Benchmarks extend previous session’s rally; Nifty regains 8,600 mark

Extending their previous session rally, Indian equity benchmarks ended the Wednesday’s session with a gain of over half a percent on value-buying amid optimism over the Union Budget. Markets traded firmly throughout the session and recaptured their crucial 28,500 (Sensex) and 8,600 (Nifty) levels. Sentiments remained up-beat with law minister Sadananda Gowda’s statement that India plans to amend its arbitration law, setting time limits for courts and easing judicial rules to decide corporate disputes, as it seeks to attract more foreign investment. Some support also came with industry body Nasscom forecasting that the industry growth in the coming financial year would be about the same as in the current one. The association has said that the growth would be 13% in 2014-15, and would be between 12% and 14% in the coming year.

However, there were some concern about economists saying that the new methodology pushing up the GDP forecast to 7.4 percent for the current fiscal is not in sync with key parameters such as tax collections and credit growth. Based on the new series, the Central Statistics Office has projected an economic growth rate of 7.4 percent for 2014-15, up from 6.9 percent a year ago. Meanwhile, foreign portfolio investors continued to remain sellers in Indian shares with net sale of Rs 1261.19 crore on February 10, 2015, as per provisional data.

On the global front, European markets made a negative opening, with Greece remaining at the forefront of investors’ minds ahead of euro zone meetings to discuss the country’s debt crisis. Euro zone finance ministers are meeting later today and EU leaders on Thursday, but officials are already downplaying the chance of a breakthrough. Asian markets, after trading cautiously, somehow managed to end slightly in the green on Wednesday.

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. Meanwhile, banking stocks continued to remain on buyers’ radar for second straight day after the Government announced infusion of Rs 6,900 crore in nine public sector banks. This additional capital has been given on the basis of new criteria that comprise of efficiency parameters. Additionally, stocks related to sugar space witnessed some buzz after Food Minister Ram Vilas Paswan said his ministry is in favour of extending export subsidy to only 1.4 million tonnes of raw sugar in the ongoing 2014-15 marketing year, as the country would be left with surplus quantities even after meeting the domestic demand of 24.8 million tonnes during this year. Last year, the Centre had announced a subsidy for exports of raw sugar of up to 4 million tonnes.

The NSE’s 50-share broadly followed index Nifty over sixty points and ended above the psychological 8,600 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by around one hundred and eighty points to finish above the psychological 28,500 mark. Broader markets too were traded with traction throughout the trade and ended the session with a gain of around one and a half percentage point. The market breadth remained in favor of advances, as there were 1,728 shares on the gaining side against 1,074 shares on the losing side while 106 shares remain unchanged.

Finally, the BSE Sensex surged by 178.35 points or 0.63% to 28533.97, while the CNX Nifty gained 61.85 points or 0.72% to 8627.40.

The BSE Sensex touched a high and a low of 28618.91 and 28424.39, respectively. The BSE Mid cap index was up by 1.55%, while Small cap index up by 1.47%.

The top gainers on the Sensex were Axis Bank up by 2.87%, Larsen & Toubro up by 2.57%, Maruti Suzuki up by 2.10%, Tata Steel up by 2.08% and Reliance Industries up by 2.07%. On the flip side, ONGC down by 2.63%, BHEL down by 2.41%, Tata Motors down by 0.90%, Mahindra & Mahindra down by 0.81% and Cipla down by 0.50% were the top losers.

On the BSE Sectoral front Capital Goods up by 2.00%, Metal up by 1.68%, Healthcare up by 1.25%, Power up by 1.16% and Bankex up by 1.05%, while there were no losing indices on BSE,

Meanwhile, after India’s forex reserves hit a new high of $327.88 billion in the week ended January 30, RBI Deputy Governor H R Khan has said that though the country’s forex kitty was at an all-time high, there should be no complacency as no amount of reserves may be enough to fight extreme volatility, as the shift in the US Fed’s policies to tighten may result in withdrawal of money from emerging markets like India.

The deputy governor has said that “We are much better placed. In terms of fool-proofing our balance sheet we have done quite a few things,” but we can’t afford to be complacent and we should be prepared to face vulnerabilities.

The surging reserves come as foreign investors have continued to be hefty buyers of bonds and shares because of expectations for economic reforms from Prime Minister Narendra Modi's government.

Khan further stated that there might be views that RBI has been focusing on accumulating dollars to fight any external challenges in future, as the forex reserves had depleted to $280 billion and the RBI had to sell to arrest a single way slide in the rupee after the May 2013 announcement by the US Fed to taper its liquidity infusing programme, which resulted in fund outflows from India. It was the worst rupee turmoil since a balance of payment crisis a decade ago because of dwindling reserves and a high current account deficit.

The CNX Nifty touched a high and low of 8651.95 and 8593.65 respectively.

The top gainers on Nifty were Jindal Steel & Power up by 5.96%, Tech Mahindra up by 2.87%, Axis Bank up by 2.73%, Larsen & Toubro up by 2.61% and Bank of Baroda up by 2.58%. On the flip side, ONGC down by 2.74%, BHEL down by 2.31%, Zee Entertainment down by 1.29%, Tata Motors down by 0.92% and Cairn India down by 0.89% were the top losers.

European Markets were trading in the red; Germany’s DAX was down by 0.17%, France's CAC was lower by 0.54% and UK’s FTSE 100 lost 0.14%.

The Asian indices ended mostly in green on Wednesday, as confidence grew that Greece would reach a new debt deal with its European creditors enabling it to stay in the euro currency bloc. Japan’s Stock Exchange was closed on account of ‘National Founding Day’ holiday. Chinese Central Bank Vice Governor Yi Gang stated that the country’s economy is now more sustainable and domestic consumption is steadily rising. China’s central bank stated that it will fine-tune policy to help head off an economic slowdown but avoid over-stimulating the economy. In its fourth-quarter monetary policy implementation report, the People’s Bank of China added that it would use both quantitative and pricing tools to keep liquidity levels appropriate and to maintain reasonable credit growth. Japanese tertiary industry activity index fell to a seasonally adjusted -0.3%, from 0.2% in the preceding month while Japan’s M2 Money Stock fell to a seasonally adjusted 3.4%, from 3.6% in the preceding month. Philippines Industrial Production fell to a seasonally adjusted annual rate of 4.2%, from 7.5% in the preceding month.