Benchmarks snap three days consecutive fall; Sensex surpasses 25,500 mark

Buoyed by firm global cues, Indian equity benchmarks ended the Monday’s trade with a gain of around three fourth of a percent, snapping three days consecutive fall. Frontline indices not only ended the session near intraday high levels but also recaptured their crucial 7,600 (Nifty) and 25,500 (Sensex) bastions as investors took to hefty across the board buying. Easing Geo-political concerns after news suggested that Russia was ending military drills near the Ukrainian border and signs of truce in Gaza, mainly honed investors’ risk appetite across the globe.

Sentiments remained jubilant since beginning after Confederation of Indian Industry (CII) stated that green shoots have started to appear in the manufacturing sector, with a majority of segments likely to post higher output. Buying got intensified in last leg of trade on report from weather department suggesting that monsoon season is likely to end with just 10% below average rain, from the abysmal 40% predicted during the month of June. Notably, the gains of local barometer gauges came in run-up to Industrial production data, which is scheduled to be released on Tuesday i.e. August 12. Factory output in June rose 5.4% from a year earlier, faster than the 4.7% growth in May.

Supportive cues from US markets provided the much needed support to local markets initially on optimism that situation in Ukraine will ease following comments from Nikolai Patrushev, Secretary of the Russian Security Council. Positive closing in Asian markets too supported the sentiments, led by the Japanese market after a report that the nation’s pension fund freed itself to buy more domestic equities. Firm opening in European counters too supported the sentiments.

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. Rally in auto counter too aided sentiments post robust earnings during the June quarter and encouraging sales growth during July. Moreover, M&M surged over 6% on expectation of agri machinery sector would get strong booster over next 2-3 years as better prospects of agriculture sector supported by number of government aids and more focus on rural economy by new government. Meanwhile, shares of real estate companies remained on buyers’ radar after the Securities and Exchange Board of India (Sebi) approved the setting up and listing of Real Estate and Infrastructure Investment Trusts, commonly referred to as REITs. Additionally, public sector oil marketing companies (OMCs) viz. BPCL, HPCL and IOC edged higher on reports that the Union Government will pay Rs 11000-crore subsidy to PSU OMCs for Q1 June 2014.

The NSE’s 50-share broadly followed index Nifty rose by around sixty points to end above the psychological 7,600 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by over one hundred and ninety points to finish above its psychological 25,500 mark. Broader markets too traded with traction and ended the session in the green with a gain of over half a percent. The market breadth remained in favor of advances, as there were 1,728 shares on the gaining side against 1,205 shares on the losing side while 98 shares remain unchanged.

Finally, the BSE Sensex surged by 190.10 points or 0.75%, to 25519.24, while the CNX Nifty soared by 57.40 points or 0.76% to 7,625.95.

The BSE Sensex touched a high and a low of 25553.44 and 25437.05, respectively. The BSE Mid cap index was up by 0.56%, while the Small cap index gained 0.76%.

The top gainers on the Sensex were Mahindra & Mahindra up by 6.45%, Tata Motors up by 3.33%, HDFC up by 3.16%, SSLT up by 2.72% and Infosys up by 2.67%. While Gail India down by 4.34%, Dr Reddys Lab down by 2.19%, NTPC down by 1.59%, Hindustan Unilever down by 0.82% and Tata Power down by 0.77 % were the top losers in the index.

On the BSE Sectoral front, Auto up by 2.65%, Realty up by 0.96%, Capital Goods up by 0.88%, IT up by 0.67% and Metal up by .66% were the top gainers, while Power down by 0.48%, FMCG down by 0.41% and Oil & Gas down by 0.12% were the only losers in the space.

Meanwhile, in order to enhance fresh investments in real estate and infrastructure sectors, the Securities and Exchange Board of India (SEBI) has cleared the new norms for setting up and listing of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).

