Strong global cues take benchmarks higher

Snapping three days losing streak, Indian equity benchmarks staged an enthusiastic performance on Thursday, by rallying around one and a half percentage points and breaking lots of psychological levels in their northward rally. 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. The rally came mainly after dovish stance of the US Fed and Sharp decline in crude oil prices. Brent oil futures for November delivery tumbled $1.47 or 1.59 percent to hit $90.67 a barrel on the ICE.

Some support also came after the International Monetary Fund (IMF), akin to World Bank, raised the India’s growth forecast to 5.6% for 2014 from its earlier estimate of 5.4% and forecasted a higher 6.4% growth in 2015 on the back of renewed confidence in the market due to a series of economic reforms pursued by the new Government. Meanwhile, Paris-based think tank, the Organisation for Economic Cooperation and Development (OECD) said that the Indian economy is projected to see a pickup in growth momentum while most of the other major economies are anticipated to see stable prospects. The readings for the month of August are based on Composite Leading Indicators (CLIs), which are designed to anticipate turning points in economic activity relative to trend.

Gains got magnified after European counters made a strong start, with CAC, DAX and FTSE all were trading higher by around half a percent or more in early deals on Thursday. Asian markets too ended mostly in the green after the minutes of the latest Fed meeting highlighted worries over downside risks to the global economy.

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 26,600 bastion, while Nifty ended above its crucial 7,950 mark. Recovery in Indian rupee too supported the sentiments. The rupee firmed up against the US dollar and was trading at 60.99 at the time of equity markets closing as compared to Wednesday’s close of 61.39.

Meanwhile, banking shares remained on buyers’ radar after the World Bank said the Indian economy is set to grow by 6.4% in 2015-16 as against 5.6% in 2014-15. Sugar stocks too edged higher as the Food Minister Ram Vilas Paswan has said that government is prepared to extend export subsidy and give additional interest-free loans to clear cane arrears after threats of a shutdown of sugar mills in Uttar Pradesh. Additionally, fertilizers stocks remained jubilant after the Fertilizer Ministry notified New Urea Investment Policy for setting up and expansion of urea plants. According to the policy, the companies will get a subsidy on production only if the urea production starts in the next 5 years.

The NSE’s 50-share broadly followed index Nifty rose by around one hundred and twenty points and ended above the psychological 7,950 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex rose by over three hundred and ninety points to finish above the psychological 26,600 mark. Broader markets too traded with traction and ended the session with a gain of over one and a half percentage points. The market breadth remained in favour of advances, as there were 2,015 shares on the gaining side against 932 shares on the losing side while 94 shares remain unchanged.

Finally, the BSE Sensex surged by 390.49 points or 1.49%, to 26637.28, while the CNX Nifty gained 117.85 points or 1.50% to 7,960.55.

The BSE Sensex touched a high and a low of 26688.70 and 26394.21, respectively. The BSE Mid cap index was up by 1.83%, while the Small cap index was up by 1.59%.

The top gainers on the Sensex were BHEL up by 8.37%, Hindalco up by 6.01%, SBI up by 2.84%, HDFC up by 2.68% and ICICI Bank up by 2.64%. On the flip side, Wipro down by 0.83%, NTPC down by 0.49%, Mahindra & Mahindra down by 0.38%, ITC down by 0.19% and Infosys down by 0.13% were the top losers in the index.

On the BSE Sectoral front Capital Goods up by 3.01%, Realty up by 2.61%, Bankex up by 2.51%, Power up by 2.25% and Metal up by 1.91% were the top gainers, while there were no losers in the space.

Meanwhile, in an attempt to downplay the threat of shut-down from sugar mills in Uttar Pradesh (UP), Food Minister, Ram Vilas Paswan, underscored that government though was ready for any eventualities, but was also prepared to extend export subsidy and give additional interest-free loans to clear cane arrears. He also asserted that sugar prices would not surge in absence of production from sugar mills in UP since the country had sufficient stock.

Burdened by payouts of around Rs 4,500 crore of cane arrears to farmers, private millers in UP, the second largest sugar producing state, threatened to shut operations this year, if cane prices were not linked to sugar rates. However, not budging from its stand, government has yet again sought mills’ guarantee to pay the cane arrears, before any relief package could be doled out.Food Minister, Ram Vilas Paswan, expressed confidence that the standoff between the UP government and the mills over cane policy would be resolved, however he criticized the two different stands taken by the millers, with the first one being agreement to pay higher cane price fixed by state and later the denial by showing the inability to do so.

Further, the minister also pointed that while the farmers had many options to grow other crops like wheat, but sugar mills, which were set up with crores of rupees of investment, did not have an option other than producing sugar.

The CNX Nifty touched a high and low of 7,972.35 and 7,886.50 respectively.

The top gainers of the Nifty were BHEL up by 8.16%, Hindalco Industries up by 5.51%, Zee Entertainment Enterprises up by 5.10%, Ambuja Cements up by 3.89% and PNB up by 3.33%. On the other hand, Tech Mahindra down by 2.55%, Jindal Steel & Power down by 0.60%, NMDC down by 0.56%, NTPC down by 0.49% and Wipro down by 0.48% were the top losers.

European markets were trading in green, France’s CAC 40 was up by 0.47%, United Kingdom’s FTSE 100 was up by 0.43% and Germany’s DAX was up by 1.16%.

All the Asian equity indices, barring Japanese Nikkei, ended the Thursday’s trade in the green terrain. The sentiment remained up-beat after minutes of the September 16-17 FOMC meeting offered a dovish outlook for U.S. monetary policy, with some Fed officials expressing concerns about global economic weakness and the impact of a stronger U.S. dollar. Meanwhile, Chinese Shanghai edged higher by over quarter a percent to end near a 20-month high, as investors looked forward to trade and inflation data due next week. Moreover, investor sentiment got a boost after Premier Li Keqiang said the government would launch some key projects in areas such as water conservation and environmental protection this year to support economic growth.

However, Japanese Nikkei ended lower, erasing earlier gains as the yen hit a three-week high against the dollar. On the economic front, Japanese core machinery orders climbed 4.7 percent in August from the previous month, government data showed, exceeding forecasts for an increase of 0.5 percent. The leading gauge of capital spending rose for the third straight month, helping ease concerns the economy is losing traction.