Benchmarks extend northward journey for fourth day in a row

Extending their gaining streak for fourth day in a row, Indian equity benchmarks staged an enthusiastic performance on Thursday, by rallying around three fourth of a percent and breaking lots of psychological levels in their northward journey. Sentiments remained positive since beginning of the trade 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 but oversold stocks. Sentiments also remained upbeat on report that foreign portfolio investors (FPIs) were net buyers of Indian stocks on August 13, 2014.

On the macro front, India’s wholesale price (WPI) inflation eased to a five-month low in July, helped by a moderation in fuel costs. The WPI rose 5.19% year-on-year last month, its slowest pace since February. In June, prices rose 5.43% from a year earlier. Meanwhile, Reserve Bank of India’s (RBI) Governor Raghuram Rajan has stated that high interest rate structure may be painful in the short run but will help in long run by containing inflation.

Recovery European markets too aided the sentiments with CAC, DAX and FTSE were trading with a gain of around half a percent in early deals. However, Asian markets ended mostly in the red as downbeat data from China and Japan sparked renewed concerns for growth in the region’s two biggest economies.  

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. Frontline indices managed to settle near intraday high levels with Sensex surpassing its crucial 26,100 bastion, while Nifty ended near its crucial 7,800 mark. Appreciation in Indian rupee against dollar too aided sentiments. The rupee was trading at 60.82 per dollar at the time of equity markets closing as against previous close of 61.22 per dollar.

Meanwhile, rally in real estate counter too supported the sentiments after the latest data showed inflation based on wholesale price index eased in July as purchases of both residential and commercial property are largely driven by finance. Meanwhile, metal and mining stocks rose on speculation the Chinese government will take steps to support its 7.5% expansion target, after data released on Wednesday showed plunge in credit expansion in July and unexpected slowdown in investment spending.

The NSE’s 50-share broadly followed index Nifty rose by over fifty points and ended near the psychological 7,800 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex rose by over one hundred and eighty points to finish above the psychological 26,100 mark. Broader markets too traded with traction and ended the session with a gain of over one percentage point. The market breadth remained in favour of advances, as there were 1,650 shares on the gaining side against 1,261 shares on the losing side while 125 shares remain unchanged.

Finally, the BSE Sensex surged by 184.28 points or 0.71%, to 26103.23, while the CNX Nifty soared by 52.15 points or 0.67% to 7,791.70.

The BSE Sensex touched a high and a low of 26135.00 and 25945.35, respectively. The BSE Mid cap index was up by 1.20%, while the Small cap index gained 1.16%.

The top gainers on the Sensex were Gail India up by 3.79%, SSLT up by 2.80%, Tata Motors up by 2.53%, Tata Power up by 2.37% and ONGC up by 2.03%. While Hero MotoCorp down by 2.69%, HDFC down by 1.44%, Hindalco Inds down by 0.83%, Bharti Airtel down by 0.75% and Hindustan Unilever down by 0.61% were the top losers in the index.

On the BSE Sectoral front, Consumer Durables up by 2.08%, Metal up by 1.94%, Capital Goods up by 1.78%, Realty up by 1.75% and Power up by 1.49% were the top gainers, while IT down by 0.08% and Teck down by 0.05%, were the only losers in the space.

Meanwhile, the Reserve Bank of India (RBI) Governor Raghuram Rajan has stated that high interest rate structure may be painful in the short run but will help in long run by containing inflation. The governor comment comes after the retail inflation rose more than expected at 7.96% in July as compared to 29 months low of 7.31% in June.The RBI considers price stability an essential condition for economic revival and aims to bring down retail inflation to 6% by January 2016.

The RBI Governor has been criticized for keeping the interest rates at high level for long. Raghuram Rajan explained that owing to the bottlenecks on supply sides, the RBI is seeking to keep some control over the demand side by keeping the interest rates high.

The RBI, with an aim to generate long term growth by bringing down inflation over a reasonable period of time, has raised repo rate three times to 8% since September’13 to tame price rise through cooling demand. The RBI is unlikely to cut key policy rates in next monetary policy review amid concerns that retail inflation could rise again due to pass-through of administered price increases, continuing uncertainty over monsoon conditions and their impact on food production, possibly higher oil prices stemming from geo-political concerns and exchange rate movement.

The CNX Nifty touched a high and low of 7,796.70 and 7,739.10 respectively.

The top gainers of the Nifty were Jindal Steel & Power up by 3.27%, GAIL (India) up by 3.13%, United Spirits up by 2.73%, Ambuja Cements up by 2.53% and SSLT up by 2.40%. On the other hand, Hero MotoCorp down by 2.51%, Hindalco Industries down by 2.03%, HDFC down by 1.76%, HCL Technologies down by 1.48% and Bharti Airtel down by 1.25% were the top losers.

The European markets were trading in green, France's CAC 40 was up by 0.10%, Germany's DAX was up by 0.25% and United Kingdom's FTSE 100 was up by 0.38%.

Asian equity indices ended mostly in red on Thursday, with China’s stocks drop, sending the benchmark index to its biggest drop in a week, on growing concern that government efforts to shore up economic growth will be insufficient. Bank Indonesia, the country’s central bank, kept its benchmark interest rate at 7.5%, citing it as necessary in the effort to narrow the current account deficit.  Indonesia’s central bank reported a larger than expected second quarter current account deficit, but kept its key policy rates unchanged and predicted improvement later this year. Bank Indonesia Governor stated that the benchmark rate - in place since November - is consistent with its 3.5% to 5.5% inflation target and with lowering the current account gap towards a healthier level. Japan’s Core Machinery Orders rose to 8.8%, from -19.5% in the preceding month. Korea’s benchmark interest rate fell in the last quarter. The Interest Rate Decision fell to a seasonally adjusted annual rate of 2.25%, from 2.50% in the preceding quarter.