Benchmarks end higher on ECB stimulus hopes

Buoyed by firm global cues, Indian equity benchmarks ended the session with a gain of over half a percent on Friday. Sentiments remained up-beat since morning and markets after a gap-up opening managed to trade in tight-band till end after European Central Bank said that it is studying new stimulus measures that could be unveiled as soon as December. Future, some support also came in with a Moody’s Investors Service’s report stating that India will clock the highest growth rate of 7-7.5 per cent among G20 economies in 2015 and 2016. It has said that India is less exposed to global risks because of its more resilient economic growth and the impact of positive policy reforms momentum.

Also, the Grant Thornton International Business Report (IBR), a quarterly global survey has stated that India Inc is the second most optimistic in terms of business optimism globally. Traders drew some encrougement with report that the government is likely to meet its fiscal deficit target this year despite risks of shortfall in tax collection and disinvestment proceeds, as it may go for a small reduction in public spending.

Global cues too remained supportive with European counters making a firm start and CAC, DAX and FTSE were trading with a gain of over a percent after European Central Bank President Mario Draghi said further rate cuts were being considered to stimulate the euro zone economy. Asian markets rallied after the European Central Bank (ECB) signalled its readiness to inject more stimulus, helping the dollar scale a fresh two-month peak against the euro.

Back home, appreciation in Indian rupee too supported the sentiments. The partially convertible rupee was trading at 64.91 per dollar at the time of equity market closing against the Wednesday’s close of 65.12 on the Interbank Foreign Exchange on fresh selling of the US currency by exporters and banks amid sustained foreign funds inflows. Report that private investment in the July-September period was about Rs 2,25,000 crore, 54% more from a year earlier and the highest in any quarter since 2011, too boosted traders’ confidence.

Buying in banking counter too aided sentiments as the Reserve Bank of India (RBI) has issued guidelines for the Gold Monetisation Scheme that allow banks to fix their own interest rates on gold deposits. On the flip side, shares of software companies struggled today after Wipro gave a muted guidance for the third quarter. Wipro expects revenues from the IT services business to be in the range of $1,841 million to $1,878 million, a growth of 0.5 per cent to 2.5 per cent from the September quarter.

The NSE’s 50-share broadly followed index Nifty rose by over forty points and ended near the psychological 8,300 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by over one hundred and eighty points to finish above the psychological 27,400 mark. Broader markets, however, struggled to get any traction and ended the session with a cut of around one third of a percent. The market breadth remained in favor of decliners, as there were 1,289 shares on the gaining side against 1,428 shares on the losing side while 155 shares remain unchanged.

Finally, the BSE Sensex surged by 183.15 points or 0.67% to 27470.81, while the CNX Nifty gained 43.75 points or 0.53% to 8295.45.

The BSE Sensex touched a high and a low 27555.06 and 27421.71, respectively. The BSE Mid cap index was down by 0.26%, while Small cap index was down by 0.37%. 

The top gaining sectoral indices on the BSE were Bankex up by 1.30%, FMCG up by 1.08%, Oil & Gas up by 0.81%, PSU up by 0.64% and Power up by 0.39%, while Capital Goods down by 1.56%, Auto down by 0.73% and TECK down by 0.40% were the losing indices on BSE.

The top gainers on the Sensex were ITC up by 2.81%, Axis Bank up by 2.81%, GAIL India up by 2.11%, NTPC up by 1.92% and HDFC up by 1.90%. On the flip side, Bharti Airtel down by 3.42%, Vedanta down by 2.67%, Larsen & Toubro down by 2.58%, Maruti Suzuki down by 2.05% and Wipro down by 1.68% were the top losers.

Meanwhile, ahead of the formal launch of the Gold Monetisation Scheme (GMS) by Prime Minister Narendra Modi on November 5, Reserve Bank of India (RBI) has issued guidelines for the scheme that allow banks to fix their own interest rates on gold deposits. As per the guidelines, banks will be free to set interest rate on such deposit, and principal and interest of the deposit will be denominated in gold. The interest will be credited in the deposit accounts on the respective due dates and will be withdrawable periodically or at maturity as per the terms of the deposit.

The GMS will replace the existing Gold Deposit Scheme, 1999. However, the deposits outstanding under the Gold Deposit Scheme will be allowed to run till maturity unless the depositors prematurely withdraw them. Resident Indians can make deposits under the scheme and the minimum deposit at any one time shall be raw gold (bars, coins, jewellery excluding stones and other metals) equivalent to 30 grams of gold of 995 fineness. The deposit certificates will be issued by banks in equivalence of 995 fineness of gold and the principal and interest of the deposit under the scheme will be denominated in gold.

As per the guidelines, the designated banks may sell or lend the gold accepted under STBD to MMTC for minting India Gold Coins (IGC) and to jewellers, or sell it to other designated banks participating in GMS. The gold deposited under MLTGD will be auctioned by MMTC or any other agency authorised by the Central Government and the sale proceeds credited to the Central Government’s account with the Reserve Bank.

RBI has also guided that the short term bank deposits will attract applicable cash reserve ratio (CRR) and statutory liquidity ratio (SLR). However, it said, the stock of gold mobilised under the scheme by banks will count towards the general SLR requirement. The government announced the gold monetization scheme on 15 September to mobilize gold held by households and institutions and facilitate its use for productive purposes. The gold deposit scheme is aimed at mobilising a part of an estimated 20,000 tonnes of idle precious metal with households and institutions.

The CNX Nifty touched a high and low 8328.10 and 8280.75 respectively.

The top gainers on Nifty were Axis Bank up by 2.98%, ITC up by 2.81%, Cairn India up by 2.43%, HDFC up by 2.06% and GAIL India up by 2.05%. On the flip side, Idea Cellular down by 7.57%, Bharti Airtel down by 3.81%, Vedanta down by 2.57%, Larsen & Toubro down by 2.35% and Maruti Suzuki down by 2.05% were the top losers.

European Markets were trading in the green; France’s CAC was up by 2.00%, Germany’s DAX was up by 2.17% and UK's FTSE was up by 1.17%.

The Asian equity markets ended in green on Friday, tracking the positive cues overnight from Wall Street and European markets after ECB hinted at further economic stimulus measures in December. Japan’s core inflation probably slipped for a second month in September, while factory output fell for a third month in a row, adding to headaches facing Bank of Japan policymakers as they head into a key policy meeting. Private spending data also due next week is expected to show modest improvement, helped by holiday spending, but the rate of recovery likely remained moderate due to slow growth in wages. The economic data next week will be among the last clues for investors and the BOJ on how the economy performed in July-September after it contracted in the second quarter. Average new home prices in China rose for the fifth month in a row in September, increasing 0.3 percent from August. Compared with a year earlier, home prices in September fell 0.9 percent, slowing from a 2.3 percent drop in August. New home prices in Beijing in September rose 4.7 percent from a year earlier, while those in Shanghai increased 8.3 percent. China’s property market accounts for around 15 percent of the economy, so even modest signs of improvement would relieve some pressure on the cooling economy. Japan’s index of leading economic indicators rose to a seasonally adjusted 103.5. South Korean GDP rose to a seasonally adjusted 1.2%, from 0.3% in the preceding month. Taiwanese Industrial Production rose to a seasonally adjusted annual rate of -4.56%, from -5.46% in the preceding month.