill in the Rajya Sabha kicks off a legislative marathon in which both the central and state governments will need to pass further laws setting the rate and scope of the GST. The government plans to implement the nationwide GST from 1 April 2017.
The main objective of the GST is to eliminate excessive taxation. GST is a uniform indirect tax levied on goods and services across a country. The measure would harmonize 11 state and central levies into a national sales tax, reducing business transaction costs.
On the macro front, the government in consultation with the Reserve Bank of India (RBI) has notified consumer price inflation target of 4% with upper tolerance level of 6% and lower tolerance level of 2% to be achieved by the Reserve Bank of India (RBI). The government notified the inflation target range of 2% to 6% in the Official Gazette on Friday, 5 August 2016 and it will be valid until 31 March 2021. The inflation target is to be fixed by the central government in consultation with the RBI once in every five years. According a statement from to the finance ministry, the key advantage of a range around a target is that it allows the Monetary Policy Committee (MPC) to recognise the short run trade-offs between inflation and growth but enables it to pursue the inflation target in long run over the course of business cycle. The range also accommodates data limitations, projection errors, short-run supply gaps and instability in the agriculture production, an important factor for CPI inflation, as food articles have a major weight in the CPI indices. It also allows to accommodate unanticipated short-term shocks even while nudging public inflation expectations on the centre of the range, to which the monetary policy will return the economy over the medium term, leading to transparency and predictability.
If the average inflation is more than the upper tolerance level of 4% + 2%, that is, 6%, or less than the lower tolerance level of 4% - 2%, that is 2%, for any three consecutive quarters, it would mean a failure to achieve the inflation target. Where RBI fails to meet the inflation target, in terms of the provisions of RBI Act, it shall set out a report to the Central Government stating the reasons for failure to achieve the inflation target, remedial actions proposed to be taken by RBI and an estimate of the time-period within which the inflation target shall be achieved pursuant to timely implementation of proposed remedial actions.
The government has initiated the process of shifting to a framework of Monetary Policy Committee (MPC) for deciding interest rates. RBI currently sets the rates. The RBI is set to announce monetary policy decision at 11:00 IST tomorrow, 9 August 2016, after a policy review.
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