Post Session: Quick Review

Extending the bull-run for the fourth consecutive session, local equity markets puffing up gains of over 1.50% logged a life time high level on Tuesday, which took Sensex above the psychologically crucial 28,250 mark and Nifty settled little shy off the crucial 8,700 mark. Sustained buying activities by funds and retail investors on positive global set-up mainly buoyed the sentiments on Dalal Street. Surge of index heavyweights such as HDFC, ICICIbank and ITC majorly contributed to the gains of frontline equity indices. Meanwhile, broader indices also participated in the rally, but the gains were less in proportion to frontline equity indices. Both, Midcap and Smallcap index ended up with gains of around 0.50%.

The gains of bourses came amidst hopes of pick-up in growth and earnings in coming quarters. Markets also drew solace from IMF’s latest World Economic Outlook report, which despite lowering global economic growth forecast in 2015, kept its growth forecast unchanged for India at 5.8% for 2014. Notably, markets rallied for fourth consecutive session since Reserve Bank Governor Raghuram Rajan cut the key repo rate in a surprise move on Thursday.

On the global front, shares in Asia rose on Tuesday strengthened after China said its economy had not slowed as much as many in markets had feared. China grew 7.4% in 2014, just missing official forecasts of 7.5%, and its slowest growth in 24 years. But fourth-quarter expansion held steady at 7.3%, down on the previous three months but marginally better than expected. Meanwhile, European shares once again neared multiyear highs in early trading Tuesday, buoyed by expectations that the European Central Bank will this week venture into uncharted territory by launching a stimulus program aimed at spurring Europe’s ailing economy.

Closer home, all the sectoral indices on BSE concluded in positive territory, with exception of stocks from Consumer Durable counters, which ended slightly lower. On the flip side, stocks from Metal, banking and Oil & Gas counters led the gainers list on BSE. While, better than expected economic growth-data from China buoyed sentiments for Metal stocks, better than expected earnings of Kotak Mahindra Bank lifted the entire banking pivotal higher. Banking stocks were in demand after Reserve Bank of India (RBI) underscored that it had decided to allow commercial banks to review the base rate methodology after three years from date of its finalization instead of the current periodicity of five years. On the result front, Kotak Mahindra Bank's third quarter standalone profit after tax surged 36.6% year-on-year to Rs 464.5 crore, aided by strong other income and lower provisions. The overall market breadth on BSE was in the favour of advances, which thumped decliners in the ratio of 1556:1409, while 124 shares remained unchanged (Provisional).

The BSE Sensex ended at 28784.67, up by 522.66 points or 1.85% after trading in a range of 28324.85 and 28829.29. There were 21 stocks advancing against 9 stocks declining on the index. (Provisional)

The broader indices ended in the green; the BSE Mid cap index was up by 0.44%, while Small cap index up by 0.41%. (Provisional)

The gaining sectoral indices on the BSE were Metal up by 3.03%, Bankex up by 1.84%, FMCG up by 1.69%, Oil & Gas up by 1.33% and Realty up by 1.20%, while Consumer Durables down by 0.07% and Power down by 0.02% were the only losing indices on BSE. (Provisional)

The top gainers on the Sensex were HDFC up by 5.88%, Sesa Sterlite up by 5.44%, Tata Steel up by 4.79%, Axis Bank up by 4.51% and Tata Motors up by 3.98%. On the flip side, GAIL India down by 2.01%, Tata Power down by 1.21%, Maruti Suzuki down by 0.72%, Dr. Reddys Lab down by 0.45% and TCS down by 0.39% were the top losers. (Provisional)

Meanwhile, in order to pass the benefit of changes in policy rate to borrowers, the Reserve Bank Monday asked banks to notify the base rate, or the minimum lending rate, at least once in every three months based on cost of funds. However, banks will not be allowed to change their base rate methodology during the review cycle. New guidelines will come into effect from February 19.

The RBI move comes after it cut repo rate by 0.25 percent, the first reduction in 20 months, to boost credit and economic growth. The RBI is of the view that banks have in the past shown reluctance to pass on benefits of rate cut but have been proactive in raising benchmark lending rate soon after repo rate is hiked. Currently, the review of the base rate does not have a fixed schedule. 

The RBI's notification added that banks will have the freedom to calculate cost of funds either on the basis of average cost of funds or on marginal cost of funds or any other methodology in vogue, which is reasonable and transparent. To provide banks greater operational flexibility, RBI decided to allow banks to review the base rate methodology after three years from date of its finalization instead of the current periodicity of five years. On interest margins, the RBI notified that an existing borrower should not be charged extra except on account of deterioration in the credit risk profile of the customer or change in the tenor premium. 

India VIX, a gauge for markets short term expectation of volatility declined 1.77% at 17.33 from its previous close of 17.64 on Monday. (Provisional)

The CNX Nifty ended at 8695.60, up by 144.90 points or 1.69% after trading in a range of 8574.50 and 8707.90. There were 42 stocks advancing against 8 stocks declining on the index. (Provisional)

The top gainers on Nifty were Sesa Sterlite up by 5.88%, HDFC up by 5.78%, Tata Steel up by 4.74%, Axis Bank up by 4.39% and Tata Motors up by 3.98%. On the flip side, GAIL India down by 2.62%, Tata Power down by 1.15%, Dr. Reddys Lab down by 0.72%, Power Grid down by 0.64% and Maruti Suzuki down by 0.57% were the top losers. (Provisional)

European Markets were trading mostly in the green; UK's FTSE 100 was up by 0.22% and France's CAC was up by 0.47%, while Germany's DAX was down by 0.02%.

The Asian equity benchmarks ended mostly in green on Tuesday, as investors awaited the outcome of central-bank policy meetings in Japan and Europe. Japan’s inflation rate is expected to slow in the next fiscal year, which could probably force the Bank of Japan to launch more stimulus later in the year. Japan, which has been grappling with either outright deflation or very low inflation for decades, is facing an even greater challenge than some other economies given the 60 percent plunge in oil prices over the past six months. China’s economy grew at its slowest pace in 24 years in 2014 as property prices cooled and companies and local governments struggled under heavy debt burdens, keeping pressure on Beijing to take aggressive steps to avoid a sharper downturn. Chinese GDP remained unchanged at an annual rate of 7.3% while Chinese Industrial Production rose to 7.9%, from 7.2% in the preceding month. Chinese Retail Sales rose to an annual rate of 11.9%, from 11.7% in the preceding month. Chinese Fixed Asset Investment fell to a seasonally adjusted 15.7%, from 15.8% in the preceding month.