Benchmarks log fresh record highs; Nifty surpasses 7,800 mark

Extending their northward journey for eighth consecutive session, boisterous benchmarks once again logged new record highs with frontline indices surpassing their crucial 7,800 (Nifty) and 26,200 (Sensex) bastions on Thursday. Earlier, both Sensex and Nifty slipped in red and traded in a narrow range. However, a recovery from lower levels was staged in the last hour of trade led by buying in banking, metals, FMCG and technology stocks.

Overall, sentiments remained up-beat after foreign portfolio investors (FPIs) bought shares worth a net Rs 652.40 crore July 23, 2014, as per provisional data from the stock exchanges. Investors also remained optimistic on report that India’s rainfall deficit reduced by 11 percentage points to 25% from 36% a week ago on the back of steady momentum in monsoon rains over the last seven days.

Further, Cabinet's approval for 49% foreign investment in insurance companies through the FIPB route also aided sentiment. Moreover, the government may soon take a decision on easing foreign direct investment (FDI) in Railways and Defence sectors, with the Department of Industrial Policy and Promotion awaiting final comments from the concerned ministries to put these proposals for consideration of the Union Cabinet.

Buying got intensified in last leg of trade with European markets trading in the green terrain in early deals on Thursday after private-sector activity in the euro-zone expanded faster than expected in July. The composite PMI for the currency bloc rose to a three-month high of 54, beating street expectation of a 52.9. Asian markets ended mostly in the green after a surprisingly strong reading on Chinese manufacturing bolstered hopes for recovery in the world’s second-biggest economy.

Back home, rally in metal counter too supported the sentiments and stocks like Tata Steel, Hindalco Industries, Sesa Sterlite, Jindal Steel etc. edged higher after a preliminary gauge of Chinese manufacturing activity reached an 18-month high in July. Moreover, scrips of companies related to DTH business also surged, as the regulator Trai has recommended extension of licence period of direct-to-home (DTH) operators from 10 years to 20 years, while proposing bringing down fees to 8% of the adjusted gross revenue.

The NSE’s 50-share broadly followed index Nifty rose by over thirty points to end above the psychological 7,800 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by around one hundred and twenty points to finish above its psychological 26,200 mark. Broader markets, however, underperformed benchmarks and ended the session mixed. The market breadth remained in favor of advances, as there were 1,506 shares on the gaining side against 1,453 shares on the losing side while 126 shares remain unchanged.

Finally, the BSE Sensex surged by 124.52 points or 0.48%, to 26271.85, while the CNX Nifty gained 34.85 points or 0.45%, to 7,830.60.

The BSE Sensex touched a high and a low of 26292.66 and 26077.70, respectively. The BSE Mid cap index was down by 0.20%, while Small cap index was up by 0.25%.

The top gainers on the Sensex were Hindalco Inds up by 2.30%, Tata Steel up by 2.18%, Hindustan Unilever up by 1.55%, Wipro up by 1.31% and ITC up by 1.09%. On the flip side, the key losers were Gail India down by 2.04%, Dr Reddys Lab down by 0.73%, Hero MotoCorp down by 0.66%, Cipla down by 0.61% and Axis Bank down by 0.22%.

On the BSE sectoral front, Metal up by 1.47%, IT up by 0.90%, FMCG up by 0.86%, Teck up by 0.64% and Bankex up by 0.44% were the top gainers, while Consumer Durables by 0.93%, Infrastructure down by 0.40%, Power down by 0.34%, Healthcare down by 0.25% and Oil & Gas down by 0.19% were the top losers in the space.

Meanwhile, the cabinet has approved the hike of foreign direct investment limit to 49 percent in insurance sector from the prevailing 26 percent. The government has cleared that it would take up the Insurance Amendment Bill as soon as possible in the Parliament. The bill is likely to pass easily in Parliament as the country’s second largest party, Congress, has indicated that it will support the bill. The Insurance Amendment Bill, which has been pending in the Parliament since 2008, proposed to enhance FDI limit to 49% with full management and control through Foreign Investment Promotion Board (FIPB) route.

Presently, most of the insurance companies particularly private players are facing severe shortage of funds. If the bill gets passed in parliament, most of the insurance companies, barring the public sector insurance companies, would benefit from higher FDI cap.

An increase in the ceiling for the insurance sector will automatically translate into a similar limit for the pension business. The government expects inflows of $6-7 billion into the pension and insurance sectors, which in turn will also generate long-term funds to finance infrastructure projects as individuals invest in insurance and pension schemes with a 20-30 year horizon. Accordingly, same investment is further invested in long-term instruments such as government securities and corporate bonds with a small portion also flowing into the stock markets.

The insurance sector was opened up to the private sector in 2000. Since then, the number of private players in the insurance sector has gone up from seven to 53 as on March 31, 2014, operating in the life, non-life, and re-insurance segments.

The CNX Nifty touched a high and low of 7,835.65 and 7,771.65 respectively.

The major gainers of the Nifty were Bank of Baroda up 3.50%, Asian Paints up by 2.81%, HCL Technologies up by 2.65%, Hindalco Industries up by 2.61% and Tata Steel up by 2.42%. On the flip side, the key losers were Cairn India down by 6.68%, GAIL down by 1.95%, Power Grid Corporation of India down by 1.21%, Hero MotoCorp down by 1.11% and Dr. Reddy's Laboratories down by 1.08%.

European markets were trading in green; UK’s FTSE 100 up by 0.14%, Germany’s DAX up by 0.47% and France’s CAC 40 was up by 0.75%.

The Asian markets concluded Thursday’s trade mostly in green, with the benchmark indices poised to extend a six-year high, after a preliminary industry survey showed China’s manufacturing sector in solid expansion territory. Hong Kong stocks rose, with the city’s benchmark index gaining to a three-year high, as a gauge of mainland manufacturing topped analyst estimates. HSBC’s China flash manufacturing PMI for July rose to 52.0, a jump from the June reading of 50.7 which indicated that the economy is finally turning around. A sub-index measuring new orders, a gauge of demand at home and abroad, hit a 18-month high of 53.7, while the sub-index for output also rose to a 16-month high in June. The employment index also improved from May, though it was still a shade under 50, which implies that jobs are still being lost in the manufacturing sector. Japan’s trade balance fell to a seasonally adjusted -1.08T, from -0.86T in the preceding month. Hong Kong Trade Balance fell to a seasonally adjusted -43.1B, from -42.4B in the preceding month. South Korean GDP fell to a seasonally adjusted annual rate of 3.6%, from 3.9% in the preceding month.