Benchmarks end higher on supportive global cues

Indian equity benchmarks ended the session with a gain of over half a percent on Wednesday as investors opted to buy beaten-down but fundamentally strong stocks after two days of continuous drubbing amid positive global cues. In the extremely volatile session of trade, key gauges made a positive start but looked like slipping below their neutral lines in noon deals, recovery in last leg of trade helped markets to pick up momentum and end with decent gains. Sentiments remained up-beat with the report of Department of Industrial Policy and Promotion that foreign direct investment (FDI) flows into India more than doubled to $3.5 billion in July, compared to FDI worth $1.65 billion in July 2013. Also, the government has got a pat on its back by the international credit rating agency Crisil, which has said that efforts being taken by the Narendra Modi government to boost the real estate sector are in the ‘right direction’.

Global cues too remained supportive with European markets were trading higher in early deals, boosted by speculation the Fed will maintain a pledge on low rates in a meeting that will conclude later in the day. Asian equity markets too shut shop mostly in the green with some of the regional indices halting their losing streak. There was some support on report of China providing 500 billion yuan ($81.4 billion) of liquidity to its five biggest banks.

Back home, appreciation in Indian rupee too aided the sentiments. The partially convertible rupee was trading at 60.92 per dollar at the time of equity market closing against the Tuesday’s close of 61.05 on the Interbank Foreign Exchange. Rally in metal counter too aided the sentiments after China’s economic stimulus raised hopes of a boost in demand in the world's biggest consumer of metals. Moreover, stocks related to steel space remained on buyers’ radar with Steel Ministry saying that Finance Ministry will take a call on withdrawing import duty of iron ore in the face of falling domestic supplies.

Shares of IT majors too remained up-beat on hopes that Fed will stick to its pledge of keeping rates low. Sentiments of the market participants further boosted after China injected $81 billion into major banks. Additionally, most of tyre stocks edged higher led by the gains of JK tyre stocks which rallied over 8% after the company announced that Apollo Tyres Africa Proprietary, a wholly-owned step subsidiary of the company in South Africa, has voluntarily initiated business rescue proceedings.

The NSE’s 50-share broadly followed index Nifty surged by over forty points to end above the psychological 7,950 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by around one hundred and forty points to finish above its psychological 26,600 mark. Broader markets traded with traction and ended the session with a gain of around half a percent. The market breadth remained in favor of advances, as there were 1519 shares on the gaining side against 1498 shares on the losing side while 101 shares remain unchanged.

Finally, the BSE Sensex surged by 138.78 points or 0.52%, to 26631.29, while the CNX Nifty gained 42.60 points or 0.54% to 7,975.50.

The BSE Sensex touched a high and a low of 26682.64 and 26511.71, respectively. The BSE Mid cap index was up by 0.25%, while the Small cap index gained 0.31%.

The top gainers on the Sensex were Dr. Reddys Lab up by 2.52%, Infosys up by 2.29%, Tata Power up by 2.21%, BHEL up by 2.18% and Tata Steel up by 1.78%. On the flip side, Cipla down by 1.60%, Coal India down by 1.26%, Sun Pharma down by 0.70%, HDFC Bank down by 0.44% and Hindustan Unilever down by 0.40% were the top losers in the index.

On the BSE Sectoral front IT up by 1.52%, Power up by 1.35%, TECK up by 1.26%, Auto up by 1.02% and Capital Goods up by 0.81% were the top gainers, while Consumer Durables down by 1.06%, PSU down by 0.15% and Bankex down by 0.04% were only losers in the space.

Meanwhile, cautioning against growing dependence on foreign capital flows, Governor Raghuram Rajan underscored that Reserve Bank of India (RBI) would continue to limit its reliance on foreign debt to finance the country’s current account deficit (CAD). He further added that it was essential that the economy in a way was careful and circumspect about this since financial conditions could change anytime and that the money the economy had gained was largely out of the stimulus offered by some developed countries like United States (US).Further, he emphasized that financial conditions could change since at some point of time the investors would find greater usage of their money back home and they may want to exit once again, thus funding the Current Account Deficit (CAD) majorly by this external cash flows was an risky option. India’s CAD for the quarter ended June narrowed sharply to $7.8 billion, or 1.7% of gross domestic product, from $21.8 billion (4.8 per cent of GDP) in the same quarter of the previous year.

The governor also had a word of caution on the nature of spending, especially that financed out of foreign resources and added the need to track trade deficit data closely. Moreover, he warned that if this money was mindlessly spent, then there was huge risk of running large deficits based on this foreign borrowing.

The country’s exports during the first five months of this financial year rose 7.31% to $134.79 billion, compared with $12.56 billion in the year-ago period, while Imports fell 2.69% from $196.22 billion to $190.94 billion. As a result, the trade deficit for the April-August period narrowed to $56.15 billion from $70.6 billion a year ago. The decline in CAD was mainly on account of reduction of this trade deficit data.

The CNX Nifty touched a high and low of 7,990.65 and 7,936.95 respectively.

The top gainers of the Nifty were Tata Power Company up by 2.45%, Infosys up by 2.43%, Dr. Reddy's Laboratories up by 2.33%, BHEL up by 2.22% and Ultra Tech Cement up by 1.91%. On the other hand, Jindal Steel & Power down by 2.13%, BPCL down by 1.96%, Cipla down by 1.73%, Coal India down by 1.34% and HDFC Bank down by 0.74% were the top losers.

European markets were trading in green, France's CAC 40 was up by 0.70%, Germany’s DAX was up by 0.46% and United Kingdom's FTSE 100 was up by 0.30%.

Asian markets ended mostly in green on Wednesday, as investors awaited a Federal Reserve policy decision.  China’s central bank joined its European counterpart in boosting liquidity to address weakening growth, underscoring a divergence in direction among the world’s biggest economies as the US reduces stimulus. The People’s Bank of China is injecting 500 billion yuan ($81 billion) into the nation’s largest banks signaling the deepest concern yet with an economic slowdown. The Bank of Japan is expected to maintain its ultra-easy monetary stance and could even take additional steps, notwithstanding signs that it could be reaching the limits of its power to reflate the economy. This month, Japan’s central bank bought bills at negative yields, essentially paying banks for the privilege of lending them cash.

Indonesia’s loan growth in July slowed to 15.7% on a yearly basis, compared with 17.2% in June. Loan growth has been on a slowing trend since the central bank tightened monetary policy from June to November last year by raising the benchmark interest rate 175 basis points to 7.5%. Indonesia’s broad money supply (M2) growth rose 11% in July from a year earlier.