REITs are listed entities that mainly invest in income-producing real estate assets, the earnings of which are mostly distributed to their shareholders. The SEBI has stated that REITs will be allowed to invest only in commercial properties such as shopping malls, office buildings, apartments, warehouses and hotels, which provide regular income to investors from rentals received from such properties. The move is likely benefit investors who wish to invest in property for the lucrative gains it offers, but do not have sufficient capital to acquire physical real estate assets such as land or buildings. According to the SEBI guidelines, investors will have to put in a minimum of Rs 2 lakh to buy trust units, which can be traded on stock exchanges and investors can earn both dividends (from rental income of the property), as well as capital appreciation.

In a bid to make REITs attractive, the capital market regular has halved the minimum asset size to Rs 500 crores from Rs 1,000 crore proposed earlier. SEBI noted that smaller players who don’t have enough rental assets to launch even Rs 500 crore REIT can float a combined REIT with multiple sponsors subject to maximum of three. Each sponsor should hold at least 5 percent of the units and overall at least 25 percent of the units.

SEBI also cleared norms for Infrastructure Investment Trusts (InvITs), which are similar to REITs, but focus on investments in infrastructure. The InvITs will invest in infrastructure projects, either directly or through a special purpose vehicle and approved minimum net worth of an InvIT sponsor is Rs100 crore. According to SEBI guidelines, a publicly offered InvIT will need to distribute at least 90 per cent of its net distributable cash flows to investors. Further, associates of the trustee have been restrained from investing in the InvITs units to avoid a conflict of interest.

It also notified that for any REITs or InvITs, the size of initial offering should be atleast Rs 250 crore and free float of atleast 25 percent is mandatory in the initial offering. Trading lot will be Rs 1 lakh with minimum subscription size of Rs 2 lakh for REITs, whereas this will be Rs 5 lakh and Rs 10 lakh for InvIT. 

The CNX Nifty touched a high and low of 7,635.55 and 7,598.60 respectively.

The top gainers of the Nifty were Mahindra & Mahindra up by 6.15%, Bank of Baroda up by 4.23%, HDFC up by 3.72%, Tata Motors up by 3.30% and SSLT up by 2.82%. On the other hand, GAIL (India) down by 4.60%, Dr. Reddy's Laboratories down by 2.26%, Jindal Steel & Power down by 1.63%, Tech Mahindra down by 1.32% and NTPC down by 1.20% were the top losers.

The European markets were trading in green, France's CAC 40 was up by 0.83%, Germany's DAX was up by 1.44% and United Kingdom's FTSE 100 was up by 0.71%.

Asian equity indices ended in green on Monday, with the benchmark indices heading for its biggest rally in six months. China’s slumping property market is fueling speculation that the industry is set for a shakeout as small developers face difficulty raising funds to pay off debt. China’s real-estate industry poses the biggest near-term risk to growth in the world’s second-largest economy after new home prices dropped in the most cities in two years in June. China’s consumer inflation came in as forecast at 2.3% rise, reinforcing bets that benign price pressures will give authorities room to relax monetary policy if needed. The producer price index fell 0.9% for the 29th consecutive month. On a monthly basis, consumer inflation ran at 0.1% in July. Japanese Household Confidence rose to a seasonally adjusted annual rate of 41.5, from 41.1 in the preceding month. Japan’s M2 Money Stock remained unchanged at a seasonally adjusted 3.0% while Japanese tertiary industry activity index fell to a seasonally adjusted -0.1%, from 0.9% in the preceding month.

Malaysian Industrial Production rose to a seasonally adjusted annual rate of 7.0%, from 6.0% in the preceding month. Singapore Prime Minister Lee Hsien Loong narrowed the government’s forecast for economic growth this year and stated that the country must review its strategies as its needs evolve. The Southeast Asian nation’s growth domestic product will probably expand 2.5% to 3.5% this year. The range is narrower than a previous prediction of 2% to 4%. The minister added that the economy grew 3.5% in the first half.