Markets stage splendid performance on Friday; Sensex recaptures 28,000 mark

Boisterous benchmarks showcased an enthusiastic performance on Friday, by rallying around one and a half percentage points amid strong global cues. Sentiments remained up-beat since start as key bourses opened with 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 8,500 (Nifty) and 28,000 (Sensex) bastions as investors took to hefty across the board buying.

Sentiments remained jubilant with the government notifying composite cap in the FDI policy, allowing up to 49 per cent foreign portfolio investment (FPI) through the automatic route in most sectors, including brownfield pharmaceuticals, single-brand retail, insurance, pension and facsimile editions of foreign newspapers. The hopes for a rate cut have been increased ahead of the Reserve bank of India (RBI) monetary policy due the decline in crude prices, advancement of monsoon and neutral stance by the Federal Reserve.

Buying intensified after European counters have made a firm start, heading for their biggest monthly jump since February. Asian markets ended mostly in green, however Shanghai Composite extended losses and posted biggest monthly drop since August 2009 on some report that Chinese regulators had asked financial institutions in Singapore and Hong Kong for stock-trading records as part of efforts to track down investors betting against shares in China.

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. Better-than-expected earnings announcement from select blue-chip companies too aided sentiments. ICICI Bank has reported 14.14% rise in its consolidated net profit at Rs 3232.37 crore for the first quarter as compared to Rs 2832.01 crore for the same quarter in the previous year. Sun TV Network has 19.10% rise in its net profit at Rs 197.28 crore for the quarter ended June 30, 2015, while Religare Enterprises reported a consolidated net profit of Rs 37.14 crore for the quarter ended June 30, 2015 as compared to Rs 0.12 crore for the same quarter in the previous year. Shares of public sector bank remained on buyers’ radar on news of recapitalization, as the government sought approval for an additional allotment of Rs 12,110 crore from the Parliament to be used for the recapitalisation of public sector banks. It was reported that 40% of the total amount will be given to 6 big banks that require support, while 20% will be given to banks based on their performance in remaining 3 quarters of the FY16, further the government will spend Rs 10,000 crore each in FY18 and FY19 and will infuse Rs 70,000 crore in PSU banks over next four years for recapitalization.

The NSE’s 50-share broadly followed index Nifty gained over one hundred and ten points to end above its psychological 8,500 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by around four hundred and ten 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 around a percentage point. The market breadth remained in favour of advances, as there were 1,658 shares on the gaining side against 1,214 shares on the losing side while 129 shares remain unchanged.

Finally, the BSE Sensex surged by 409.21 points or 1.48% to 28114.56, while the CNX Nifty soared by 111.05 points or 1.32% to 8532.85.

The BSE Sensex touched a high and a low 28161.17 and 27814.51, respectively. The BSE Mid cap index was up by 1.03%, while Small cap index was up by 0.91%.

The top gaining sectoral indices on the BSE were Realty up by 2.89%, Healthcare up by 1.99%, Auto up by 1.80%, FMCG up by 1.78% and Metal up by 1.71%, while Power down by 0.60% and Oil & Gas down by 0.27% were the losing indices on BSE.

The top gainers on the Sensex were SBI up by 5.25%, Coal India up by 4.55%, Lupin up by 4.26%, Dr. Reddys Lab up by 4.05% and ICICI Bank up by 3.97%. On the flip side, BHEL down by 2.84%, NTPC down by 0.70%, Tata Steel down by 0.42%, Bajaj Auto down by 0.18% and Cipla down by 0.13% were the top losers.

Meanwhile, global rating agency, Moody’s in its latest report has said that though 7.5% GDP growth appears high, it is below India's potential. India’s true potential of GDP growth rate lies somewhere near 10%. The report though highlighted that green shoots are slowly emerging, but cautioned that the government's failure to deliver promised reforms is the major impediment and the political infighting is denting business confidence. It also warned that GDP growth is not likely to rise above 7.5% if the government continues to overpromise and not deliver.

Moody’s further pointed that key reforms like the land acquisition bill, flexible labour laws, and the goods and services tax have failed to pass parliament. These are unlikely to be delivered until later this year or even 2016. It added that land acquisition bill is a catalyst to investment and passing this bill will improve country’s business environment by speeding up the conversion of land for infrastructure use.

The rating agency in its report has also said that foreign firms are wary of investing in India, as lengthy delays in acquiring land tend to stall projects. If India wants to become a global economic powerhouses like china, reforms must be delivered promptly. These signs are not well for manufacturing.

Moody’s in its report has also expressed hopes that RBI will cut interest rates again this year and there could be two more 25 basis point rate cuts in 2015, as the rainfall deficit this season has not been as large as previously expected, which guides the RBI’s rate cycle.

The CNX Nifty touched a high and low 8548.95 and 8448.00 respectively.

The top gainers on Nifty were Bank of Baroda up by 6.41%, SBI up by 4.87%, Coal India up by 4.72%, HCL Tech up by 4.60% and Dr. Reddy up by 4.42%. On the flip side, BHEL down by 2.96%, Kotak Mahindra Bank down by 2.90%, Tata Power down by 1.65%, BPCL down by 1.50% and Tata Steel down by 0.99% were the top losers.

European Markets were mostly trading in the red; UK's FTSE was down by 0.26%, France’s CAC was down by 0.03% while Germany’s DAX was up by 0.21%.

Asian markets, barring Shanghai Composite and Straits Times, closed mostly in green on Friday. China’s committee members have promised to step up targeted adjustments to economic policy to foster stable growth in the world’s second-largest economy. To ensure that the economy can sustain a reasonable pace of growth, the members reiterated the government’s line that it would keep economic policies broadly stable, while increasing targeted adjustments. Japan’s National Core CPI remained unchanged at a seasonally adjusted 0.1%, compared to the preceding month. The percentage of the total work force that is unemployed and actively seeking employment during the previous month rose to a seasonally adjusted 3.4%, from 3.3% in the preceding month. Japanese Housing Starts rose to a seasonally adjusted 16.3%, from 5.8% in the preceding quarter while Japanese Household Spending fell to a seasonally adjusted -2.0%, from 4.8% in the preceding month. South Korean Industrial Production rose to a seasonally adjusted annual rate of 1.2%, from -3.0% in the preceding month whose figure was revised down from -2.8%. Taiwanese GDP fell to 0.64%, from 3.37% in the preceding month.