Markets witness fire-works at start of Diwali week; bulls cheer fuel reforms, poll verdict

Indian equity benchmarks started Diwali week with some fireworks, by rallying over a percentage point 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 traded jubilantly throughout the session as investors continued hunt for fundamentally strong but oversold stocks. The rally came mainly after ruling party's victory in two state assembly elections of Maharashtra and Haryana, which will give Narendra Modi government a tremendous morale boost to pursue economic reforms.

Sentiments also remained up-beat on news that government raised the price of gas from domestic fields to $5.6 per unit, around 33% higher from $4.2 at present. The new price would come into effect from November 1 and would be revised every six months with a view to ensuring ‘stability in the market’. Some strength also came in from IMF’s latest world economic outlook that, India is poised to become a  two trillion dollar economy this year, while its GDP size would cross another milestone of three trillion dollars after five years in 2019.

On the global front, Asian markets shut shop in the green led by Japan's Nikkei, up by around 4% on the back of upbeat US economic data and rally in exporters’ shares amid a weaker yen. Moreover, Shanghai Composite edged higher as Chinese central bank is set to inject about 200 billion yuan ($32.66 billion US dollars) worth of three-month loans into five or six medium-sized listed banks. However, European markets were trading in the red terrain in early deals after investors booked profits after sharp gains on Friday.

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 above their crucial 26,400 (Sensex) 7,850 (Nifty) bastions. Recovery in Indian rupee too supported the sentiments. The rupee firmed up against the US dollar and was trading at 61.31 at the time of equity markets closing as compared to Friday’s close of 61.44.

Meanwhile, share related to oil and gas counter remained on buyers’ radar as the hike in gas prices would help improve revenue and profit going forward while lowering the subsidy burden. Moreover, banking shares gained on expectations of more reforms to push the economy on the growth track. Metal shares rebounded on reports about Chinese central bank considering injecting more liquidity in the economy to revive demand and arrest the deceleration in the Chinese growth. Additionally, auto stocks firmed up on expectations that lower diesel prices would lead to higher demand. On the flip side, software and technology counters witnessed profit taking after the rupee strengthened against the US dollar.

The NSE’s 50-share broadly followed index Nifty rose by around hundred points to regain the psychological 7,850 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex rose by over three hundred and twenty points to finish above the psychological 26,400 mark. Broader markets too traded with traction and ended the session with a gain of around half a percent. The market breadth remained in favour of advances, as there were 1,633 shares on the gaining side against 1,206 shares on the losing side while 112 shares remain unchanged.

Finally, the BSE Sensex surged by 321.32 points or 1.23%, to 26429.85, while the CNX Nifty soared by 99.70 points or 1.28% to 7,879.40.

The BSE Sensex touched a high and a low of 26517.90 and 26368.94, respectively. The BSE Mid cap index was up by 1.12%, while the Small cap index was up by 0.48%.

The top gainers on the Sensex were ONGC up by 5.44%, Hindalco up by 4.69%, Tata Motors up by 3.94%, Axis Bank up by 3.92% and Larsen & Toubro up by 2.90%. On the flip side, Wipro down by 1.67%, Infosys down by 1.09%, TCS down by 0.88%, ITC down by 0.51% and Reliance Industries down by 0.39% were the top losers in the index.

On the BSE Sectoral front PSU up by 2.64%, Auto up by 2.17%, Capital Goods up by 2.14%, Oil & Gas up by 1.94% and Infrastructure up by 1.93% were the top gainers, while  IT down by 0.83%, TECK down by 0.26% were the only losers in the space.

Meanwhile, in a major and much awaited reform, the government de-regulated retail prices of diesel, which will now reflect international movement in oil prices. This development, which would bring an immediate respite of about Rs 3.50 per litre on diesel prices, marks the first reduction in diesel rates in over five years. Diesel rates were last cut by Rs 2 a litre to Rs 30.86 in January 29, 2009.

Also, the government decided to re-launch the direct benefit transfer scheme for cooking gas and link with the new bank account opened under Pradhan Mantri Jan Dhan Yojna and for those who lacked bank accounts could continue to enjoy the benefits of subsidized LPG cylinders. The programme would be implemented 'in a mission mode' between November 10 and January 1, 2015.

Diesel reduction comes right after the state elections and also at a time when international crude prices have been running at four year low. However, originally, petrol and diesel prices were deregulated in April 2002 when the NDA government was in power. But, administered pricing regime made a silent entry towards the end of NDA regime in the first quarter of 2004 when crude prices started inching up. It was back in January 2010, the previous government decided to raise diesel prices by up to 50 paisa a litre every month. Nevertheless, with the over-recovery or the profit of diesel climbing to Rs 3.56 per litre, the centre decided to take the guards off.

Deregulation would mean that the government and state-owned explorers including Oil and Natural Gas Corp (ONGC) from now on, would no longer would be subsidising diesel. Finance Minister Arun Jaitley had budgeted Rs 63,400 crore for petroleum subsidies which was 25 per cent lower than previous fiscal.

Lastly, a cut in these prices leads to a lower subsidy bill and will eventually help the government cut taxes on petro products, which in turn, will help cushion the shocks when global crude prices rise again since India imports two-thirds of its energy need.

The CNX Nifty touched a high and low of 7,905.95 and 7,856.95 respectively.

The top gainers of the Nifty were UltraTech Cement up by 5.90%, ONGC up by 5.01%, Hindalco Industries up by 4.70%, DLF up by 4.48% and BPCL up by 4.10%. On the other hand, Jindal Steel & Power down by 7.35%, Wipro down by 1.88%, Infosys down by 1.07%, TCS down by 0.64% and ITC down by 0.61% were the top losers.

European markets were trading in red, France’s CAC 40 was down by 0.74%, United Kingdom’s FTSE 100 was down by 0.83% and Germany’s DAX was down by 1.07%.

Asian markets ended in green on Monday, with Chinese stocks trading in Hong Kong climbing the most in a week amid speculation as the central government is accelerating measures to support economic growth. This week is expected to be an important one for Chinese markets because the Communist Party gathers in Beijing for an important planning meeting. China is also expected to release third quarter GDP data scheduled on Tuesday and the Hong Kong and Shanghai stock exchanges are expected to launch a program allowing investors from both sides to access each other’s stocks, opening up a crucial channel for fresh capital flows. China’s central bank is planning the injection of about 200 billion yuan ($32.7 billion) into some national and regional lenders as Prime Minister Li Keqiang steps up stimulus to support economic growth. The injection comes after the central bank provided 500 billion yuan of liquidity to China’s five biggest banks last month.

Indonesian financial markets rose as Joko Widodo became the country’s seventh president, lifting optimism that he will guide the nation toward improving the economy and the public’s livelihood through reforms such as reducing costs on fuel subsidies. Hong Kong Unemployment Rate remained unchanged at a seasonally adjusted 3.3% compared to the preceding month.