Rally in banking, Cap Goods stocks take markets to high point of the day

Indian stock markets continue to gain traction in Friday afternoon trades as the benchmark equity indices climbed well over half a percentage points. Hefty buying in heavyweights from banking and capital goods counters underpinned the 30-share Sensex above the psychological 17,700 levels while the 50-share Nifty too moved closer to the 5,400 levels. The BSE’s Bankex index spurted over two and half a percent thanks to hefty gains in bellwethers like ICICI Bank, SBI, Axis Bank while close to three percent gains in L&T pushed the Capital Goods index close to two percent higher. However, the enthusiasm appeared tempered as spike in international crude oil prices kept optimism under check. Also the high beta Realty index plunged around two percent after heavyweight DLF continued to reel under immense selling pressure on reports flagged concerns about the company's financial health and limited the upside chances for the frontline indices. Meanwhile, automobile and cement sector stocks kept buzzing in the session as major companies reported their monthly sales numbers. Sanguine global cues too helped the local markets gain momentum. Apart from the overnight gains in US markets on the back of encouraging set of economic reports including the US jobs data, markets in Asia too moved higher as HSBC surveys underscored that manufacturing activity in the region remained resilient. European stock futures too are indicating a higher opening for the markets there as investors cheered reports that the region’s leaders agreed to speed up payment to the permanent bailout fund.

Moreover, the broader markets gained from strength to strength in afternoon trades and traded with good amount of gains in tandem with their larger peers. The bourses climbed on good volumes while market breadth on BSE was in favor of advances in the ratio of 1593:999 while 130 scrips remained unchanged.

The BSE Sensex is currently trading at 17,689.26 up by 105.29 points or 0.60% after trading as high as 17,731.88 and as low as 17,504.38. There were 20 stocks advancing against 10 declines on the index.

The broader indices were trading on a positive note; the BSE Mid cap index gained 0.69% and Small cap rose 0.70%.

On the BSE sectoral space, Bankex up 2.58%, Capital Goods up 1.90%, Healthcare up 1.67%, Metal up 1.12% and power up 0.94%, were the major gainers while Realty down 1.96%, FMCG down 0.24%, IT down 0.19%, and Oil & Gas down 0.03% were the only losers in the space.

Sun Pharma up 3.45%, ICICI Bank up 3.19%, L&T up 2.93%, SBI up 2.45% and Jindal Steel up 2.17% were the major gainers on the Sensex, while DLF down 5.99%, ONGC down 1.84%, Bajaj Auto down 1.12%, ITC down 0.48% and HUL down 0.42% were the major losers in the index.

Meanwhile, the government in its efforts to bridge the widening fiscal deficit has given its nod to the Central Public Sector Enterprises (CPSEs) to go for buyback of shares. The decision opens up another route for the government to disinvest stake even if the market sentiment is poor.

The decision could put pressure on cash rich PSUs like Coal India and NMDC which do not have big investments lined up in the near future, to buy back their shares. The government could nudge them to either buy back shares or participate in government auction, given their surplus cash position. However Minister of heavy industries, Praful Patel has clarified that the decision rests with the companies.

Buy back of equities will make the companies part with its reserves and surpluses. Under the existing regulations, a company will have to make provisions to buy back not just for one particular stakeholder but for all. Secondly it will have to extinguish all the shares bought back within a time limit.

As per the government, opting for buyback and auction routes does not mean that initial public offerings and follow-on public offers will not be used as a route for disinvestment. In fact the process for stake sale in a few other companies, including Oil India, is likely to start soon.

The government had so far been selling stakes in state-run companies through public offers in keeping with its stated objective of benefiting the retail investors, but volatile and uncertain market had made follow-on offers difficult. The government had set a disinvestment target of Rs 40,000 for this fiscal. However it has garnered Rs 1,145 crore from stake sale in Power Finance Corporation and its stake sale in ONGC through the auction route yesterday has fetched it Rs 12,666 crore after Life Insurance Corporation (LIC) stepped in to buy a majority of its shares.

The S&P CNX Nifty is currently trading at 5,388.55, higher by 48.80 points or 0.91% after trading as high as 5,392.55 and as low as 5,315.05. There were 36 stocks advancing against 14 declines on the index.

The top gainers on the Nifty were Axis Bank up 4.36%, Sun Pharma up 3.81%, Kotak Bank up 3.42%, ICICI Bank up 3.40% and IDFC up 3.36%.

DLF down 4.98%, ONGC down 1.77%, Bajaj Auto down 1%, ITC down 0.63% and HUL down 0.50% were the major losers on the index.

In the Asian space, Shanghai Composite surged 1.29%, Hang Seng climbed 0.90%, Jakarta Composite advanced 0.62%, KLSE Composite gained 0.69%, Nikkei 225 ascended 0.72%, Straits Times rose 0.39%, Seoul Composite added 0.22% and Taiwan Weighted moved up 0.32%.