Post Session: Quick Review

In a marvelous day of trade Indian markets surged by over 2 percent to reclaim their crucial psychological levels on Monday, coming after a long weekend, as the stock exchanges remained closed on Friday on account of ‘Gandhi Jayanti’. It was a one way ride and markets without any sign of profit taking kept on surging higher till last. The surge was mainly on optimism generated by a lower-than-estimated jobs addition in the US jobs data released on Friday, which added to expectation that the US Fed may refrain from raising key interest rates this year, fueling a rally in global markets. The possibility of the Fed delaying the lift-off date for rates also meant its loose policy, which has helped shore up stock markets globally by providing cheap cash, would continue a little longer. On the domestic front, traders got an encouragement with the World Bank forecast that backed by the prospects of faster implementation of reforms and a favourable terms-of-trade shock, India is expected to weather global volatility with real GDP growth projected to increase to 7.5 per cent despite a weak export recovery. Meanwhile, the government said that though revenue collection will fall short by Rs 50,000 crore but expressed confidence that economic growth will exceed 7.5 per cent, with fiscal deficit remaining within the budgeted target.

On the global front, there was euphoria in the global equity markets, after a weaker-than-expected US jobs report reduced the case for the Federal Reserve to raise interest rates. All the Asian markets posted good gains led by the surge in commodity stocks. The European markets too made a strong start as many investors are now not expecting the Fed to raise interest rates this year. Markets sentiments were also aided after Glencore shares rallied as much as 72 percent in Hong Kong.

Back home, there was across the board buying with broader markets along with bluechips surging higher on continued buying by foreign funds and retail investors. It was a relief rally across the globe on hopes that the central banks' accommodative stance will continue for more time. Traders also took cues from the strength in rupee which surged to its one month high, though the undertone remained positive after the bigger-than-expected rate cut from the Reserve Bank of India last week. Traders also drew some support with economic affairs secretary Shaktikanta Das’ statement that India is rolling out the red carpet for overseas investors with sweeping foreign investment policy reform and quicker approvals. He said that Foreign Investment Promotion Board (FIPB) will now meet twice a month to speed up approvals, signaling the clear intent of the government to push ahead with reforms on a wide range of issues. Capital goods and banking witnessed the maximum gain in trade, power, consumer durables, realty, auto, oil and gas, metal, technology and FMCG too posted significant gains. A surge in Glencore stocks in international markets lifted the mining sector stocks back at home too. Banking and power stocks remained in limelight from the very beginning on a report that Cabinet is likely to consider this week a proposal to recast Rs 4.3 lakh crore loans of nine state power distribution companies with a view to bring down their liabilities.

The BSE Sensex ended at 26794.24, up by 573.29 points or 2.19% after trading in a range of 26375.31 and 26822.42. There were 26 stocks in green against just 4 stocks in red on the index. (Provisional)

The broader indices too posted good gains; the BSE Mid cap index surged by 1.90%, while Small cap index ended up by 1.62%. (Provisional)

The top gaining sectoral indices on the BSE were Capital Goods up by 3.34%, Bankex up by 2.78%, Metal up by 2.44%, Power up by 2.32%, Auto up by 2.21%. (Provisional)

The top gainers on the Sensex were Tata Motors up by 6.03%, Tata Steel up by 5.96%, ICICI Bank up by 4.81%, Hindalco up by 4.74% and HDFC up by 4.57%. On the flip side, Maruti Suzuki down by 3.54%, Lupin down by 1.19%, Dr. Reddys Lab down by 1.11% and Hindustan Unilever down by 0.61% were the top losers. (Provisional)

Meanwhile, Industry body, the Associated Chambers of Commerce & Industry of India (ASSOCHAM) has approached the government for incentives like a cut in excise duty, teaser loans for housing and interest subvention for exporters, saying that sectors like real estate, power, steel, gems and jewellery are in a real crisis.  It has sought special dispensations for these industries for taking them out of stress.

The chamber pointed that the RBI did show a great courage and slashed the policy interest rates, which however, did not get transmitted to the borrowers, on earlier occasions. Between September 2014  and August , 2015 while the Repo rate got reduced by 75 basis points (before the latest 50 bps cut), the banks weighted average lending rate was marginally brought down to 11.93 per cent, just down 15 bps from 12.12 per cent. Certainly, the banks did not help the situation and some of these core employment generating industries slipped further into troubles because of lack of consumer demand, high interest costs and cheap imports.

The industry body has said that besides, the Reserve Bank of India , banks, states and the Central Government should move fast in taking the troubled power distribution companies (discoms) out of morass, or else they would become dead assets and big drags on the exchequer , causing big rise in the non-performing assets.

Assocham Secretary General D S Rawat has said that for creating additional demand, the government will have to chip in with rather bold measures and create extra elbowroom for select industries by extending short-term stimulus on construction materials like steel, cement, power equipment. He said that the RBI has correctly noticed, the average industry capacity utilization is 77 per cent. So, unless the C.U reaches at least 100 per cent, we cannot expect the investment cycle to revive even though interest rates have come down.

The CNX Nifty ended at 8126.40, up by 175.50 points or 2.21% after trading in a range of 8005.10 and 8128.90. There were 44 stocks on gainers side against 6 stocks decliners side on the index. (Provisional)

The top gainers on Nifty were Tata Steel up by 6.24%, Tata Motors up by 5.93%, ICICI Bank up by 5.24%, HDFC up by 5.13% and Bosch up by 5.05%. On the flip side, Maruti Suzuki down by 3.45%, Dr. Reddys Lab down by 1.26%, Lupin down by 1.16%, Hindustan Unilever down by 0.80% and Indusind Bank down by 0.06% were the top losers. (Provisional)

The European markets have made a strong start, UK’s FTSE 100 increased 120.71 points or 1.97% to 6,250.69, France’s CAC surged 132.78 points or 2.98% to 4,591.66 and Germany’s DAX was up by 208.24 points or 2.18% to 9,761.31.

The Asian equity markets ended in green on Monday, following a disappointing US jobs report that has chipped away at the prospect of an interest rate hike from the Federal Reserve by the end of the year. China Stock exchange was closed on account of ‘National Day’ holiday. The World Bank cut its 2015 and 2016 growth forecasts for developing East Asia and Pacific, and added that the outlook was clouded by the risk of a sharp slowdown in China and possible spillovers from expected increases in US interest rates. The Washington-based lender now expects the developing East Asia and Pacific (EAP) region, which includes China, to grow 6.5% in 2015 and 6.4% in 2016, down from 6.8% growth in 2014. The bank raised concern that the outlook for household incomes and business profits in Indonesia and Malaysia was clouded by weakness in global commodity markets. The World Bank stated that stress may arise whenever individual firms and sectors suffer from a significant concentration of liabilities, adding that such risks are a special concern in Indonesia, Malaysia, Thailand and Vietnam.

Japanese wage growth slowed in August and summer bonuses fell from last year, a discouraging sign for private consumption that should keep policymakers under pressure to offer more stimulus as fears of a recession grow. The Labour ministry stated that Japanese wage growth slowed in August, a discouraging sign for private consumption that should keep policymakers under pressure to offer more stimulus as fears of a recession grow. Japan’s Average Cash Earnings fell to a seasonally adjusted 0.5%, from 0.9% in the preceding quarter whose figure was revised up from 0.6%. Hong Kong Retail Sales fell to a seasonally adjusted annual rate of -5.4%, from -2.8% in the preceding month.