Markets cheer rate cut; Sensex recaptures 28,000 mark

Boisterous benchmarks showcased an enthusiastic performance on Thursday, by rallying over two and a half percentage points, led by financials on expectations that further easing of interest rates would help spur growth. Sentiments remained up-beat since start as key bourses opened with a huge gap on up-side 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 stocks. Frontline indices not only ended the session near intraday high levels but also recaptured their crucial 8,450 (Nifty) and 28,000 (Sensex) bastions as investors took to hefty across the board buying.

Sentiments remained jubilant after the Reserve Bank of India (RBI) Governor Raghuram Rajan unexpectedly cut the repo rate by 25 basis points to 7.75% from 8%. Meanwhile, the cash reserve ratio (CRR) has been kept unchanged at 4% of net demand and time liabilities (NDTL) while the reverse repo rate stands adjusted to 6.75%. Some support also came after United Nations (UN) in its report said that the Indian economy is likely to expand by 6.4 per cent this year, driving the economic growth in South Asia. The progress in implementing much-needed structural reforms was likely to boost the country’s economic performance in 2015. Meanwhile, Finance Ministry’s Chief Economic Adviser Arvind Subramanian said that prospects for the Indian economy look ‘very bright’ with the remarkable turnaround witnessed in recent months on the back of lower current account deficit and the slew of reforms unleashed by the new government.

On the global front, European shares were trading in the red as Switzerland’s central bank ended its minimum exchange rate policy that was meant to keep the euro from falling below 1.20 Swiss francs. However, Asian markets ended mostly in the green terrain, led by a surge in Chinese shares, which roused gains as investors second guess uncertain prospects for the world economy.

Back home, there was broad based buying witnessed in the markets and apart from the blue chips, the broader markets too participated strongly in the rally. Appreciation in Indian rupee too supported the sentiments. The partially convertible rupee was trading at 62.00 per dollar at the time of equity market closing against the Wednesday’s close of 62.19 on the Interbank Foreign Exchange. Meanwhile, rally in rate sensitive counters viz. Realty, Banking and Auto too aided the sentiments after RBI in a surprise inter-meeting has cut the interest rates by 25 bps to 7.75 per cent with immediate effect.

The NSE’s 50-share broadly followed index Nifty gained by over two hundred and ten points to end near its psychological 8,500 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex zoomed by around seven hundred and thirty points to end above its crucial 28,000 mark. The broader markets too traded jubilantly throughout the session and ended the session with a gain of over one percentage point. The market breadth remained in favour of advances, as there were 1,720 shares on the gaining side against 1174 shares on the losing side while 112 shares remain unchanged.

Finally, the BSE Sensex surged by 728.73 points or 2.66%, to 28075.55, while the CNX Nifty soared by 216.60 points or 2.62% to 8,494.15.

The BSE Sensex touched a high and a low of 28194.61 and 27703.70, respectively. The BSE Mid cap index was up by 1.21%, while the Small cap index was up by 1.01%.

The top gainers on the Sensex were HDFC up by 7.16%, SBI up by 5.02%, ICICI Bank up by 4.60%, Larsen & Toubro up by 3.61% and Tata Power up by 3.55%. On the flip side, Hindalco down by 0.18% and Hindustan Unilever down by 0.05% were the only losers.

On the BSE Sectoral front Realty up by 7.99%, Bankex up by 3.29%, Capital Goods up by 2.40%, Auto up by 2.13% and Infrastructure up by 2.12% were the top gainers, while there were no losers in the space. 

Meanwhile, optimistic over the latest economic reforms measures taken by the government, the World Bank has said that India would catch up with China's growth in the year 2016 and 2017.  World Bank stated that China's growth will remain high, but will begin to taper very gently, reaching 6.9 per cent in 2017. On the other hand, India is likely to witness GDP growth at 6.4% this year from a 5.6% rate last year. Further, Indian economic growth rate is likely to increase at 7% during 2016 and 2017 and would remain higher as compared to projected 6.9% China growth rate in 2017.    

The World Bank, in its latest update of its Global Economic Prospects, has highlighted that India should be among the prime beneficiaries of the spectacular plunge in crude oil prices that has lost almost 60 percent of its value since June.

Indian economic growth had slowed down to below 5% over the last two financial years. High interest rate and stubborn inflation, low investments and slow execution of infrastructure projects were the leading factors impacting country's economy growth. However, the domestic economy has shown signs of nascent recovery and expanded at 5.5% during first half of this fiscal as compared to 4.9% in the same period of previous fiscal. 

On South Asia region growth, the Bank stressed that regional growth is projected to rise to 6.8% by 2017 driven by India, the region's largest economy, which emerged from two years of modest growth.

The CNX Nifty touched a high and low of 8,527.10 and 8,380.55 respectively.

The top gainers on Nifty were DLF up by 9.19%, HDFC up by 6.58%, IDFC up by 6.10%, UltraTech Cement up by 5.95% and Power Grid Corporation of India up by 4.92%. On the flip side, BHEL down by 0.78%, Tech Mahindra down by 0.61%, Asian Paints down by 0.55%, Hindalco Industries down by 0.46% and Hindustan Unilever down by 0.11% were the only losers.

Most of European Markets were trading in the red; UK's FTSE 100 was down by 0.34% and France's CAC was down by 0.05%, while Germany's DAX was up by 0.48%.

The Asian equity benchmarks ended mostly in green on Thursday, with Japanese stocks rising for the first time in three days, as yen retreated from its strongest level this year. The Bank of Japan maintained its upbeat economic assessment for eight of Japan’s nine regions in a quarterly report, signaling that the country is on track to emerge from recession without additional monetary easing. It cut its assessment for one region, the northernmost prefecture of Hokkaido, where factory output took a hit from declines in public works spending. Japan’s economy slipped into recession in the third quarter of last year as a sales tax hike in April cooled household spending. BoJ governor Haruhiko Kuroda stuck to his optimistic outlook, stating that the world’s third-largest economy is recovering moderately as a trend. Japan’s Core Machinery Orders rose to 1.3%, from -6.4% in the preceding month. Japan’s Corporate Goods Price Index fell to a seasonally adjusted annual rate of 1.9%, from 2.7% in the preceding month. South Korea’s central bank cut its forecast for economic growth this year to 3.4% from 3.9% predicted in October. Bank of Korea Governor Lee Ju-yeol noted that the fourth quarter of last year was unexpectedly weak.

Cautious Chinese banks issued far less credit in December than expected despite a surprise rate cut by the central bank, driving cash-starved companies into the shadow banking system in a major blow to the government’s financial reform efforts. The weaker-than-expected loan data indicates Beijing’s traditional reliance on credit to spark the economy is losing its effectiveness, posing a further challenge to policymakers as they look for ways to avert a sharper slowdown in 2015. Singaporean Retail Sales fell to a seasonally adjusted 6.5%, from 7.9% in the preceding month whose figure was revised down from 8.1%.