Dalal Street witnesses jubilation on rate cut hopes; Sensex regains 28,000 mark

Boisterous benchmarks showcased an enthusiastic performance, by rallying around two percentage points and breaking lots of psychological levels in their northward journey on Friday after Wholesale Price Index (WPI) inflation fell for July, raising hopes of a rate cut by the Reserve Bank of India (RBI). Sentiments remained up-beat since start as key bourses made gap up opening 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 their hunt for fundamentally strong stocks. Frontline indices not only extended their rally for second straight session but also regained their crucial 8,500 (Nifty) and 28,000 (Sensex) bastions as investors took to hefty across the board buying. Sentiments got bolstered after China’s central bank today raised the value of yuan against the US dollar by 0.05%, putting a stop to the 3-day fall in the currency.

Domestic sentiment was buoyed as the WPI inflation fell at a faster-than-expected annual rate of 4.05% in July, its ninth consecutive decline and lowest in atleast a decade, mainly driven by weak food and fuel prices. Some support also came with Finance minister Arun Jaitley’s statement that the Cabinet committee on political affairs chose not to prorogue Parliament, keeping the door open for both Houses to meet at short notice before the winter session begins in November, has encouraged the traders to take higher bets.

On the global front, the European markets made mostly a positive start after Greek legislators approved a bailout package that may unlock as much as 86 billion euros ($96 billion) and help the nation avoid a default next week. Asian markets ended mixed on Friday as crude oil futures remained under pressure, crashing to 6-1/2 year lows after data indicated a big increase in US stockpiles arising fears of a growing global glut.

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. Traders also got some comfort with the recovery in rupee which has been falling sharply tracking the devaluation of yuan. The rupee was at 64.97 per dollar at the time of equity markets closing as compared to 65.09 per dollar level on Thursday. Rally in rate sensitive counters too aided the sentiments on hopes of rate cut after WPI came at record low. Telecom majors, including Bharti Airtel, Idea Cellular and Rcom ring loud after the government permitted spectrum sharing between a move that could resolve the issue of call drops and improve efficiency in their respective telecom circles.

The NSE’s 50-share broadly followed index Nifty rose by over one hundred and sixty points and ended above the psychological 8,500 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by around five hundred and twenty points to finish above the psychological 28,000 mark. Broader markets too traded with traction throughout the trade and ended the session with a gain of around a two percentage points. The market breadth remained in favor of advances, as there were 1,790 shares on the gaining side against 1,054 shares on the losing side while 99 shares remain unchanged.

Finally, the BSE Sensex surged by 517.78 points or 1.18% to 28067.31, while the CNX Nifty soared by 162.70 points or 1.95% to 8518.55.

The BSE Sensex touched a high and a low 28100.64 and 27643.20, respectively. The BSE Mid cap index was up by 2.36%, while Small cap index was up by 1.72%.

The top gaining sectoral indices on the BSE were Realty up by 7.60%, Bankex up by 3.05%, Auto up by 2.40%, Infrastructure up by 2.19% and Capital Goods up by 1.84%, while they were no losers on sectoral index.

The top gainers on the Sensex were Vedanta up by 3.73%, ICICI Bank up by 3.58%, SBI up by 3.49%, Reliance Industries up by 3.44% and HDFC up by 3.40%. On the flip side, Dr. Reddys Lab down by 0.75% and Infosys down by 0.68% were the top losers.

Meanwhile, the auto industry which has recently started showing signs of recovery is likely to get its cheers doubled, as the transport ministry in its plan to phase out vehicles which are over 10 years old, is looking to provide incentives of up to Rs 1.50 lakh to those who surrender their old vehicles. Also, Transport Minister Nitin Gadkari will be taking proposal of excise duty waiver along with other sops including lower interest rate on auto loans, discount from manufacturers as well as the scrap value of the old vehicle with the finance ministry soon. Transport minister said that if the proposal gets okayed, an owner of an old car would get incentive of up to Rs 30,000, which could go up to Rs 60,000 for heavy commercial vehicles such as trucks. The minister added that there would be other benefits of up to Rs 1.50 lakh but did not elaborate.

Gadkari also said the comprehensive scheme would include provisions of setting up of 8-10 auto shredding plants near ports such as Kandla, which would issue certificates for accepting old vehicles and would recycle vehicles from India and abroad. 'It will create huge employment as well.'

The auto industry have long been demanding for the same to push up sales, but now it has found the ministry’s support in the wake of the National Green Tribunal's order banning diesel vehicles over 10 years old in the National Capital Region.

The CNX Nifty touched a high and low 8530.10 and 8381.20 respectively.

The top gainers on Nifty were PNB up by 8.96%, Zee Entertainment up by 4.79%, Yes Bank up by 4.43%, Bank of Baroda up by 4.33% and Kotak Mahindra Bank up by 3.95%. On the flip side, Dr. Reddys Lab down by 1.18%, BPCL down by 1.16%, and Infosys down by 0.82% were the top losers.

European Markets were trading in the red; France’s CAC was down by 0.31%, Germany’s DAX was down by 0.18% and UK's FTSE was down by 0.04%.

The Asian markets closed mixed on Friday, while Shanghai’s benchmark edged up as investors turned bullish after concerns about the yuan’s depreciation eased. Japan now faces a critical stage in its battle to defeat deflation, and is being helped by falling oil prices boosting Japan’s terms of trade and getting the economy nearer its full potential. The Cabinet Office in its annual economic report stated that Japan was making steady progress towards ending deflation, noting that the Bank of Japan’s massive asset purchases had lifted inflation expectations, an important step to creating price stability.  Core consumer inflation has ground to a halt and may fall slightly until around end-September due largely to last year’s oil price collapse, keeping the Bank of Japan under pressure to ease again to achieve its ambitious 2 percent price growth goal. The Cabinet Office echoed the BOJ’s view that cheaper oil prices were positive for the economy, stimulating economic activity. Japan’s annual export growth was expected to slow in July from June’s big gain, suggesting overseas demand may not be enough to help the economy rebound from last quarter’s expected contraction. China’s central bank stated that the gold reserves rose to 53.93 million fine troy ounces by the end of July, up from 53.32 million at end-June. The adjustment in June was the first in more than six years. Malaysian GDP fell to a seasonally adjusted 4.9% compared to 5.6% in the preceding month.