Markets end at record closing highs; Nifty surpasses 7,400 mark

Extending their previous session’s rally, Indian equity benchmarks ended the volatile day of trade at all time closing high levels with domestic bourses surpassing their crucial 24,850 (Sensex) and 7,400 (Nifty) levels. Sentiments remained up-beat after the central bank kept rates on hold and toned down its inflation rhetoric. The Reserve Bank of India (RBI) in its bi-monthly monetary policy review kept the repo rate and Cash Reserve Ratio (CRR) unchanged at 8% and 4%, respectively as per the street’s expectations. However, the Statutory Liquidity Ratio (SLR) was reduced by 50 basis points to 22.5% of banks NDTL with effect from the fortnight beginning June 14. Besides, RBI also reduced the liquidity provided under the export credit refinance (ECR) facility from 50% of eligible export credit outstanding to 32% with immediate effect.

Meanwhile, RBI introduced a special term repo facility of 0.25% of NDTL to compensate fully for the reduction in access to liquidity under the ECR. RBI shall also continue to provide liquidity under 7-day and 14-day term repos of up to 0.75% of NDTL of the banking system. Sentiments also remained buoyant after the eight core industries’ output grew by 4.2 per cent in April, higher than 3.7 per cent registered in the corresponding period a year ago. The core sector output in the month of April has surged mainly on the back of healthy production growth in electricity, fertilisers, cement and coal. Some support also came from report that foreign institutional investors (FIIs) bought shares worth a net Rs 234.49 crore on June 2, 2014, as per provisional data from the stock exchanges.

On the global front, most of the Asian equity indices shut shop in the green terrain after China's factory activity expanded at its fastest pace in five months in May due to rising new orders, reinforcing views projecting that the world's second-largest economy is regaining momentum in the second quarter following Beijing’s targeted measures to bolster growth. The official Purchasing Managers’ Index increased to 50.8 in May, the highest level since December. However, European counters made a sluggish start with CAC, DAX and FTSE all were trading in the red in early deals on Tuesday.

Back home, rally in metal stocks too aided the sentiments. Scrips like Sesa Sterlite, Tata Steel, Hindustan Zinc, and SAIL all edged higher on the back of positive manufacturing data in China, the world's biggest consumer and producer of the metal. Additionally, sugar stocks remained on buyers’ radar on hopes that the Modi-led government would help revive the industry by encouraging ethanol blending in petrol and also hike import duty on the commodity to support local prices. On the flip side, banking counter witnessed selling pressure after the Reserve Bank of India left the key interest rate unchanged in its monetary policy review.

The NSE’s 50-share broadly followed index Nifty gained by over fifty points to end above its psychological 7,400 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by over one hundred and seventy points to end above its crucial 24,850 mark. The broader markets too traded with traction throughout the session and ended the session with a gain of around a percent. The market breadth remained in favour of advances, as there were 1921 shares on the gaining side against 1,089 shares on the losing side while 96 shares remain unchanged.

Finally, the BSE Sensex soared by 173.74 points or 0.70%, to 24858.59, while the CNX Nifty surged by 53.35 points or 0.72%, to 7,415.85.

The BSE Sensex touched a high and a low of 24892.06 and 24626.97, respectively. The BSE Mid cap index was up by 0.63%, while the Small cap index rose by 1.18%.

The top gainers on the Sensex were Tata Steel up by 6.69%, SSLT up by 6.53%, Coal India up by 5.29%, ONGC up by 4.40% and BHEL up by 3.48%. While Dr Reddys Lab down by 3.15%, Gail India down by 2.07%, Hindustan Unilever down by 1.51%, ITC down by 1.16% and Wipro down by 0.95% were the top losers in the index.

On the BSE Sectoral front, Metal up by 5.06%, Realty up by 3.15%, PSU up by 1.87%, Oil & Gas up by 1.76% and Power up by 1.44% were the top gainers, while FMCG down by 0.75%, Healthcare down by 0.50%, Bankex down by 0.18% and IT down by 0.04% were the only losers in the space.

Meanwhile, industry body Assocham has pitched for a stable tax regime, steps for early rollout of Goods and Services Tax (GST), slashing of tax rates and measures to revivie special economic zone (SEZ) in the coming union budget to boost Indian economic growth. Industry chamber has stated that first union budget by the new government should reflect its tax policy direction to stimulate economic growth, contain inflation and create conducive environment for investment especially in manufacturing and infrastructure which generates large-scale employment. The growth in manufacturing sector declined by 0.7% yoy in FY14 compared with de-growth of 0.2% in FY13 owing to the weak domestic demand.

Assocham further asserted that new government should introduce tax incentives in the coming budget to promote in-house R&D and national and corporate energies to create world-class Indian brands which can contribute significantly to import substitution and value added exports.

Furthermore, industry chamber has also sought for extension of tax benefits to telecom and power sectors, slashing of excise duty and service tax rates to 10 percent from 12 percent, bringing down personal and corporate income tax rates and creation of a conductive tax regime for attracting investments. Regarding the indirect tax, Assocham said that as indirect tax has always been an effective tool to drive economic and social growth, the government should replace indirect tax structure with GST in order to integrate India into a single economy and provide a unified tax policy for the country. Assocham further suggested the immediate withdrawal of Minimum Alternate Tax (MAT), Dividend Distribution Tax (DDT) and restoring the SEZ policy to its present form for providing impetus to the special economic zones.

 The CNX Nifty touched a high and low of 7,424.95 and 7,342.15 respectively.

The top gainers of the Nifty were Tata Steel up by 6.72%, SSLT up by 5.98%, Coal India up by 5.64%, DLF up by 5.21% and Grasim Industries up by 5.16%. On the other hand, Dr. Reddy's Laboratories down by 3.10%, HCL Technologies down by 2.43%, IndusInd Bank down by 2.36%, GAIL (India) down by 2.11% and Kotak Mahindra Bank down by 1.61% were the top losers.

The European markets were trading in red, France's CAC 40 was down by 0.07%, Germany's DAX was down by 0.25% and United Kingdom's FTSE 100 was down by 0.34%.

The Asian markets concluded Tuesday’s trade mostly in green, with the benchmark index poised for a seven-month high, as concern eased about a slowdown in the world’s second-largest economy. China’s non-manufacturing purchasing managers’ index rose to 55.5 in May from 54.8 in April, according to data released by the Beijing-based National Bureau of Statistics and the China Federation of Logistics and Purchasing. Home prices in major Chinese cities posted their first monthly decline in nearly two years in May, providing new evidence that the once red-hot market is losing steam. The average price of a new home in 100 major cities fell 0.3% from April to 10,978 yuan ($1,760) per square meter, the first fall since June 2012.

Hong Kong Retail Sales fell to a seasonally adjusted annual rate of -9.8%, from -1.3% in the preceding month. Japan’s Monetary Base fell to 45.6%, from 48.5% in the preceding month while Japan’s Average Cash Earnings rose to a seasonally adjusted 0.9%, from 0.7% in the preceding quarter. Thai consumer confidence jumped in May on hopes a new military government would impose order after months of political chaos that had threatened to tip the economy into recession.