Markets stage splendid performance ahead of RBI’s policy meeting

Boisterous benchmarks showcased an enthusiastic performance on Monday, by rallying around two percentage points ahead of the RBI’s policy meeting tomorrow. Sentiments remained up-beat since start as key bourses opened with decent gains and there appeared not even an iota of profit booking in the session as the benchmarks managed to fervently gain from strength to strength as investors continued hunt for fundamentally strong stocks. Frontline indices not only ended the session near intraday high levels but also recaptured their crucial 7,350 (Nifty) and 24,650 (Sensex) bastions as investors took to hefty across the board buying.

Sentiments got bolstered after manufacturing activity inched up in May compared to the previous month, according to the widely-tracked HSBC Purchasing Managers’ Index (PMI). The index for manufacturing rose marginally to 51.4 points in May from 51.3 points in April. Sentiments also remained up-beat on reports that foreign institutional investors (FIIs) bought shares worth a net Rs 2,977.62 crore on May 30, 2014, as per provisional data from the stock exchanges. Meanwhile, investors shrugged off weak GDP data announced after the market hours on Friday. India’s economic growth remained below the 5 percent mark for the second year in a row at 4.7 percent in 2013-14.  Growth remained subdued at 4.6 percent in the fourth quarter of 2013-14 too, mainly due to a decline in manufacturing and mining output.

Global cues remained supportive with encouraging Chinese factory data and another closing record on Wall Street lifted Asian equities and commodities, while European counterparts too traded mostly in the green in early deals on Monday ahead of a European Central Bank meeting.

Back home, there was broad based buying witnessed in the markets and apart from the blue chips, the broader markets too participated strongly in the rally. Rally in capital goods counter too aided the sentiments led by over six percent rise in Larsen & Toubro (L&T). The company reported 52.33% rise in its net profit of Rs 2723.48 crore for the fourth quarter as compared to Rs 1787.94 crore for the same quarter in the previous year. The total income of the company increased by 11.42% at Rs 20574.37 crore for quarter under review as compared to Rs 18465.08 crore for the quarter ended March 31, 2013.

Meanwhile, banking stocks witnessed strong demand ahead of the Reserve Bank of India's (RBI's) bi-monthly monetary policy review on Tuesday, some PSU banks also hogged limelight after reports suggested of Finance Ministry considering the option of transferring all PSU banks equity into a holding company. Additionally, public sector oil marketing companies (OMCs) viz. BPCL, HPCL and IOC all traded jubilantly during the session on report that after the latest hike in diesel prices, losses on sale of diesel have dipped to a new low of Rs 2.80 per litre, the new government on Saturday allowed oil companies to raise rates by 50 paisa a litre.

The NSE’s 50-share broadly followed index Nifty gained by over one hundred and thirty points to end above its psychological 7,350 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by around four hundred and sixty points to end tad below its crucial 24,700 mark. The broader markets too traded jubilantly throughout the session and ended the session with a gain of over two percentage points. The market breadth remained in favour of advances, as there were 2,001 shares on the gaining side against 977 shares on the losing side while 109 shares remain unchanged.

Finally, the BSE Sensex soared by 467.51 points or 1.93%, to 24684.85, while the CNX Nifty surged by 132.55 points or 1.83%, to 7,362.50.

The BSE Sensex touched a high and a low of 24709.09 and 24270.20, respectively. The BSE Mid cap index was up by 2.16%, while the Small cap index rose by 2.01%.

The top gainers on the Sensex were L&T up by 6.40%, Bharti Airtel up by 5.52%, ONGC up by 5.17%, Tata Steel up by 4.42% and SBI up by 4.23%. While Dr Reddys Lab down by 1.96%, Sun Pharma down by 1.38%, ITC down by 1.32%, Wipro down by 0.83% and NTPC down by 0.63% were the top losers in the index.

On the BSE Sectoral front, Capital Goods up by 4.93%, PSU up by 3.42%, Bankex up by 3.28%, Oil & Gas up by 2.85% and Infrastructure up by 2.75% were the top gainers, while Healthcare down by 0.92% and FMCG down by 0.82% were the only losers in the space.

Meanwhile, in some encouraging news from India's factories, May data pointed to a slight improvement in operating condition as the production volumes at Indian manufacturers continued to rise, leading to further job creation across the sector. The HSBC India Manufacturing Purchasing Managers' Index (PMI), a measure of factory production, which is based on data from monthly survey of purchasing executives in over 500 manufacturing companies, stood higher at 51.4 in May from 51.3 in April, little higher reading above 50 water shed mark that segregates growth from contraction. The activity in the sector expanded for the seventh consecutive month in May, though the rate of expansion was unchanged from the modest pace registered in April.

Growth in both total new orders and new export business led to this small uptick, with the new orders sub-index, including domestic demand as well as orders from abroad, rising to 53.2 in May, a three-month high, from 52.5. Notably, the pace of incoming work marking a seven-month sequence of expansion, accelerated to the quickest since February. Meanwhile, new export business rose at a solid rate that was quicker than in April. Encouragingly, staffing levels were raised in May, amid evidence of increased production requirements.

On the inflation front, while the input costs continued to rise in May, albeit at the weakest rate in one year, output charges increased further. The rate of charge inflation was, however, marginal and weaker than the series average.

Manufacturing output in India, which accounts for about 16% of the overall economy, has been languishing of late. A prolonged slowdown in output from mines, utilities and factories has severely hurt growth. However, the recent momentum in the manufacturing sector albeit marginal, which points to improving operating condition, is on account of higher domestic and export order flows. But the latest PMI data show that India, now growing below 5 percent on an annual basis, is still grappling with an inflation challenge with output pricing still rising, making it difficult for Reserve Bank of India (RBI) to take down its inflation guard just yet.

The CNX Nifty touched a high and low of 7,368.60 and 7,239.50 respectively.

The top gainers of the Nifty were Larsen & Toubro up by 6.70%, BPCL up by 6.53%, Bharti Airtel up by 5.49%, ONGC up by 4.98% and Jindal Steel & Power up by 4.77%. On the other hand, HCL Technologies down by 2.30%, Tech Mahindra down by 2.03%, Dr. Reddy's Laboratories down by 1.86%, Sun Pharmaceuticals Industries down by 1.84% and ITC down by 1.51% were the top losers.

The European markets were trading in green, France's CAC 40 was up by 0.13%, Germany's DAX was up by 0.25% and United Kingdom's FTSE 100 was up by 0.27%.

The Asian markets concluded Monday’s trade mostly in green, after a gauge of China’s manufacturing expanded at the fastest pace in five months and policymakers said they will cut the reserve requirement ratio for some lenders. Taiwan, China and Hong Kong markets remained shut for the trade today on account of the Dragon Boat Festival. The rupiah hit its weakest level in more than three months after Indonesia unexpectedly reported a trade deficit, leading losses among emerging Asian currencies as investors took profits on May’s gains amid broad strength in the dollar. China’s economy is projected to grow 7.3% this year, which would be the weakest pace since 1990. Expansion slowed to 7.4% in the first quarter from a year earlier, compared with 7.7% in the previous period. The official target for expansion is 7.5%. Chinese Manufacturing PMI rose to an annual rate of 50.8, from 50.4 in the preceding month.

Japanese capital spending rose to an annual rate of 7.4%, from 4.0% in the preceding quarter. Indonesian Inflation rose to a seasonally adjusted 7.32%, from 7.25% in the preceding month while Indonesian Trade Balance fell to a seasonally adjusted -1.97B, from 0.67B in the preceding month. Thai CPI rose to a seasonally adjusted annual rate of 2.62%, from 2.45% in the preceding month.