D-street celebrates NDA’s victory; still ends 3% off day’s high

Indian equity benchmarks ended the session at their fresh record closing high levels as the Bharatiya Janata Party and its allies swept the election, although markets gave up a big chunk of the gains towards the close as investors booked profits at higher levels. Earlier, markets made gap-up opening and crossed the psychological 25,000 (Sensex) and 7,500 (Nifty) bastions in early deals, as early trends indicated the pro-reform and business friendly BJP-led NDA set to get a majority and form a stable government. Appreciation in Indian rupee against dollar too aided the sentiments. The Indian rupee gained sharply against the US dollar on hopes of further inflows from foreign institutional investors.

But, markets pared around 3% of early gains on profit booking witnessed at higher levels in second half. Even though, frontline indices managed to settle at their fresh all time high levels with Sensex surpassing its crucial 24,100 bastion, while Nifty ended above its crucial 7,200 mark. The market sentiment was also boosted by data showing that foreign funds continued purchases of Indian stocks on May 15, 2014. Foreign institutional investors (FIIs) bought shares worth a net Rs 934.94 crore on Thursday, as per provisional data from the stock exchanges.

Global cues remained sluggish with European counters opening lower, as the decline in economic output in Portugal and Italy from the previous quarter contrasted with strong growth in Germany. The Asian markets ended largely mixed, led by Nikkei which was down by around one and a half percent as yen surged to near an eight-week high to the dollar.

Back home, there was broad based buying witnessed in the markets and apart from the blue chips, the broader markets too equally participated in the rally. Meanwhile, financials were the top gainers on the Sensex on hopes that the BJP-led NDA would unveil reforms and stimulate economic growth. Power stocks continue to trade higher for second day in a row after the Centre announced a nine-member panel, which will identify more blocks, in addition to already selected 54 mines, for sale through competitive bidding to expedite coal auction process.

Additionally, rail stocks like Kalindee Rail Nirman (Engineers), Kernex Microsystems, Titagarh Wagons, Hind Rectifiers, BEML, Stone India, Transformers & Rectifiers, Container Corporation of India and Texmaco Infrastructure edged higher, as Modi has been stressing on improving Indian railways and is heading to become the next Prime Minister of India. On the flip side, software stocks like Oracle Financial Services Software, Tech Mahindra, Wipro, Hexaware Technologies, Infosys, TCS, MphasiS and HCL Technologies declined as rupee edged higher against the dollar.

The NSE’s 50-share broadly followed index Nifty surged by about eighty points to end comfortably above its psychological 7,200 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged over two hundred and ten points to surpass the psychological 24,100 mark. The broader markets too traded jubilantly throughout the session and ended the session with a gain of around one and a half percent. The market breadth remained in favour of advances, as there were 1,425 shares on the gaining side against 1,379 shares on the losing side while 160 shares remain unchanged.

Finally, the BSE Sensex soared by 216.14 points or 0.90%, to 24121.74, while the CNX Nifty surged by 79.85 points or 1.12%, to 7,203.00.

The BSE Sensex touched a high and a low of 25375.63 and 23873.16, respectively. The BSE Mid cap index was up by 1.64%, while the Small cap index rose by 1.21%.

The top gainers on the Sensex were SSLT up by 11.11%, SBI up by 5.93%, Axis Bank up by 5.60%, BHEL up by 5.25% and ICICI Bank up by 5.15%. While Tata Steel down by 4.40%, Dr Reddys Lab down by 2.95%, Infosys down by 2.83%, ITC down by 2.81% and Wipro down by 2.61% were the top losers in the index.

On the BSE Sectoral front, Realty up by 5.97%, Bankex up by 4.39%, PSU up by 3.60%, Power up by 3.33% and Capital Goods up by 3.15% were the top gainers, while IT down by 2.22%, FMCG down by 1.85%, Healthcare down by 1.39%, Teck down by 1.27% and Consumer Durables down by 0.97% were the losers in the space.

Meanwhile the Reserve Bank of India’s (RBI) Governor Raghuram Rajan has pointed that a subdued growth, the fiscal and current account deficits and sticky inflation are the four biggest macro-economic challenges. Presently, Indian economy is struggling with slowdown and the factors like high interest rates, low investments and slow execution of infrastructure projects have been impacting economy’s growth. Indian economy’s growth slowed down to 4.6 percent during the first three quarter of FY14 and is likely to remain at sub-5% level in FY14.

On inflation front, the Governor has said that despite some improvement in price rise over the past few months, WPI inflation still remained above the Reserve Bank of India's comfort level of 5 percent. Rajan further stated that Interest rate is the best tool available with the central bank to control price rise, whereas the Government too has tools like increasing agricultural production and improving supply to check inflation. Raghuram Rajan added that the new government and the central bank need to work together to check high inflation, which has been eroding the business sentiments in the country. Rajan exuded confidence that retail inflation would come down to 6% by March 2016. The WPI inflation eased to 5.20% in April as against 5.70% in March, while, retail inflation rose to three-month high at 8.59% in April.

The country is also witnessing improvement on fiscal as well as current account deficit front. During the April-December FY’14, CAD stood at $31.1 billion (2.3% of GDP) versus $69.8 billion (5.2% of GDP) reported in the same period of previous fiscal year. In the FY14, the CAD is likely to improve to around 2% of GDP level mainly on the back of improved trade deficit figure. Further, the country’s fiscal deficit is expected to contain at 4.5% of GDP in FY14 as compared to the 4.89% of GDP in the previous fiscal year.

The CNX Nifty touched a high and low of 7,563.50 and 7,130.65 respectively.

The top gainers of the Nifty were SSLT up by 11.05%, PNB up by 8.16%, BPCL up by 6.85%, DLF up by 6.50% and State Bank of India up by 5.95%. On the other hand, Tata Steel down by 4.47%, ITC down by 3.30%, Dr. Reddy's Laboratories down by 3.09%, HCL Technologies down by 2.97% and Wipro down by 2.83% were the top losers.

The European markets were trading in red, France's CAC 40 was down by 0.46%, Germany's DAX was down by 0.69% and United Kingdom's FTSE 100 was down by 0.33%.

The Asian markets concluded Friday’s trade mostly in green, while Japan Nikkei closing in red owing to a stronger yen and following a sell-off on Wall Street. China will support the stable growth of foreign trade and job creation as businesses come under pressure to increase exports. Optimizing the foreign trade structure - including encouraging imports of technology and key parts, maintaining stable growth of goods trade and supporting services trade - is the central issue of a policy document issued by China’s Cabinet. Japan’s economy grew 1.5% in the January-March quarter from the previous one, posting its biggest expansion since July-September 2011, as consumer spending jumped ahead of an April 1 sales tax increase. Japan’s industrial production rose to a seasonally adjusted 0.7%, from 0.3% in the preceding month. Hong Kong GDP rose to a seasonally adjusted annual rate of 0.2%.