Global crude oil slump takes the domestic market to fresh all time high

Indian markets after snapping the November series on an impressive note made a triumphant start of the new series with both the benchmarks rallying to new highs, posting over a percent gains for the day. Benchmarks after a gap-up start never showed any sign of profit booking and kept on strengthening. Although there was cautiousness about the second quarter GDP data to be announced after the market hours, which was likely to have slowed, traders largely concentrated on the big news from the global front, where crude prices slumped to their lowest level since May 2010, after the Organization of the Petroleum Exporting Countries (OPEC) decided not to cut output at the conclusion of its highly-anticipated meeting. OPEC said that it would keep its official production target unchanged at 30 million barrels a day. Fall in crude prices is a boon for importers like India, which imports about 70 percent of its petroleum requirement. Decline in crude prices results into lower inflation, improvement in fiscal and current account balances and higher growth.

The US markets were closed due to Thanksgiving Day holiday, so there was not much cue from there, while the Asian markets made a mixed closing, though the Japanese markets surged after yen dropped toward a seven-year low against the dollar and Japanese two-year yields slid below zero after a government report showed household spending declined and inflation slowed, indicating BOJ will likely step up stimulus efforts if it has to reach the inflation goal. The European markets made a soft start dragged down by decline in energy shares for the fifth day.

Back home, the bulls went berserk on the Dalal Street with all the sectoral indices along with broader markets posting considerable gains. The most buzzing sector of the trade was banks with eight of the BSE banking index' twelve constituents, touching new yearly highs. Though, the RBI is not likely to cut interest rate in its upcoming monetary policy review but the slump in crude prices seemed paving the way for a favourable decision from the RBI early next year. There was another development related to the sector with State Finance Minister stating that the government is considering a plan to reduce stakes in state-run banks to 52 per. The reduction of government of India share in equity capital of PSBs to 52 per cent will enable mobilisation of about Rs 89120 crore. With the decline in crude prices not only the PSU OMCs were in jubilant mood but other companies whose large raw material is crude based, especially paint companies, they too surged in trade today. There was slight selling in final hours on report that India's fiscal deficit was Rs 76.77 billion during April-October, or 89.6 percent of the full-year target, however markets remained strong. Power stocks extended their gains after power, coal and renewable energy minister Piyush Goyal's assurance of quick action to resolve fiscal difficulties and fuel scarcity of power plants. Barring IT and telecom pack, which remained under pressure after the TRAI issued fresh pricing recommendations for the upcoming spectrum auction, all sectors ended in the green.

Finally, the BSE Sensex surged by 255.08 points or 0.90%, to 28693.99, while the CNX Nifty soared by 94.05 points or 1.11% 8,588.25.

The BSE Sensex touched a high and a low of 28822.37 and 28483.99, respectively. The BSE Mid cap index was up by 0.97%, while the Small cap index was up by 0.26%.

The top gainers on the Sensex were SBI up by 5.10%, Axis Bank up by 2.79%, Tata Steel up by 2.78%, Tata Motors up by 2.78% and Mahindra & Mahindra up by 2.53%. On the flip side, Sesa Sterlite down by 2.88%, Bharti Airtel down by 1.01%, ONGC down by 0.71%, Dr. Reddys Lab down by 0.44% and Bajaj Auto down by 0.35%.

On the BSE Sectoral front Bankex up by 2.87%, Auto up by 1.95%, PSU up by 1.93%, Realty up by 1.65% and Consumer Durables up by 1.16% were the top gainers, while TECK down by 0.18%, and IT down by 0.05% were the only losers in the space.

Meanwhile, easing loan norms for low-cost housing, Reserve Bank of India (RBI) has allowed banks to give loans to individuals against investment in long-term bonds issued to raise money for lending to infrastructure and affordable housing projects. Banks can give loans up to Rs 10 lakh per borrower and the tenure of loans would depend upon the maturity period of bonds.

However, banks could lend against these bonds only if it were issued by them. RBI has strictly barred banks for lending against bonds issued by other banks. Meanwhile, banks can issue long-term bonds with a minimum maturity of seven years to raise resources for lending to long-term projects in infrastructure and affordable housing.

In July, following a budget announcement by the finance minister, RBI had allowed banks to raise funds by selling long-term bonds that are exempt from the central bank’s reserve requirements and priority sector lending targets. As per RBI’s regulations, banks have to set aside 4% of their deposits as cash reserve ratio (CRR) and mandatorily invest 22% of their funds in government bonds. They also have to compulsorily lend 40% of their funds to priority segment, which includes small businesses, agriculture and weaker sections of the society.

The CNX Nifty touched a high and low of 8,617.00 and 8,516.25 respectively.

The top gainers on Nifty were PNB up by 7.68%, Bank of Baroda up by 7.48%, Asian Paints up by 5.72%, State Bank of India up by 5.38% and IndusInd Bank up by 4.08%. On the flip side, Cairn India down by 4.53%, SSLT down by 3.04%, ONGC down by 1.12%, Bharti Airtel down by 1.08% and BHEL down by 0.74% were the top losers.European markets were trading in red, Germany’s DAX was down up by 0.47%, United Kingdom’s FTSE 100 was down by 0.69% and France’s CAC 40 was down by 0.53%.

Asian markets ended mostly in green on Friday. Though there were no overnight cues from the US, the Japanese stock markets rose sharply, as a weaker yen boosted exporter shares. The investors also digested a flurry of economic data painting a mixed picture of the world's third-largest economy. The Japanese industrial output unexpectedly rose for the second straight month in October, the jobless rate fell and inflation fell a less than expected 4% in the month, while retail sales fell more than forecast and the annual core consumer inflation slowed for a third straight month due to falling oil prices, underscoring the challenges facing Prime Minister Shinzo Abe, as he tries to overcome deflation and boost growth in the world's third-largest economy. The Chinese market increased amid optimism lower crude prices will benefit transport companies and the central bank will continue to ease policy. The Chinese market was up on hopes that People’s Bank of China may trim reserve ratios after unexpectedly lowering lending rates last week.