Receding crude oil prices reignites bullish sentiments on D-Street

After being brutally butchered by around five percentage points in the last four sessions, the domestic benchmark equity indices regained the firepower to go all guns blazing on Tuesday. The key indices vivaciously rallied well over one and half a percent in the session as many investors, smarting from huge losses took up reverse positions, vowing to avenge the next day.

The local markets, which suffered the humiliation of comprehensively underperforming the global markets on Monday, went on to outclass all the equity indices across Asia and Europe in the session as the plunge in international crude oil prices buttressed the chances of a rebound for the domestic bourses which were reeling under the pressure of spiraling crude oil prices for four consecutive days.

Market participants relentlessly added positions in the rate sensitive counters like the high beta - Realty, Bankex and Auto a day ahead of the release of important third quarter GDP growth numbers by the government. Auto sector stocks also got a lift after union heavy industries minister Praful Patel batting for the auto manufacturers on the diesel duty proposal opined that dual diesel pricing is not feasible right now and government has not pitched for hike in duty for diesel vehicles.

The Capital Goods pocket too settled with handsome gains as majors like L&T and BHEL rallied sharply after the severe pounding in previous session. However, the information technology counter shrugged the sanguine sentiments prevailing largely across the board and slipped by over half a percent after heavyweights like TCS, Wipro and Infosys settled in the red. Also the defensive FMCG counter settled on a flat note with a negative bias on the back of close to a percentage point drop in bellwether ITC.

On the global front, Asian markets largely exhibited positive trends while European markets too opened on a positive note but market participants looked for trading cues from the European Central Bank's second 3-year long-term refinancing operation (LTRO) on Wednesday.

Back home, the NSE’s 50-share broadly followed index Nifty, got underpinned by around a hundred points and settled below the psychological 5,400 support level while Bombay Stock Exchange’s Sensitive Index - Sensex jumped about three hundred points to close below the psychological 17,700 mark.

The position build up was far more prominent in broader markets as the indices recovered almost all the ground lost in the previous session and settled with around three percent gains, outperforming their larger peers by a fat margin.

Considering the fact that this was just third day of a fresh F&O contract, the markets surged on good volumes of over Rs 1.21 lakh core while the turnover for NSE F&O segment also remained on the lower side as compared to that on Monday at over Rs 0.92 lakh core. The market breadth remained extremely optimistic as there were 2139 shares on the gaining side against 765 shares on the losing side while 116 shares remained unchanged.

Finally, the BSE Sensex climbed by 285.37 points or 1.64% to settle at 17,731.12, while the S&P CNX Nifty jumped 94.30 points or 1.79% to close at 5,375.50.

The BSE Sensex touched a high and a low of 17,776.82 and 17,530.44 respectively. The BSE Mid cap and Small cap indices were up by 3.40% and 2.78% respectively.

The major gainers on the Sensex were BHEL up 6.74%, Hindalco up 4.97%, SBI up 4.92%, Tata Motors up 4.85% and DLF up 4.78%, while, TCS down 1.80%, Wipro down 0.93%, ITC down 0.80%, NTPC down 0.36% and Sun Pharma down 0.34% were the major losers on the index.

The only gainer on the BSE sectoral space was Realty up 5.91%, Capital Goods (CG) up 4.02%, Bankex up 3.93%, Power up 3.57% and Metal up 3.43% while IT down 0.56% and FMCG down 0.13% were the top losers on the BSE sectoral space.

Meanwhile, sharp rise in the prices of petrol, diesel and liquefied petroleum gas (LPG) cylinders can be expected after the conclusion of the Assembly polls in the five States. With the volatile international crude oil prices exerting pressure on the oil companies’ balance sheets, the government may be forced to hike prices before the start of the parliament session on March 12.

Tensions between the United States and Iran coupled with latest European Union sanctions against Tehran have ignited the crude oil markets worldwide. The Indian crude oil basket touched a new high of $123 per barrel on February 27. However, the Oil Marketing Companies (OMC) has not been able to revise prices due to the crucial assembly elections in states such as Uttar Pradesh, Punjab and Uttarakhand.

Even though petrol prices were deregulated by the government in June 2011, any change in them has to be approved by the EGoM. The prices, which are supposed to be recalibrated every fortnight, haven’t been changed since December 01, 2011 keeping in view the assembly elections.

The oil industry claims to have lost about Rs 900 crore since the last revision. Besides petrol, State-owned oil firms are losing Rs 12.77 per litre on diesel, Rs 30.21 a litre on kerosene and Rs 378 per 14.2-kg domestic LPG cylinder. Indian Oil Corp., Bharat Petroleum and Hindustan Petroleum are losing over Rs 410 crore a day on sale of diesel, domestic LPG and kerosene.

With the government’s subsidy bill threatening to go out of control and the OMCs suffering huge losses, pressure is mounting on the government to bring in a sharp hike in prices of petrol, diesel and LPG. If it comes through, the hike in petrol prices is expected to be around Rs 4 per litre, as per government officials. Cooking gas prices too could go up by Rs 70 per cylinder and diesel by about Rs 5 per litre.

The S&P CNX Nifty touched a high and low of 5,391.10 and 5,306.45 respectively.

The top gainers on the Nifty were Reliance Infra up 8.97%, JP Associates up 6.72%, RPower up 6.45%, IDFC up 6.36% and BHEL up 6.13%.

On the flip side, Cairn down 3.37%, TCS down 2.24%, BPCL down 1.26%, Wipro down 1.07% and ITC down 0.54% were the top losers on the index.

The European markets were trading in green as France's CAC 40 up 0.34%, Britain’s FTSE 100 up 0.15% and Germany's DAX up by 0.41%.

Most of the Asian equity indices snapped the session on higher note on Tuesday after data showed a slightly improved housing market in the US. The National Association of Realtors said its index of sales agreements rose 2 percent last month to a reading of 97, the highest since April 2010. A reading of 100 is considered healthy. Moreover, ease in crude oil prices too supported the sentiments. Benchmark oil slipped below $108 per barrel while the dollar fell against the euro and the yen.

Meanwhile, Hong Kong index rose over one and a half percent in relatively thin Tuesday trade, bolstered by property and Chinese financials, ahead of key corporate earnings scheduled to be released after the market close. The Shanghai Composite Index reversed all its early losses to end up 0.2 percent at 2,451.86, extending its winning streak into an eighth session and closing at the highest since November 17, 2011. In addition, Japanese shares gained 0.92 percent on Tuesday to close at a seven-month high after late bargain-hunting reversed early losses.