Benchmarks rally on firm global cues; Nifty recaptures 8,100 mark

Indian equity benchmarks staged an enthusiastic performance on Thursday, by rallying over one and a half percentage points and breaking lots of psychological levels in their northward journey. Sentiments, after a cautious start, turned positive and there appeared not even an iota of profit booking in the session as the benchmarks managed to fervently gain from strength to strength, supported by sustained foreign capital inflows. US Federal Reserve’s decision to keep interest rates near zero for a considerable time has mainly boosted the confidence of the market participants. Sentiments also got bolstered on optimism that trade ties with China would attract foreign inflows and revive country's economic growth. Some support also came after the Reserve Bank of India eased foreign direct investment (FDI) norms allowing companies to issue equity shares to a resident outside India against any type of fund subject to certain conditions.

Buying got intensified in last leg of trade as European counters made a firm start with CAC, DAX and FTSE were trading with a gain of around a percent in the morning deals on Thursday, tracking gains  on Wall Street after the U.S. Federal Reserve renewed its pledge to keep ultra-low interest rates for ‘a considerable time’. Asian markets too ended mostly in the green led by Japanese market which surged over a percent toward a six-year high on a weaker yen.

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 and Nifty surpassing their crucial 27,100 and 8,100 bastions. Rally in oil and gas counters too supported the sentiments as the four-member committee of secretaries has submitted its report on a new gas pricing mechanism, prescribing a rate much lower than the doubling of price approved by previous UPA government.

Meanwhile, shares of real estate companies rallied on reports that the Real Estate (Regulation and Development) Bill, 2013 is likely to come up for consideration in Rajya Sabha in the forthcoming Winter Session. Buying in pharma space too aided the sentiments led by over 1.50% rally in Sun Pharmaceutical Industries after the drug maker said it has entered into a licensing agreement with Merck & Co Inc for investigational therapeutic antibody candidate, Tildrakizumab to be used for treatment of plaque psoriasis, a skin ailment. Additionally, stocks related to Sugar space too edged higher after the industry body ISMA’s report that India's sugar output is estimated to rise up to five percent at 25.5 million tonnes in the next marketing year starting October despite drop in sugarcane area.

The NSE’s 50-share broadly followed index Nifty rose by around one hundred and forty points and ended above the psychological 8,100 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex rose by over four hundred and eighty points to finish above the psychological 27,100 mark. Broader markets too traded with traction and ended the session with a gain of around two percent. The market breadth remained in the favour off advances, as there were 2235 shares on the gaining side against 817 shares on the losing side while 94 shares remain unchanged.

Finally, the BSE Sensex surged by 480.92 points or 1.81%, to 27112.21, while the CNX Nifty gained 139.25 points or 1.75% to 8,114.75.

The BSE Sensex touched a high and a low of 27132.20 and 26503.08, respectively. The BSE Mid cap index was up by 1.83%, while the Small cap index gained 2.69%.

The top gainers on the Sensex were Hero MotoCorp up by 5.57%, HDFC up by 3.73%, Tata Motors up by 3.70%, Larsen & Toubro up by 3.57% and BHEL up by 3.51%. On the flip side, Infosys down by 1.08% and Hindustan Unilever down by 0.58% were the only losers in the index.

On the BSE Sectoral front Realty up by 4.65%, Consumer Durables up by 3.17%, Capital Goods up by 2.84%, Auto up by 2.67% and Power up by 2.23% were the top gainers, while there were no losers in the space.

Meanwhile, tightening noose over wilful defaulters, the Securities and Exchange Board of India (Sebi) may soon issue guidelines to deal with them, given that there are no restrictions at present on such entities raising funds from the capital market.

An entity is declared a wilful defaulter by a lender if it defaults on loan repayments despite having the capacity to repay. Also, entities that use the loan amount for purposes other than specified ones could be declared wilful defaulters. The market regulator might deem wilful defaulters not ‘fit and proper’ from the perspective of accessing capital markets. The new framework will be applicable to those approaching the capital market for raising funds for the first time, as well as the listed companies and entities associated with it.

Recently, Reserve Bank of India (RBI) too has clarified that in cases where guarantees furnished by the companies within the group on behalf of the wilfully defaulting units are not honoured then such group companies should also be reckoned as wilful defaulters. The apex bank has said that banks can name company management as wilful defaulters. Similarly, group companies of a defaulting company can also be termed as wilful defaulters. According to the new clarification, guarantors who refuse to pay will also be treated as defaulters. The central bank had however clarified that these norms would be applicable only prospectively.

Sebi and the RBI are also planning increased coordination to ensure wilful defaulters are kept away from financial markets. Currently RBI shares data on wilful defaulters with Sebi, credit rating agencies and Credit Information Bureau of India on a quarterly basis and Sebi acts against those towards whom adverse orders are passed by other regulatory authorities.

The CNX Nifty touched a high and low of 8,120.85 and 7,939.70 respectively.

The top gainers of the Nifty were Hero MotoCorp up by 6.06%, Larsen & Toubro up by 3.79%, DLF up by 3.76%, BPCL up by 3.74% and BHEL up by 3.60%. On the other hand, Infosys down by 1.04%, Hindustan Unilever down by 0.64%, SSLT down by 0.09% and Tech Mahindra down by 0.03% were the only losers.

European markets were trading in green, France's CAC 40 was up by 0.71%, Germany’s DAX was up by 1.00% and United Kingdom's FTSE 100 was up by 0.49%.

Asian markets ended mostly in green on Thursday, with Japanese market closing at a six-year high as the yen tumbled after the Federal Reserve raised its estimates for interest rates. Japan’s exports declined in August as shipments to the United States contracted, another sign the economy is struggling to rev up after a deep slump in April-June. Exports fell 1.3 percent in August from a year ago, less than the median estimate for a 2.6 percent annual decline. That followed a 3.9 percent annual gain in the previous month after having fallen in June and May. The patchy performance has dashed hopes that external demand can offset a consumer spending slump caused by an April sales tax hike to 8 percent from 5 percent, heaping pressure on policymakers to do more to spur economic growth. Japan’s trade balance rose to a seasonally adjusted -0.92T, from -1.02T in the preceding month. Hong Kong Unemployment Rate remained unchanged at a seasonally adjusted 3.3%, compared to the preceding month.

The People’s Bank of China lowered the rate on the 14-day repurchase agreement to 3.50% from 3.75%, sending money market rates tumbling. One year interest rate swaps fell to 3.46% after the news from 3.51% while five-year swaps were down at 3.75% from 3.79%. A lower repo rate is aimed at lowering other rates in the market, part of the government’s ongoing attempt to lower corporate financing costs without instituting high profile measures such as a cash reserve cut or interest rate cut.