Benchmarks end higher on rate cut hopes; Sensex regains 27,300 mark

Indian equity benchmarks ended the Friday’s session with a gain of around half a percent as investors remained hopeful of Reserve Bank of India (RBI) slashing the key policy rate to fuel investments and propel growth. Markets, after a cautious start, gained traction and traded mostly in the green terrain throughout the session with frontline gauges recapturing their crucial 27,300 (Sensex) and 8250 (Nifty) bastions. The sentiments got bolstered after the India Meteorological Department (IMD) forecasted that the southwest monsoon is likely to hit the Kerala coast on May 30, two days ahead of schedule, which bodes well for timely sowing of crops.

Some support also came with an UN report, saying that Indian economy is likely to clock 8.1 percent growth in the current financial year, spurred by strong consumer spending amid low inflation, infrastructure projects and government’s reform measures. Finance Minister Arun Jaitley too has said that the economy was in a recovery mode with inflation and fiscal deficit under control and despondency giving way to a positive environment.

On the global front, European markets have made a firm opening and CAC, DAX and FTSE were trading in green in early deals, as bond-market jitters eased after a rollercoaster unwind of bets linked to the European Central Bank’s stimulus plan. Asian markets ended mixed with investors awaiting more US data later in the session for clues on the timing of the US Federal Reserve’s interest rate hike.

Back home, appreciation in Indian rupee too supported the sentiments. The partially convertible rupee was trading at 63.54 per dollar at the time of equity market closing against the Thursday's close of 63.64 on the Interbank Foreign Exchange. Some support also came with report that foreign direct investment (FDI) in India grew by about 40% Year-On-Year (Y-o-Y) to Rs 1.76 lakh crore in 2014-15 as compared to Rs 1.26 lakh crore in 2013-14.

Rally in Rate sensitive counters like Auto and banking too aided the sentiments as sustained fall in consumer inflation prices has given boost to hopes of a rate-cut by Reserve Bank of India. On the flip side, realty space edged lower led by over one and a half percent fall in led by DLF as the Competition Commission found the realty giant guilty of indulging in “unfair and abusive” business practices in sale of apartments in a Gurgaon housing project. In a fresh order yesterday against DLF, the Competition Commission of India (CCI) ruled that the realty giant was guilty of indulging in “unfair and abusive” business practices in sale of apartments in a Gurgaon housing project.

The NSE’s 50-share broadly followed index Nifty rose by around forty points and ended above the psychological 8,250 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by around one hundred and twenty points to finish above the psychological 27,300 mark. Broader markets too traded in-line with benchmarks and ended the session with a gain of around half a percent. The market breadth remained in favor of advances, as there were 1,456 shares on the gaining side against 1,233 shares on the losing side while 115 shares remain unchanged.

Finally, the BSE Sensex surged by 117.94 points or 0.43% to 27324.00, while the CNX Nifty gained 38.15 points or 0.46% to 8,262.35.

The BSE Sensex touched a high and a low of 27379.57 and 27159.76, respectively. The BSE Mid cap index was up by 0.35%, while Small cap index up by 0.62%.

The top gainers on the Sensex were SBI up by 2.39%, Bharti Airtel up by 1.80%, HDFC up by 1.80%, Mahindra & Mahindra up by 1.42% and Infosys up by 1.30%. On the flip side, NTPC down by 2.05%, Vedanta down by 2.01%, Coal India down by 0.91%, GAIL India down by 0.85% and ICICI Bank down by 0.76% were the top losers.

 The gaining sectoral indices on the BSE were Consumer Durables up by 0.81%, TECK up by 0.69%, Healthcare up by 0.65%, FMCG up by 0.67% and IT up by 0.65% while, Realty down by 1.33%, Metal down by 1.05%, Power down by 0.25% and Oil & Gas down by 0.06% were the losing indices on BSE.

Meanwhile, Reserve Bank of India (RBI) Governor Raghuram Rajan has once again raised concerns over rising Non Performing Assets (NPA) of some banks and has said that there was no danger of any financial crisis but it may be early to declare that the worst was over on the non-performing asset front.

Rajan talking about the size of the non-performing loans (NPL) in the banking sector said that some banks have managed to bring down their bad loan positions, for others it is still increasing, though he also said that it was a matter of concern, but ruled out the possibility of the issue leading to a financial crisis.

The RBI governor while replying to a press conference after a meeting of the RBI's central board, said that he was concerned about the losses that it implies and the effects on bank functioning. He further said on the losses to the tax payer that he was concerned about the size of the NPLs.

Rajan also said that the RBI was in touch with the banks to identify the problems and trying to bring down the NPL at the earliest. He added that the history of NPLs in the past in the banking sector has been a combination of actions by the banks as well as growth tends to restore bank's health... A slow recovery is underway, so I think that will help, but we are doing everything we can on the regulatory side to make sure that these bad assets are recognised, problems are dealt with and we move forward.

The CNX Nifty touched a high and low of 8,279.20 and 8,212.20 respectively.

The top gainers on Nifty were Lupin up by 3.83%, State Bank of India up by 2.15%, Housing Development Finance Corporation up by 1.78%, IndusInd Bank up by 1.71% and Bharti Airtel up by 1.45%. On the flip side, Bank of Baroda down by 2.55%, Punjab National Bank down by 2.42%, Vedanta down by 2.26%, NTPC down by 1.91% and Cairn India down by 1.26% were the top losers.

European Markets were trading in the green; France’s CAC was up by 0.46%, Germany’s DAX was up by 0.25% and UK’s FTSE was up by 0.39%.

The Asian markets ended mixed on Friday, as investors awaited more US data later in the session for clues on the timing of the US Federal Reserve’s interest rate hike. Chinese Premier Li Keqiang stated that there was improvement in the economy but that more forceful measures are needed to boost growth. Li warned that investment activity is moderating and that the trade sector is under big pressure owing to weak global conditions. The Bank of Korea held interest rates steady at a record low for a second consecutive month, while upbeat remarks by Governor Lee Ju-yeol pared the chances of another rate cut soon. Asia’s fourth-largest economy was recovering steadily at the pace seen in April, but sentiment among economic players clearly showed improving signs. The Bank of Korea’s monetary policy committee kept the base rate at 1.75% in a 6-1 vote.

Bank of Japan Governor Haruhiko Kuroda repeated that there is no need to expand the already massive monetary easing at this point as expectations of higher prices are evident. Kuroda added that the bank will take necessary action without hesitation if it detects a shift in the underlying price trend that could undermine the path toward anchoring 2% inflation at the earliest possible time. Kuroda enlightened that the mechanism of his two-year-old aggressive monetary easing is working in the bigger picture despite an unexpected slump in energy prices and a slow recovery in consumption. Japanese consumer confidence in April worsened for the first time in five months. The survey’s sentiment index for general households, which includes views on incomes and jobs, was at 41.5 in April, down from 41.7 in March. Japan’s M2 Money Stock remained unchanged at a seasonally adjusted 3.6% compared to the preceding month.