Market goes for a pre-budget rally; Sensex surges by 470 points

Indian markets recovering from the Rail Budget blues made an emphatic bounce back on Friday. Bourses after a positive start and trading cautiously till mid of the session, suddenly gained pace after the presentation of Economic Survey for the year 2014-15 in the parliament. Economic Survey has estimated economic growth between 8.1 and 8.5 per cent in 2015-16. In FY16 real GDP growth at market prices is estimated to be above 0.6-1.1 percentage points higher vis-a-vis 2014-15 estimates of 7.5 per cent. The survey highlighted that private sector investment remains the main driver of growth engine in the long-term but in the medium and near-term the government has to step up spending. Stressing on increased role of Indian Railways, the survey stated that public investment, especially by Indian Railways will play a catalytic role till the time issues plaguing private investment don't get solved.

The global cues though remained mixed, while the US markets had closed mostly lower, the Asian markets recovering from some early weakness in managed mostly a positive close despite weak economic data from Japan, the country’s inflation slowed for a sixth straight month in January, pushing the Bank of Japan further from its 2 percent target. The European markets have extended their gains on some better than expected economic data. Eurozone economic confidence and German consumer confidence came in better than expected, also the German unemployment rate declined in January.

Back home, Indian markets rallied a day ahead of the annual budget, the new F&O series of March made a jubilant start with benchmark indices Sensex and Nifty reclaiming their crucial psychological levels of 29200 and 8800 respectively. Once the details of the Economic Survey were out, markets gained momentum and stopped only with the close of the trading session. Traders took heart with the Economic Survey saying that the government remains committed to fiscal consolidation, adding that it will adhere to fiscal deficit target of 4.1% of GDP in FY15. Apart from the infra related stocks, banks which are considered proxy to the economy, gained momentum in the second half. Markets surged over one and half a percent in the one way upmove, hardly showing any sign of profit taking. Traders were also enthused by the positive statement of the global rating agency S&P which not only has raised the GDP growth forecast but also said that Indian economy is a “bright spot” in Asia, while it was reported that India’s per capita income, a gauge for assessing standard of living, rose by 37.6 per cent to Rs. 88,533 in the last four years to 2014-15. On the sectoral front on the BSE, almost all sectoral indices barring FMCG posted considerable gains. It is being expected that all round reforms will be announced in the budget with special emphasis on infra and housing.

The NSE’s 50-share broadly followed index Nifty surged by over one hundred sixty points, past the psychological 8,800 level, while Bombay Stock Exchange’s Sensitive Index -- Sensex --heaved gains of around 500 points, crossing the 29,000 mark. Broader markets outperformed the benchmarks and gained close to two percent each. The news series had considerable total market turnover of 2.16 lakh crores.

The market breadth remained in favour of advances, as there were 1,795 shares on the gaining side against 1,079 shares on the gaining side, while 125 shares remained unchanged.

Finally, the BSE Sensex surged by 473.47 points or 1.65% to 29,220.12, while the CNX Nifty ended higher by 160.75 points or 185% to 8,844.60.

The top gaining sectoral indices on the BSE were Realty up by 4.25%, Capital Goods up by 3.80%, Power up by 3.17%, Metal up by 3.02%, Bankex up by 2.73%, while FMCG down by 0.21% was the lone losing index on the BSE.

The top gainers on the Sensex were Tata Power up by 5.43%, Larsen & Toubro up by 4.67%, ICICI Bank up by 4.25%, Sesa Sterlite up by 4.20% and Hindalco up by 3.67%. On the flip side, GAIL India down by 1.07%, ITC down by 0.47%, Wipro down by 0.36% and Hindustan Unilever down by 0.15% were the top losers.

Meanwhile, giving a shot in arm to the government, the global rating agency Standard & Poor’s (S&P) has sharply revised India's growth forecast for the next several years to reflect a recent change in how gross domestic product is calculated by the government. S&P revised upwards GDP growth forecast to 7.9% for 2015-16 and 8.2% in the year after, crediting the move to rising investment and fall in oil prices. The agency also raised its growth forecast for 2016-17 to 8.2 percent from 6.6 percent previously.

S&P  which currently rates India at “BBB-“ with a “stable” outlook had recently said that India must boost growth, cut its fiscal deficit and fulfill promises of financial and fiscal reforms to justify an upgrade in a credit rating, has now said that the Indian economy should be a 'bright spot' in Asia.

Regarding Asia-Pacific, the agency said growth in the region will be slightly lower, but India's “star is rising.” It also lowered growth forecasts for a slew of Asian countries, including China and Japan and said that weaker growth in China and Japan may be weighing on the overall sentiment.

S&P’s earlier projection of 6.2 per cent in 2015-16 and 6.6 per cent in 2016-17 of Indian economy were based on the old definition of gross domestic product (GDP) and the base year. The revisions come after India changed the way to measure the economy. Though, S&P has not specified that it had revised its estimates on the basis of the revisions in GDP computation.

The CNX Nifty touched a high and low of 8717.45 and 8856.95 respectively. There were 46 stocks advancing against just 4 stocks declining on the index.

The top gainers on Nifty were Bank of Baroda up by 5.63%, Tata Power up by 5.56%, Jindal Steel & Power up by 5.18%, Ultratech Cement up by 4.98% and Larsen & Toubro up by 4.82%. On the flip side, GAIL India down by 1.03%, Wipro down by 0.55%, ITC down by 0.49% and BPCL down by 0.21% were the top losers.

The Asian markets ended mostly in red on Friday, while Taiwan Stock Exchange was closed on account of ‘Peace Memorial Day’ holiday. Indonesia‘s central bank signaled that it is comfortable with the drop in the rupiah as it makes exports more competitive in Southeast Asia’s largest economy. Indonesia‘s economy posted its weakest growth in five years in 2014 as the end of the commodities boom and high interest rates dented investment and domestic demand. Bank of Japan Governor Haruhiko Kuroda repeated his latest outlook that a moderate rebound in crude oil prices will help anchor 2% inflation around fiscal 2015 but indicated a slip in longer-term public inflation expectations. The Governor repeated that a plunge in crude oil prices over the past year has filtered to prices, adding downward pressure, but they are expected to rise steadily going forward and, as the base year effect of lower energy costs fades.

Japanese households cut spending more than expected and retail sales fell for the first time in seven months in January, a sign the central bank’s radical stimulus has yet to convince consumers that inflation will take hold. Household spending fell a more-than-expected annual 5.1 percent in January in the 10th straight month of declines, the longest losing streak since the global financial crisis in 2009. Annual retail sales dropped a worse-than-expected 2.0 percent. Japanese Housing Starts rose to a seasonally adjusted -13.0%, from -14.7% in the preceding quarter. Thai Industrial Production fell to a seasonally adjusted -1.31%, from -0.35% in the preceding month.