Benchmarks hit record high on strong GDP growth; Nifty surpasses 8,000 mark

Boisterous benchmarks once again showcased an enthusiastic performance, by rallying around a percentage point on Monday on the back of strong economic growth data for April-June quarter. Sentiments remained up-beat since start as key bourses made a gap-up opening 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 their hunt for fundamentally strong stocks. Frontline indices not only extended their rally for third straight session but also recorded their all time closing high, settling comfortably above their crucial 8,000 (Nifty) and 26,800 (Sensex) bastions as investors took to hefty across the board buying.

Sentiments got bolstered after India’s economic growth accelerated to two-and-half year high of 5.7 per cent in the April-June quarter on the back of improvement in mining, manufacturing and services sector performance. Some support also came with Reserve Bank of India Governor Raghuram Rajan’s statement that India is now better prepared to handle the impact of any US interest rate increase because of signs its economy is improving. Moreover, investors shrugged-off some softness in manufacturing growth. The HSBC India Manufacturing PMI for the month of August slowed to 52.4 as against a July's 17-month high of 53.0.

On the global front, Asian markets ended the session mostly in the green terrain as traders in the region weighed the prospect of stimulus by the Chinese policy makers after reports of slower manufacturing growth. However, European markets after a positive start turned lower in early deals on Monday as tensions over Ukraine simmered. 

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. Sustained foreign institutional investor (FII) flows and participation of domestic mutual funds, which have bought close to Rs 60,000 crore since May 9, too supported the sentiments. FII inflow totaled Rs 44,426 crore ($7.4 billion), while mutual funds invested a net of Rs 14,012 crore in Indian equities between May 9 and August 28.

Meanwhile, public sector oil marketing companies (OMCs) edged higher after the under-recovery on High Speed Diesel declined to Rs 0.08 per litre in the first fortnight of September 2014, effective September 1, 2014. The auto sector stocks too kept buzzing for the day after August sales numbers started trickling in and manufacturers showing strong volume growth across most segments during August 2014, led by improved demand. Additionally, stocks related to textile space too remained on buyers’ radar as the Minister of State for Textiles has said that the Union government would soon come out with a national textile policy. The Minister also said that new textile parks would be set up at the earliest.

The NSE’s 50-share broadly followed index Nifty rose by over seventy points and ended above the psychological 8,000 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by around two hundred and thirty points to finish above the psychological 26,800 mark. Broader markets traded with traction throughout the trade and ended the session with a gain of around one and a half percentage point. The market breadth remained in favor of advances, as there were 1,923 shares on the gaining side against 1,010 shares on the losing side while 137 shares remain unchanged.

Finally, the BSE Sensex surged by 229.44 points or 0.86%, to 26867.55, while the CNX Nifty soared by 73.35 points or 0.92% to 8,027.70.

The BSE Sensex touched a high and a low of 26900.30 and 26732.39, respectively. The BSE Mid cap index was up by 1.57%, while the Small cap index gained 1.30%.

The top gainers on the Sensex were Hero MotoCorp up by 5.79%, Maruti Suzuki up by 4.71%, Tata Power up by 3.62%, Hindalco up by 3.59% and GAIL India up by 3.36%. On the flip side, Sun Pharma down by 1.46%, ITC down by 1.37%, HDFC down by 1.19%, BHEL down by 0.89% and Tata Motors down by 0.87% were the top losers in the index.

On the BSE Sectoral front, Metal up by 2.79%, Capital Goods up by 2.75%, Realty up by 2.72%, Power up by 2.60% and Infrastructure up by 2.25% were the top gainers, while FMCG down by 0.67% was the top loser in the space.

Meanwhile, buoyant over India’s economic growth recovery, the Reserve Bank of India (RBI) Governor Raghuram Rajan has asserted that India is better prepared to handle the impact of interest rate increases in the US as foreign funds are not likely to exit the country due to signs of an upturn in economic growth.

Since December 2008, Federal Reserve kept interest rate near zero to improve the country’s economic growth. Improving US macro-economic data has raised expectations that the Federal Reserve will soon increase the interest rates. Any decision by the Fed to raise rates will have implications for economies like India, as it could lead to capital outflows from emerging markets particularly those running with high current account deficits.

Meanwhile, India has taken a lot of measures to contain the CAD. Curbs on gold imports, such as higher duties and 80/20 rule, have dramatically helped narrow India's current account deficit to $32.4 billion in the FY14 from $87.8 billion a year earlier. On the other hand, India also built up its foreign exchange reserves driven by recently taken measures which helped banks to raise around $34 billion in overseas loans and deposits from the Indian diaspora. Improving trade deficit coupled with the falling global crude prices leading to decline in government's fuel subsidy bill also improved the country’s overall economic situation. As per the economic survey 2014, Indian economy is likely to grow in the range of 5.4 to 5.9 percent in FY15 overcoming the sub-5 percent GDP growth over the past two fiscal years.

The CNX Nifty touched a high and low of 8,035.00 and 7,984.00 respectively.

The top gainers of the Nifty were Hero MotoCorp up by 6.46%, Jindal Steel & Power up by 6.39%, Maruti Suzuki India up by 5.14%, IndusInd Bank up by 4.88% and Tata Power Company up by 4.45%. On the other hand, Sun Pharmaceuticals Industries down by 1.56%, ITC down by 1.45%, HDFC down by 1.42%, BHEL down by 1.00% and Tata Motors down by 0.83% were the top losers.

European markets were trading in red, France's CAC 40 was down by 0.31%, Germany's DAX was down by 0.19% and United Kingdom's FTSE 100 was down by 0.05%.

Asian markets ended mostly in green on Monday, after the regional benchmark index capped its first monthly drop since April. China’s stocks rose, sending the benchmark index to a one-week high, amid speculation that the government will accelerate stimulus after an official gauge of the nation’s manufacturing expanded at a slower pace last month. Growth in China’s vast factory sector slackened in August as foreign and domestic demand slowed, stoking speculation that further policy easing would be needed to prevent the economy from stumbling once more. An index of growth in China’s vast manufacturing sector fell from a 27-month high to 51.1 in August. China’s official Purchasing Managers’ Index (PMI) slipped in August from July’s 51.7 slightly missing the median forecast of 51.2. Japanese capital spending fell to an annual rate of 3.0%, from 7.4% in the preceding quarter. Indonesian Trade Balance rose to a seasonally adjusted 0.13B, from -0.30B in the preceding month while Indonesian Inflation fell to a seasonally adjusted 3.99%, from 4.53% in the preceding month. Thai CPI fell to a seasonally adjusted annual rate of 2.09%, from 2.16% in the preceding month.