Post Session: Quick Review

Indian markets extended their jubilation on Wednesday with gains of around one and half a percent and while Nifty reclaimed the crucial psychological level of 7950 intraday, Sensex surged past 26000 to its highest level in a week, supported by positive global trends. However, the euphoria of RBI unexpectedly cutting the key policy rates by 50 basis points kept making its impact on the markets and rate sensitives strengthened further. The central bank had also hiked limit for FPI investment in government bonds to 5 per cent of the outstanding stock by March, 2018, a move that will bring in an additional Rs 1.2 lakh crore in G-Sec. Also, there was some support on the street with a report that India moved up 16 positions to rank 55th on a global index of the world's most competitive economies, where Switzerland remains on top. The World Economic Forum (WEF) said in its latest Global Competitiveness Report that the jump in India's position underlines the country's recent economic recovery, improvement in the competitiveness of the country's institutions and its macroeconomic environment and a 'slight improvement' in infrastructure.

On the global front there were signs of recovery with major indices across the world rebounding from sharp fall, after series of volatile trade amid the collapse in China’s equity bubble and an exodus from emerging-market assets, as the world prepares for the Federal Reserve’s first interest-rate increase. Japanese markets made a smart bounce back and led the Asian pack after yen weakened against dollar. The European markets too made a strong start, with major averages surging by around two percent in early deals even though German unemployment unexpectedly rose in September in a sign that Europe’s largest economy is not immune to risks from slowing growth in emerging markets.

Back home, the trade firmed up with every passing hour of the day and benchmarks surged to their highest level in the final moments supported by the rally in metal and FMCG stocks. There were some bouts of profit taking too in mid of the day but the market breadth remained strong and firm start of the European markets amid broad based buying helped the markets to move higher.The rupee strength too supported the equity markets, the domestic currency that had appreciated against the greenback in the previous session after the RBI in a surprise move, cut the short-term borrowing rate, strengthened further. On the sectoral front, while most of the indices finished in green, banking suffered profit taking after big surge of last session. The oil & gas sector stocks too remained in action and upstream companies were in somber mood after the government cut natural gas prices by 16 per cent to $4.24 per unit for the six month period, beginning October 1. Natural gas prices, according to a formula approved by the government in October last year, will fall to $4.24 per million British thermal unit on net calorific value (NCV) basis from the current $5.50 per mmBtu.  On gross calorific value (GCV) basis, the new gas price for October 1 to March 31 would be $3.82 per mmBtu as compared to $4.66 currently. While the cut will impact the revenue of producers like ONGC and Reliance Industries, it will bring gains for users in the power and fertiliser sector in the form of lower feedstock cost.

The Anil Ambani group companies remained in focus after Anil Ambani during AGM said that Japanese major Nippon Life is in an advanced stage of talks to hike stake in Reliance Life Insurance and Reliance Mutual Fund. He also said that Reliance Communications (RCom) is in advanced talks to share and trade spectrum with Reliance Jio Infocomm in the 800-850 Mhz band, apart from selling its stake in its tower unit. Reliance Capital ended up by around 2.5% and RCom zoomed by over 6%.

The BSE Sensex ended at 26154.83, up by 376.17 points or 1.46% after trading in a range of 25918.21 and 26179.70. There were 25 stocks in green against 5 stocks in red on the index. (Provisional)

The broader indices too posted good gains; the BSE Mid cap index surged by 1.71%, while Small cap index gained 1.07%.(Provisional)

The top gaining sectoral indices on the BSE were Metal up by 3.36%, FMCG up by 2.36%, TECK up by 2.07%, Realty up by 2.05%, Power up by 1.88%, while Bankex down by 0.44% was the lone losing index on the BSE.(Provisional)

The top gainers on the Sensex were Tata Steel up by 5.79%, GAIL India up by 5.37%, Bharti Airtel up by 4.34%, BHEL up by 4.28% and Hindalco up by 4.18%. On the flip side, SBI down by 1.49%, Axis Bank down by 1.39%, Vedanta down by 0.70%, HDFC down by 0.13% and Maruti Suzuki down by 0.08% were the top losers. (Provisional)

Meanwhile, after a surprise rate cut of 50 basis points from the Reserve Bank of India (RBI), government has said that it will review the interest rate on small savings, like PPF and Post Office deposits, to bring them in line with market rates. Finance Minister Arun Jaitley, welcoming the 50-basis-point cut in repo rate by the central bank, said that the decision of the Reserve Bank of India will significantly provide policy support to the real economy and help in the recovery process and indicated that the returns on small saving products could come down in line with the overall reduction in interest rates, he said the government will review the interest rate as well as all other aspects of these schemes.

RBI in its policy review had pointed that the median base lending rates of banks have fallen by only about 30 basis points despite extremely easy liquidity conditions. This is a fraction of the 75 basis points of the policy rate reduction during January-June, even after a passage of eight months since the first rate action by the RBI. Banks have, in the past, been reluctant to transmit the entire policy rate cut by RBI to borrowers with small saving schemes offering interest rates between 8.7 per cent and 9.3 per cent.

Earlier, Economic Affairs Secretary Shaktikanta Das too had said that the government will undertake review of small saving interest rate also. He said this was being done in response to the 0.5 per cent cut in key lending (repo) rate announced by the Reserve Bank. However, Chief Economic Advisor Arvind Subramanian has said that the government would undertake the review in the broader context to see what the rates are and who was benefiting from these rates. 

Smalls saving schemes include Post Office Monthly Income Scheme (MIS), Public Provident Fund (PPF), Post Office Time Deposit Scheme, Senior Citizen’s Savings Scheme, Post Office Savings Account, and Sukanya Samriddhi Accounts. Currently, most one-year deposit schemes of public sector banks fetch 8.25-8.5 per cent. The average return of most small savings schemes is around 8.5 per cent.

The CNX Nifty ended at 7947.25, up by 103.95 points or 1.33% after trading in a range of 7874.50 and 7957.70. There were 35 stocks on gainers side against 15 stocks on losers side on the index. (Provisional)

The top gainers on Nifty were Cairn India up by 6.44%, Idea Cellular up by 6.26%, Tata Steel up by 6.21%, GAIL India up by 4.90% and Hindalco up by 4.69%. On the flip side, Bank Of Baroda down by 2.11%, Tech Mahindra down by 1.90%, SBI down by 1.61%, Axis Bank down by 1.49% and Tata Power down by 1.44% were the top losers. (Provisional)

European markets were trading with good gains, France’s CAC surged by 112.51 points or 2.59% to 4,456.24, UK’s FTSE 100 gained 123.41 points or 2.09% to 6,032.65 and Germany’s DAX increased by 231.53 points or 2.45% to 9,681.93.

The Asian equity markets ended in green on Wednesday after sliding to three and a half year lows the previous day on concerns over a weak outlook for commodities amid slowing economic growth in China. Buying in Japanese market mainly led gains in Asian region with a weaker yen and window-dressing buying at the end of the first half of fiscal 2015 underpinning investor sentiment. Market participants also remained hopeful for more monetary and fiscal stimulus from Japan after the latest data showed that industrial output fell unexpectedly for the second straight month in August and retail sales showed no improvement from a month ago, while housing starts increased for the sixth consecutive month in August, offering some respite to investors worried about deflation and sluggish growth. Moreover, investors await the Bank of Japan’s Tankan survey due on Thursday and household spending figures out Friday to determine whether the central bank will step up monetary policy easing at its October 30 policy meeting. Seoul shares reversed early losses and ended with a gain of over a percent as foreign investors turned net buyers after five consecutive days of selling.