Markets soar to day’s high despite negative start of European shares; Nifty holds above 7850 mark

Going from strength to strength, local equity markets were now trading at day’s high point tailing sanguine regional counterparts, which took Sensex and Nifty higher above the psychologically crucial 26,400 and 7,850 levels respectively with gains of over 1.25%. Sustained buying activities by funds and retail investors on hopes for additional reforms after Narendra Modi's party won election in two states mainly got the bulls going. Additionally, slew of measures taken by the government in the past two days, like de-regulating diesel prices and raising the cost of natural gas also aided the sentiment. Meanwhile, broader indices also fuelling the rally were trading higher with gains of over a percent.

On the global front, despite positive Asian counterparts, European shares dipped in early trade on Monday as previous session’s sharp rebound lost steam even as some takeover activity boosted the shares of Nutreco, German sportswear firm Adidas and Havas.

Closer home, with the buying being broad-based, only stocks from Information Technology counter were underperformers, while rest all the sectoral indices on BSE were trading in green, maximum gains were lured by stocks from PSU, Oil & Gas and Auto counters. Additionally, banking stocks soared as a sharp cut in diesel price is expected to bring down freight rates, which in turn could reduce consumer price inflation. In the biggest wave of economic reforms since coming to power, the NDA government on Saturday de-regulated the price of diesel and announced a new price for domestically-produced natural gas. With this, immediate price of diesel was reduced by Rs 3.37 a litre (ex-Delhi) with effect from midnight Saturday.  The overall market breadth on BSE was in the favour of advances which thumped declines in the ratio of 1672:841; while 117 shares remained unchanged.

The BSE Sensex is currently trading at 26443.25, up by 334.72 points or 1.28% after trading in a range of 26399.84 and 26517.90. There were 25 stocks advancing against 5 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 1.23%, while Small cap index up by 1.10%.

The gaining sectoral indices on the BSE were PSU up by 2.35%, Oil & Gas up by 2.15%, Auto up by 2.12%, Capital Goods up by 2.11% and Bankex up by 1.67% while, IT down by 0.56%, and TECK down by 0.11% were the losing indices on BSE.

The top gainers on the Sensex were ONGC up by 6.65%, Hindalco up by 4.80%, Tata Motors up by 4.04%, Axis Bank up by 3.61% and Larsen & Toubro up by 2.84%. On the flip side, Infosys down by 1.13%, Wipro down by 0.94%, Reliance Industries down by 0.25%, TCS down by 0.20% and ITC down by 0.11% were the top losers.

Meanwhile, the government has approved raising natural gas price to $5.61 per mmBtu. The new gas price will be implemented from November 1 and will be revised every six months with the next revision being on April 1. However, Reliance Industries will continue to get current $4.2 per mmBtu rate till it makes up for shortfall in output from KG-D6 block.  

RIL will get the higher rates if it is legally able to prove that output fall was a result of geological reasons as it claims and it did not deliberately cut production. As per the RIL agreement with government, natural gas output from D1&D3 gas fields in KG-D6 block should be 80 mmscmd, but it is languishing at less than 8 mmscmd.

The Cabinet modified the Rangarajan formula approved by previous UPA government to bring down the increase in rates from $8.4 to $5.61 per mmBtu. Gas price increase had been deferred on three occasions previously. Higher gas prices would increase inflation in the country by rising operating cost of fertilizer plants, running power stations and prices of food.

Every dollar increase in gas price will lead to Rs 1,370 per tonne rise in urea production cost and 45 paise per unit increase in electricity tariff. However, there is only 7 percent of the nation’s power generation capacity based on gas. Furthermore, there would be a minimum Rs 1.89 per standard cubic metre hike in piped cooking gas and Rs 2.81 per kg increase in CNG price.

The CNX Nifty is currently trading at 7885.40, up by 105.70 points or 1.36% after trading in a range of 7872.20 and 7905.95. There were 43 stocks advancing against 7 stocks declining on the index.

The top gainers on Nifty were ONGC up by 6.65%, Hindalco up by 4.95%, Ultratech Cement up by 4.88%, Tata Motors up by 4.08% and Axis Bank up by 3.72%. On the flip side, Jindal Steel & Power down by 4.88%, Infosys down by 1.08%, Wipro down by 0.94%, Reliance Industries down by 0.18% and TCS down by 0.09% were the top losers.

Asian markets were set for a green close; with FTSE Bursa Malaysia KLCI trading up by 14.01 points or 0.78% to 1,802.32; Shanghai Composite trading up 15.96 points or 0.68% to 2,357.14; Straits Times trading up 22.03 points or 0.7% to 3,189.76; KOSPI Index trading up 29.4 points or 1.55% to 1,930.06; Jakarta Composite trading up 56.52 points or 1.12% to 5,085.47; Hang Seng increased 119.03 points or 0.52% to 23,142.24; Taiwan Weighted increased 150.26 points or 1.77% to 8,663.14 and  Nikkei 225 increased 578.72 points or 3.98% to 15,111.23.

European markets also got off to a negative start; with Germany’s DAX trading lower by 55.34 points or 0.63% to 8,794.93; France’s CAC trading lower by 21.36 points or 0.53% to 4,011.82 and UK’s FTSE 100 trading lower by 7.39 points or 0.12% to 6,302.90.