Sensex, Nifty edge higher as easing trade tensions spur risk appetite; Tata Motors rallies nearly 4%, Bharti Airtel in red

Shares rose on Friday, led by gains in metal, banks and auto stocks, as trade tensions between the United States and China eased, boosting risk appetite. The BSE Sensex jumped over 250 points on Friday led by global euphoria over progress in US-China trade and likely Conservative Party win in UK general elections. After rising 284 points in early session, the 30-share index was trading 244.04 points or 0.60 percent higher at 40,825.75, according to a PTI report. Similarly, the broader Nifty was trading 66.20 points or 0.55 percent up at 12,038.

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Tata Motors was the top gainer in the Sensex pack rallying up to 3.78 percent, followed by Vedanta, Yes Bank, Tata Steel, SBI, M&M, Axis Bank and RIL.

On the other hand, Bharti Airtel was the top loser, shedding up to 0.59 percent. Asian Paints, Kotak Bank, Bajaj Auto and Sun Pharma were also trading in the red.

In the previous session, the 30-share gauge ended 169.14 points, or 0.42 percent, higher at 40,581.71, while the Nifty settled 61.65 points or 0.52 percent, up at 11,971.80.

However, in the domestic market, increasing food inflation and weak factory output data capped the gains in benchmark indices.

Rising food prices pushed the retail inflation in November to over a three-year high of 5.54 percent, while the industrial sector output shrank for the third month in a row by 3.8 percent in October, indicating a deepening slowdown in the economy, government data showed on Thursday.

On a net basis, foreign institutional investors sold equities worth Rs 683.83 crore, while domestic institutional investors bought shares worth Rs 810.23 crore, data available with the stock exchange showed on Thursday.

Representational image. Reuters

According to traders, domestic investors followed cues from global markets, which were enthused by reports of the completion of the first phase of US-China trade deal and Boris Johnson's likely re-election as British prime minister

The Trump administration and China are close to finalising a modest trade agreement that would suspend tariffs that are set to kick in Sunday, de-escalating their 17-month trade war.

In return, Beijing would buy more US farm products, increase Americans companies' access to the Chinese market and tighten protection for intellectual property rights.

Reports suggest that US President Donald Trump has give his final approval to the deal.

Further, Boris Johnson is set to be re-elected as British prime minister with a landslide majority in the country's general elections, an exit poll suggested on Friday, a victory that will end the uncertainty over Brexit and will help him to take the UK out of the European Union by the end of next month.

Rupee rises 33 paise

The Indian rupee appreciated by 33 paise to 70.50 against the US dollar in early trade on Friday as gains in domestic equity market and positive developments on the US-China trade talk front strengthened investor sentiments.

Forex traders said the news that the US and China are very close to reaching a trade deal supported the local unit.

At the interbank foreign exchange, the rupee opened at 70.54, then gained further ground and touched a high of 70.50, registering a rise of 33 paise over its previous close.

On Thursday, the rupee had settled for the day at 70.83 against the US dollar.

The domestic unit, however, could not hold on to the gains and was trading at 70.53 against the dollar at 0937 hrs.

President Donald Trump on Thursday tweeted that the United States is "VERY close" to a trade deal with China, days before new tariffs are due to take effect.

"Getting VERY close to a BIG DEAL with China. They want it, and so do we!" Trump tweeted.

Besides, Myron Brilliant, the US Chamber of Commerce's head of international affairs, who has been briefed by both the Trump administration and China said "We're close to a deal".

Besides, a higher opening in domestic equities supported the local unit

Asian shares scale 8-month peaks

Asian shares scaled eight-month peaks on Friday as a last-gasp Sino-US trade deal and a likely major election win by Britain’s Conservative Party looked to have cleared a couple of dark clouds from the global horizon, according to a Reuters report.

The double dose of relief slugged safe-haven sovereign bonds and the Japanese yen, and led markets to scale back the chance of more interest rates cuts around the world.

“Global investors have been given two of the biggest gifts on their Christmas list and should be appreciative for a while at least,” said Sean Callow, a senior forex analyst at Westpac. “Global equity indices such as MSCI World should set more record highs and sterling could push above $1.36.”

The pound hit its highest since mid-2018 as UK exit polls seemed to rule out a shock win by the left-wing Labour opposition, and could help clarify the outlook for Brexit.

Polls suggested Prime Minster Boris Johnson could gain a commanding 368 seats in Britain’s Parliament, settling another long-standing uncertainty.

The pound was last up 2.4 percent at $1.3476 and reached levels on the euro not visited since mid-2016.

A wave of trade euphoria had already lifted Wall Street to record highs. Reuters reported the United States has agreed to reduce some tariffs on Chinese goods and delay a tranche of tariffs as part of a phase one deal.

China also has agreed to make $50 billion in agricultural purchases in 2020 as part of the deal, that person and another US source familiar with the talks said.

“If the US cuts the current tariffs to some extent as reported, that is not something markets have priced in, so we could see a further leg up in the stock market,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo. “The Conservatives appear to be on course for a big win. We are now finally seeing a clear direction on Brexit after three years of deadlock.”

Less need for more cuts?

In Asia, Japan's Nikkei climbed 2.4 percent to a 14-month top, while South Korean stocks firmed 1.3 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan climbed 1.2 percent to its highest since late April. Shanghai blue chips advanced 1.4 percent.

E-Mini futures for the S&P 500 ESc1 rose 0.4 percent to another peak, and EUROSTOXX 50 futures  gained 0.9 percent. FTSE futures FFIc1 eased 0.2 percent, perhaps because a Tory win had already been priced in.

Wall Street had celebrated the trade news with record highs. The Dow ended Thursday up 0.79 percent, while the S&P 500 gained 0.86 percent and the Nasdaq 0.73 percent.

That was bad news for bonds and yields on US 10-year Treasuries shot up to 1.91 percent, a rise of 12 basis points in just two sessions.

Interest rate futures slipped as investors priced in less chance of a rate cut from the Federal Reserve next year—a shift seen across a range of developed nations.

Other safe harbours also took a beating, with the yen sliding across the board. The dollar firmed further to 109.52 yen having risen 0.7 percent overnight.

The dollar fared less well elsewhere as the pound and the euro both benefited from the UK exit polls. The euro added 0.4 percent to $1.1176, while the dollar slipped to 96.742 on a basket of currencies.

The dollar also lost out to the Chinese yuan to hit an 18-week low as any trade truce would be seen as a boon for the export-heavy economy. The dollar was last at 6.9715 yuan having shed a steep 1.2 percent overnight.

The shift from safe havens left spot gold flat at $1,468.48 per ounce.

Oil prices rallied on hopes a trade deal would support global growth and thus demand.

US crude CLc1 added 35 cents to $59.i53 a barrel, while Brent crude LCOc1 rose 47 cents to $64.67.

--With inputs from agencies